People often joke that real estate agents are like housing therapists.  There is some truth to that, but I've never been a therapist, just felt like one sometimes.  Coming to terms with changing expectations can often feel similar.  I notice my own feeling on any given real estate deal start at some imagined outcome and generally shrink a little over time until the transaction completes, so I have to get used to managing my expectations constantly.

Denial

When markets turn, some sellers just don't want to believe it.  They look in the recent past and think yeah I should be able to get that price for my home since someone else did just a few months ago.  But things have changed.  There are more homes on the market, money is more expensive, and wages haven't caught up to the price multiple of the home price to household income.  The number of buyers that can afford to pay the price that the neighbor got just a few months ago has shrunk and there are now two or three more homes on the market trying to do the same thing.  This phase started in Austin around June of 2022.  You can see it pretty clearly here.  That is when home prices started to correct and only seasonally went up in 2023 (orange line), and now 2024 is lower than 2023.  The good news is that denial is clearly in the rear view window as of this writing.

[MLS Stats: Median Homes Price in the Austin Metro area 2022 - 2024]

Anger

You can only stay angry for so long because eventually you just get tired.  The 2023 market dropped a lot compared to 2022.  2024 is a lot closer to 2023 than the difference between 23 and 22.  That's a mouthful but it means the deceleration of the market has slowed.  It appears to still be going down but not as rapidly.  We've had our first rate drop from the Fed with news of continued drops in 2025 and 2026 but it will still be a little while (3-6 months) before we see any noticeable lowering in mortgage rates.  Even at these lower prices were seeing a lot more inventory for sale.  In the chart below you can see we are about double our typical inventory.  It is coming down but we're still in the deep end.

[Texas Realtors Market Viewer: Austin Metro Area Residential homes SF, Condo, Townhouse 2015 - 2024]

Bargaining

So you tried to sell your house in a declining market and just can't get over where the new pricing is.  Even after months on the market sellers aren't giving up.  So instead of selling their home they decide to rent it unwilling to take a loss.  So we see a big uptick in lease listings in 2023 and even more in 2024.  This has caused an increase in the supply of leases and as a result we are also seeing a drop in median rent compared to 2023.

[MLS Stats: New Lease listings in the Austin Metro Area from Sep 2022 to Sept 2024]

Depression

What to do from here?  Well you can see from the historic median price data below for the Austin metro area, we had a very consistent housing price trend line over the last 10 years.  Covid and free money happened which created the bubble above the line and now we are coming back to the median trend.  The unknown is whether or not we will over compensate below the trend line.  

[Texas Realtor Market Viewer: Austin MSA]

As of today it looks like a soft landing back to 'normal.'  Austin has also been building a lot of homes, more than any other metro in terms of new homes per capita.  And what happens when you add more supply... that's right, prices go down.  I still do not think this is like 2008 because home owners still have a lot of equity, whereas in 2008 they didn't so more people just gave their keys to the bank.  That isn't happening now, so instead we see this new behavior.

Acceptance

Acceptance is tough because we are always looking to the future full of hope or dread.  Acceptance implies some level of completion which works for grief but not for housing prices.  Perhaps this occurs when you actually close on the sale of your home.  If we use that as a metric, acceptance is in short supply but increasing.  Closed sales growth below is in brown and the growth in median home price is in blue.  So acceptance has been on the retreat since 2022 and looks like recently bounced off increasing in May so we are still declining albeit more slowly.

[Texas Realtor Market Viewer: Austin MSA Growth Trend for closed sales and median price]

Today we are somewhere between bargaining and depression.  The depth of that depression depends on what happens next year.  To make the market more stable and equitable we need a lower housing price to household earnings ratio.  That will happen from falling home prices as a result of more supply, lowering interest rates to make borrowing more affordable but not so much that it increases prices, and wage growth in the Austin metro area.  These numbers will differ in every market across the US and the average numbers will tell a story that applies only in aggregate.  Look to your local markets, and let us know if we can assist you with what is going on in your back yard.

As always, question everything and don't take suggestions as absolutes. These are written from a perspective of our experience and offering our insight, however limited. We're not perfect and get things wrong... but not on purpose.