Austin Housing Market Crash Rings Real Estate Alarm Bells

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Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property insurance market, local and national politics. She has previously extensively covered U.S. and European politics. Giulia joined Newsweek in 2022 from CGTN Europe and had previously worked at the European Central Bank. She is a graduate in Broadcast Journalism from Nottingham Trent University and holds a Bachelor's degree in Politics and International Relations from Università degli Studi di Cagliari, Italy. She speaks English, Italian, and a little French and Spanish. You can get in touch with Giulia by emailing: g.carbonaro@newsweek.com.

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The housing market in the city of Austin, Texas, has become the focus of widespread concerns after home prices have dropped faster than anywhere else in the country, including the troubled San Francisco.

According to the Zillow Home Value Index, home prices in Austin have fallen by more than 10 percent between July 2022 and April 2023, while on a national level home prices declined by about 1 percent. The Texas city saw the biggest decline in the entire country, 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.

What is happening in Austin is something that housing market analysts predicted last summer, when experts told Newsweek that the recent years of booming prices would have been followed by a price correction.

Austin, Texas, housing
Mobile home park in Pflugerville just north of Austin. | Location: Pflugerville, Texas, USA. Robert Daemmrich Photography Inc/Corbis via Getty Images

This correction, which has seen home prices drop across the country—though at very different speeds—in the past few months, has been interpreted by experts as the direct consequence of how unaffordable homes have become for many after two years of bidding wars and low inventory, especially since mortgage rates have suddenly surged.

Experts have consistently said that the current correction is nothing like the housing market crash of 2008, saying that both mortgage borrowers and lenders are in a much better position now than they used to be 15 years ago.

However, in Austin, the situation is now almost paradoxical, as suggested by a recent Fortune article which pointed out how the city dodged the 2008 crash, only to find itself on the verge of a very similar situation—something that has the characteristic of a housing bubble.

Lance Lambert, a reporter at Fortune, called the Austin housing market "the most interesting" in America. "During the '00s housing crash, it took Austin 43 months to fall 8.5% peak-to-trough. This time around, Austin has fallen 10.02% in just 9 months."

In the 2000s, home prices in Austin fell by 8.5 percent, while in cities such as Las Vegas, Phoenix and Miami were falling by 63.9, 56.4 and 52.2 percent respectively between their peaks around 2007 and their bases in 2012, according to Zillow.

An Austin-based real-estate agent and housing investor, Sean Fuentes, told Fortune that the city's housing market was the object of speculation from investors between 2020 and 2022, with many at that time expecting prices in the city would to continue rising.

Both elements are considered to be key parts to the forming of a housing bubble, together with a sudden price drop, which Fortune says is happening now in Austin.

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About the writer

Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property insurance market, local and national politics. She has previously extensively covered U.S. and European politics. Giulia joined Newsweek in 2022 from CGTN Europe and had previously worked at the European Central Bank. She is a graduate in Broadcast Journalism from Nottingham Trent University and holds a Bachelor's degree in Politics and International Relations from Università degli Studi di Cagliari, Italy. She speaks English, Italian, and a little French and Spanish. You can get in touch with Giulia by emailing: g.carbonaro@newsweek.com.

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Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property ... Read more