Austin Area Market Shows Increased Inventory and Steady Pricing: Chuck Farr’s May 2025 Newsletter
Spring is in full swing. Greetings to homeowners, tenants, prospective buyers, and real-estate investors! Here is the usual blend of multiple-sourced articles with different perspectives on the local real-estate market.
Market Backchannel: As we enter late May, the Austin area real-estate market shows continued stability in pricing, growing inventory levels, sales volume declines, economic headwinds, and cautious optimism. The latest April Central Texas data from my local realty network shows continued resilience as we continue into Spring and move along historical seasonal patterns (March through May are considered peak selling months).
Months of sales inventory increased to 5.6 or 6 months (depending on the data source), indicating a balanced market leaning more in buyers’ favor. Average days on market hover around 75 or 76 days. Year-over-year April sales decreased 13.8% or 14.3% depending on data source. Median home prices in the entire Austin metro area are $450K or $460K depending on data source. Current mortgage rates and the labor market are holding steady. Buyers continue to show interest at a slower pace. Sellers need to blend preparation, pricing, and patience in this complex market.
AI on the Economy: For this month’s tiptoe through the AI tulips, I asked the xAI interface Grok the following question: “Please give me a summary of the prognostications about the upcoming 2025 mortgage interest rates for the USA real-estate market based on macro level data in late May such as inflation, bond rates, and other factors.” Here is what the large language model (LLM) said in response:
“Below is a summary tailored as a response to how mortgage rates affect the U.S. real estate market, focusing on U.S. and global macro-level data from late May 2025. The summary addresses the impact of mortgage rates on the U.S. real estate market, incorporating inflation, bond yields, Federal Reserve policy, and global factors as requested.
“How Mortgage Rates Affect the U.S. Real Estate Market (May 2025)
“Mortgage rates significantly influence the U.S. real estate market by affecting affordability, homebuyer demand, and housing inventory dynamics. Based on macro-level data from late May 2025, here’s a summary of current and projected mortgage rates and their impacts on the U.S. real estate market, driven by U.S. and global economic factors.
“Current Mortgage Rates: The average 30-year fixed mortgage rate is approximately 6.81%, with 15-year rates at 5.92%, according to Freddie Mac data.
“Forecast for 2025: Mortgage rates are expected to range between 6.2% and 6.8% throughout 2025. Fannie Mae projects 6.3% by Q4, while the Mortgage Bankers Association forecasts 6.7%. A decline to around 5.75% is possible if 10-year Treasury yields drop to 3.5% and mortgage spreads narrow, though this would likely require a significant economic slowdown.
“Key U.S. Macro-Level Drivers:
· “Inflation: U.S. CPI inflation is at 2.4% year-over-year in April, with core inflation around 3%. Persistent services inflation and potential tariff-induced price increases (e.g., proposed 10–25% tariffs) could sustain higher inflation, keeping mortgage rates elevated and reducing affordability for homebuyers.
· “Bond Yields: 10-year Treasury yields, currently at ~4.33%, are a primary driver of fixed mortgage rates. Elevated yields due to economic growth expectations and tariff concerns maintain high mortgage rates, limiting purchasing power in the real estate market.
· “Federal Reserve Policy: The Fed is expected to hold rates steady at the June 18, 2025, meeting, with markets pricing in one or two 0.25% rate cuts by December 2025 if labor markets weaken (unemployment at 4.2%). Delayed or fewer cuts due to strong economic data or tariff-driven inflation would keep mortgage rates high, dampening real estate demand.
· “Housing Market Dynamics: Reduced Federal Reserve purchases of mortgage-backed securities and a $36 trillion federal deficit contribute to elevated rates. However, increasing housing inventory could ease home price growth, offering some relief to buyers despite high rates.
“Global Macro-Level Factors:
· “Trade and Tariffs: Proposed U.S. tariffs (e.g., 25% on Mexico, 10% on China) could increase global inflation, pushing up U.S. bond yields and mortgage rates. This would further strain affordability, potentially reducing home sales and slowing real estate market activity.
· “Geopolitical Risks: Ongoing conflicts (e.g., Russia-Ukraine, Middle East tensions) and potential oil price spikes (Brent crude ~$75/barrel) could drive global inflation, indirectly increasing U.S. mortgage rates and impacting real estate demand.
· “Global Economic Growth: Slowing global demand, particularly in markets like China, may reduce commodity price pressures, potentially lowering U.S. yields and mortgage rates. However, trade disruptions could counteract this, maintaining higher rates and constraining real estate activity.
“Impact on the U.S. Real Estate Market:
“Affordability: High mortgage rates (6.2–6.8%) continue to challenge affordability, particularly for first-time buyers, as elevated rates increase monthly payments. For example, a $400,000 loan at 6.8% has a monthly payment ~$400 higher than at 5%. This reduces purchasing power, slowing home sales and price growth.
“Demand and Sales: Elevated rates deter buyers, particularly in high-cost regions, leading to reduced demand. Existing home sales are projected to remain sluggish unless rates fall significantly, which is unlikely without a recession.
“Inventory and Prices: Rising inventory due to new construction and sellers adjusting to market conditions could stabilize or slightly lower home prices, offering some relief. However, high rates may keep some sellers on the sidelines, tightening supply in certain markets.
“Investment and Refinancing: High rates discourage refinancing, limiting homeowner liquidity, and reduce investor appetite for real estate, particularly in commercial sectors. A prolonged high-rate environment could cool investment activity.
“Conclusion: In 2025, U.S. mortgage rates are likely to remain in the mid-6% range, constraining affordability and dampening real estate demand. Global trade tensions and domestic deficits pose risks of higher rates, while an economic slowdown [or lower inflation rates] could push rates toward 6% or lower. Homebuyers face challenging conditions, and those in the market should monitor affordability trends and consider locking in rates, as significant declines below 6% are unlikely without a major economic downturn. The real estate market will likely see slower sales and modest price growth unless macroeconomic conditions shift favorably.”
In the News: According to the April Central Texas Housing Report released by Unlock MLS, residential home sales across the Austin-Round Rock-San Marcos MSA “rose 11.5% to 5,710 listings, increasing housing inventory to 5.6 months, 1.8 months more than April 2024….At the same time, home sales fell 13.8% to 2,484 listings while the median sales price dipped 3.2% to $450,000. The data mirrors national trends of declining home sales amid higher mortgage rates and wavering consumer confidence.
“Clare Knapp, Ph.D., housing economist for Unlock MLS and the Austin Board of REALTORS®, noted that the significant increase in housing inventory across the MSA has helped make homeownership more affordable for the standard household.
‘“Central Texas’s move toward more balanced market conditions mirrors housing market corrections nationwide, underscoring that what is happening in our market isn’t an anomaly. What’s unique to the Central Texas housing market is its supply of affordably priced inventory. Austin was one of the most affordability-constrained markets emerging from the pandemic. Many parts of the country are still supply-constrained, but in April, the Austin area posted the highest inventory level affordable to the standard household since 2012.’
‘“While this signals progress, especially for first-time homebuyers, significant work remains to improve long-term housing affordability across the region, especially as higher mortgage rates and economic turbulence impact buyer confidence,’ Knapp continued.
“Brandy Wuensch, 2025 Unlock MLS and ABoR president, provided further insight into current housing market conditions.
‘“In today’s dynamic market, it’s important for buyers and sellers to work with a professional agent who can help them understand and act on current opportunities. With more affordable inventory available, a trusted agent can guide buyers through options like down payment assistance, financing alternatives and negotiation strategies.’
“Wuensch added, ‘Even with these ongoing market adjustments, Central Texas homes priced competitively are still selling quickly and at or above list price. While the market may feel uncertain, one thing remains clear: homeownership continues to be one of the most powerful tools for building long-term financial stability and creating generational wealth.’
“Austin-Round Rock-San Marcos MSA [Entire Metro Area]
“April 2025 - For Sale
2,484 – Residential homes sold, 13.8% less than April 2024.
$450,000 – Median price for residential homes, 3.2% less than April 2024.
5,710 – New home listings on the market, 11.5% more than April 2024.
13,351 – Active home listings on the market, 19.7% more than April 2024.
3,074 – Pending sales, 1.8% more than April 2024.
5.6 – Months of inventory, 1.8 months more than April 2024.
$1,480,662,458 – Total dollar volume of homes sold, 14.3% less than April 2024.
95.2% – Average close to list price, compared to 95.7% in April 2024.
“April 2025 - For Lease
2,153 – Closed leases, 2.8% less than April 2024.
$2,250 – Median price for rent, 2.0% less than April 2024.
3,141 – New lease listings on the market, 5.1% more than April 2024.
3,975 – Active lease listings on the market, 0.6% less than April 2024.
2,468 – Pending leases, 2.5% more than April 2024.
1.9 – Months of inventory, 0.1 months more than April 2024
$4,462,738 – Total dollar volume of leases, 8.5% less than April 2024.
97.8% – Average close to list price, compared to 97.1% in April 2024.”
For folks in the Austin MSA area, if you had bought a house in 2018 at the median price of $305K, its value would have increased to $502K by the May 2022 peak. Median price for the MSA is now still nearly $450K (if you use the Unlock MLS source), so you would have still done well investing in Central Texas real estate. Check the latest Central Texas Housing Report for more details and data for the city of Austin (Travis) and surrounding counties. You will see a wide range across the area, so check where you live.
Spring Home Maintenance Tips: Springtime has its own home maintenance checklist for Central Texas property owners. Here are a few items to consider during May:
· We talk about this every Spring: termites are tiny subterranean critters that march just below the surface of your yard until they hit wood. Consider having your property inspected for termites if you have not done so in a year or two; perhaps set up an annual plan with a pest control pro. March and April are the annual termite swarming season, but May is not too late.
· Get your HVAC serviced if you can. Consider setting up a Spring-and-Fall annual contract to protect your investment in energy survival. Keep good records; just as buyers who want to know you changed the oil on your vehicle regularly, someday a buyer may pay more for your house if you have proof that you maintained the HVAC, roof, termite inspections, etc. If you have not yet done a Spring service, I recommend doing so in June. Better late than nada.
When considering your real-estate needs and situation in the context of macro-level data, remember that your potential sale or purchase will always be hyperlocal. Let us know if we can help. Issues of this and previous newsletters are located on the Blog tab of my website at www.chuckfarr.com. Please DM or email me if you want your email added to my newsletter list.
