COVID-19 hijacks housing market

By Sahar Chmais

In early March, when COVID-19 gripped the U.S., many experts predicted a grim outlook that the housing market would suffer. This was the case in some parts of the country, but perhaps Central Texas is an enigma.

CoreLogic’s forecast shows an overall increase of 4.8% in U.S. home prices and expects a 6.6% decrease in 2021. But then there are places like New York City, which experienced a dramatic drop, of 17%, in home prices. As the market experiences slight increases and decreases, homes in Austin and Hays County boomed. Yes, the area took multiple hits in April and May because of the virus, but for a few months now, sellers have been receiving swarms of offers while buyers feel fatigued because of the competition.

“There are not a lot of homes on the market,” said Realty Austin real-estate agent Elle Klein Garrison, “but there’s still a number of people moving here and that is driving the prices up.”

Garrison attributes the rush of buyers to several reasons. The area has nice weather year-round, homes are spacious and the job market is growing, she said.

“Starting at the beginning of COVID, people were stuck in their homes for months,” Garrison explained. “So I’ve seen a big uptick, because if people are going to be stuck working from home, they want to be able to at least go outside.”

Weather and space are not the only motives. Austin and Hays County are experiencing job growth with Amazon opening a warehouse in Kyle and Tesla building a factory near the Austin-Bergstrom International Airport. The area continues growing, but dirt is limited, Garrison said.

The desire to move to Central Texas combined with COVID-19 has caused the shortage. Garrison said that when the coronavirus hit, many sellers feared going into the market. Unprecedented times got them thinking about walk-through safety. They also wondered if there would be buyers out there.

“The concern sellers always have,” Garrison said, “is, ‘are we leaving money on the table, are we getting everything we could possibly get for our house?’ Generally, in this market, yes and more because we are seeing multiple offers.”

Sometimes, buyers will put offers on multiple homes and their offer still does not get selected by the sellers. Having to constantly compete has fatigued some clients.

The shortage of listings has impacted both Austin and Hays County, but Austin’s shortage may have pushed more people toward buying in Hays County.

Buyers seeking a home in Central Texas have better luck having their needs fulfilled in Hays County. When comparing the MLS between July 2019 and 2020, Travis County’s number of listings dropped by 43.8% and prices increased by 16%. Meanwhile, Hays County listings went down by 37% and the sold price increased by 18.5%.

If a consumer wants a home in Austin between $200,000 to $300,000, there are about 66 open listings. But if a buyer looks for a home between the same price point in Hays County, they will find about 263 available listings.

Hays County has more availabilities in the $300,000 and below price range, but house prices continue to increase. The average price of houses sold in 2020 has been $408,871, an increase of $65,000 since 2019.

Yet people still flock to Hays County because they find more options while spending less.

“I see people moving more to the outskirts because they can afford more house,” Garrison said. “You definitely get more land in and more master-planned communities in Hays versus Travis County. A lot of the master-plan communities have been built with walking trails, lakes, ponds, parks and outdoor amenities in mind, and you’re not going to find that in a lot of the interior communities in Austin.”

COVID-19 has been a big culprit in the 2020 housing market. It has caused low-interest rates at numbers Garrison said she has never seen in her 17 years of experience. Some people are getting their loans in a 2.75% bracket.

Joshua Roberson, senior data analyst at the Real Estate Center at Texas A&M University, said the interest rates are at a historical low.

But these lower interest rates are not reason to celebrate quite yet. When COVID-19 hit, the Federal National Mortgage Association, also known as Fannie Mae, tightened loan requirements and made it more difficult for people to buy a home. Clients can seek creative lenders, but the interest rate will not be as low.

Expectations about what will happen next are difficult to gauge because we have nothing to compare this to; COVID-19 is a new benchmark, Roberson said. But based off of his experience, he does not see rates going up anytime soon. This is not to be taken as investment advice, Roberson warned, but only as his short-term prediction.

“I wouldn’t expect home prices to decline,” Roberson said. “I would expect them to at least stay stable. So far home prices, in general, are keeping steady. I don’t see any reason why they would drop; demand is good enough – it’s the supply side that suffered more.”

Still, like Roberson said, the coronavirus has thrown analysts because they have nothing to compare it to. He said that in September, if we see another surge of the virus, it might shake up the market and create another pause like in April and May. During those months, sales halted because of people’s psychological response.

“There’s a psychological component,” Roberson told the Hays Free Press, “so we can’t really measure how soon we will have recovery. I’m going to be seeing if sales sustain. In May, when sales dropped, there was a knee-jerk reaction. Let’s see if we have a trend or if there will be a reaction to every [coronavirus change].”

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