Zillow shows crashing home prices in Austin. Here's why local experts are optimistic.

Panic swirled this week as news broke regarding a real estate "market crash" in Austin.

"Austin Housing Market Crash Rings Real Estate Alarm Bells," proclaimed a headline in Newsweek.

Data from Zillow's Home Price Value Index show prices dropped faster in Austin than anywhere else in the country this past year.

Year-to-date home sales price data from the Austin Board of Realtors show a 12.6% decline in median price for homes in the five-county Austin region compared to the first four months of last year. The city of Austin saw its median sold price drop 10.8% during the same period.

The lower prices come as mortgage rates have risen, decreasing purchasing power for many buyers.

But even though prices are declining, was the headline about a crash overstated?

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Several leading experts who have been tracking the Austin-area housing market for decades say yes.

Values have indeed dropped in the Austin region, several of them say, but it's a correction — not a crash. It's a sign that the local market — in which experts have repeatedly said home prices were rising at an unsustainable pace — is stabilizing.

"I think that Zillow is overstating the case," said Charles Heimsath, a longtime Central Texas housing market analyst and president of Capitol Market Research, an Austin-based real estate consulting firm.

"Yes, sales are declining, inventory is increasing, and prices are dropping. But this is an indication that we are returning to a more balanced market where buyers and sellers are on more equal footing, where real negotiation about price and terms takes place," Heimsath said. "When you travel in a car at 100 mph and slow down to 50 mph you may feel that you are just crawling down the road, but you are actually moving along at a pretty good pace."

Ashley Jackson, president of the Austin Board of Realtors, said as much when the board released its latest housing report, for April.

"This is still a market that is seeing lots of activity, just not at a record-setting pace, and that is to be expected given broader economic trends," Jackson said. "Home prices are moderating, pending sales are holding strong and homes on the market last month are selling closer to list price. These are all signs of a market that is still balancing and doing so in a healthy way."

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What local experts say

In addition to Heimsath and Jackson, we checked in with other local housing industry experts to get their take on the Zillow index and Newsweek article. Here's what they had to say:

Eldon Rude, a housing market consultant and principal of 360 Real Estate Analytics:

"A number of indicators — (including data from the Austin Board of Realtors and the National Association of Realtors) — show that prices are dropping," Rude said.

As a region that had seen one of the most significant surges in home prices during the pandemic, the Austin market, like many others around the country, slowed after April 2022 with consecutive interest rate hikes.

"People got a little nervous about the market, and that precipitated a softening," Rude said.

And while it's true that many buyers can't afford as much house as they could a year ago, resulting in price declines for homes that are selling, "they're correcting, not crashing," Rude said.

"A crash is when there aren't buyers in the market, when there's not demand. But there's still demand here," Rude said.

Austin's underlying fundamentals, including job growth (despite layoffs), continues to be strong, Rude said. He said the builders he talks to regularly say sales have picked up, that people are still buying houses.

"It's been a good spring for builders," Rude said. "Rates have been generally stable (6% to 7% for over six months now), so people are feeling more comfortable and confident."

He said homebuyer contract cancellations are now down to pre-pandemic levels — below 20%, "which is normal," after having soared as high as 50%.

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Mark Sprague, a housing market analyst with Independence Title in Austin:

Sprague has a different take on the numbers. He makes a distinction between home values and sold prices.

While the prices for homes that are selling are lower due to people being able to afford less home because of rising mortgage rates, home values continue to rise because of limited inventory and continued strong demand, Sprague said.

"The charts are showing what is selling," Sprague said. "Sold values are dropping because the buyers are not able to buy/qualify what they could a year ago ... due to the buyer having lost 40% buying power since the start of last summer with rates rising. The buyers will have lost 72% buying power by the end of the year if rates end up at the anticipated 7.5% to 8.5%. But does that mean your home's value has dropped 72%? No."

Bottom line, Sprague said:

"What people can afford has dropped, but that has not dropped the value of any property. Locally, regionally and nationally, you're still in a seller's market.”