Austin Housing Affordability Reaches Best Level Since January 2022

September 09, 2024 : Austin's housing market has seen a significant improvement in affordability as of September 2024, making it the most affordable it has been since January 2022. This dramatic change is primarily due to two key factors: improved interest rates and a substantial drop in home prices. These elements have worked together to make homeownership more accessible in Austin, marking a positive shift after a period of high prices and rising interest rates.

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Monthly PITI (Principal, Interest, Taxes, and Insurance) as a percentage of median household income is the metric used to measure housing affordability. This figure reflects how much of a household’s income is spent on housing each month. According to data for September 2024, this percentage has improved to 36.6%. This marks a significant decline from its peak of over 40% in 2022, a time when affordability had become a serious concern for potential homebuyers in Austin.

​One of the key reasons behind this shift is the improvement in mortgage interest rates. Interest rates in September 2024 are at their best levels in 18 months, making monthly mortgage payments more manageable for buyers. Lower interest rates mean reduced costs in financing a home, which has had a direct impact on making housing more affordable for a wide range of buyers. The cost of borrowing has decreased, enabling buyers to lock in better mortgage rates, thus lowering their monthly payments.

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In addition to improved interest rates, home prices in Austin have dropped significantly since their peak in May 2022. At that time, the median sold price was $550,000. However, in September 2024, the median sold price stands at $429,250. This is a reduction of $121,000, or approximately 21.95%, making homes significantly more affordable for buyers who may have been priced out of the market during the peak pricing period. This sharp decline in prices has contributed to the overall improvement in affordability.

The Austin affordability improvement is especially notable considering the rapid price increase Austin experienced in the years leading up to the peak in May 2022. During that time, housing prices surged, leading to a corresponding rise in Monthly PITI as a percentage of median household income. With this percentage now dropping to 36.6% in September 2024, Austin is experiencing a renewed sense of affordability, allowing more households to enter the market or upgrade to larger homes that would have been out of reach just two years ago.

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Historically, housing affordability in Austin fluctuates based on a combination of home prices and mortgage interest rates. The current improvement in affordability is a testament to how quickly the market can shift when key economic factors like home prices and interest rates align favorably for buyers. The median sold price of $429,250 in September 2024 is an important milestone, showing just how much prices have adjusted since the housing market reached its peak in 2022.

In conclusion, the Austin housing market in September 2024 is the most affordable it has been in nearly two years. This shift is driven by improved interest rates and a notable reduction in home prices, offering buyers a rare opportunity to purchase homes at a lower cost. With Monthly PITI as a percentage of median household income dropping to 36.6%, the Austin market has become more accessible, providing relief to buyers who were previously priced out of the market.