Austin was the only city to experience a decline in home prices between April and May compared to 99 of the largest housing markets in the U.S. that saw a house price increase, according to data tracked by Black Knight, a leading provider of financial/ mortgage software.
The month-over-month home price decline in Austin is a sign that the housing market inventory is tight, Fortune magazine reported on Friday, adding that the housing market has grown resilient in the first half of 2023, with home prices quickly stabilizing during the spring.
The unique housing price change comes as some experts expected that the booming housing market in 2022 would end this year as the Federal Reserve continues to hike interest rates to combat inflation in the country. Mortgage rates increased over 7 percent —which is more than double the average 3.22 percent rate for a 30-year mortgage in January 2022—however, the housing market remained stable as a low supply of homes fuels a housing shortage.
High home prices compounded with higher mortgage rates last year and a consistent lack of supply led to a drop in sales across the country.
Black Knight stated on Friday that seasonally adjusted house prices nationwide increased 0.71 percent between April and May, but only Austin saw –0.33 percent during that period. The city's home prices decline means that Austin experienced a housing market correction, which happens when prices slightly drop by 10 percent or less. The term "correction" is used to state that home prices became unsustainable somehow and therefore the housing market is correcting itself to better meet supply, demand, and affordability.
Last fall marked the peak of the housing correction, according to Fortune, when 92 of the country's 100 largest housing markets tracked by Black Knight saw a month-over-month price decrease in October.
Austin is experiencing a correction phase due to strained fundamentals, specifically a wider-than-average gap between local house prices and local rentals, according to Fortune. Thorough remodeling levels and investor speculation also contributed to Austin being pushed to a correction mode, even though the city's home values remain over 40 percent since March 2020.
In June, the Austin housing market became the subject of widespread concerns after home prices dropped faster than any city in the country, including San Francisco.
Austin home prices fell by more than 10 percent between July 2022 and April 2023, according to the Zillow Home Value Index in June, while on a national level home prices declined by about 1 percent. The housing price decline in Austin was followed by San Francisco with a drop of 10 percent, Bend, Oregon, with a fall of 9.5 percent and Boise with a decrease of 9.3 percent.
Housing market analysts anticipated the home price decline in Austin as experts previously told Newsweek that the recent years of booming prices would be followed by a price correction.
Newsweek reached out by email to mortgage rate website HSH.com for comment.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Fatma Khaled is a Newsweek weekend reporter based in New York City. Her focus is reporting on U.S. politics, world ... Read more
