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Austin-area new home sales surge, but rising inventory raises concerns

New numbers show that new home sales in the Austin area rose 4.1% in May compared to April.

But as builders struggle to sell inventory in the face of higher interest rates, a growing supply of newly built homes is making the outlook for the rest of the year look bleak, according to the latest monthly report from Ben Caballero’s HomesUSA.com, which tracks the new-home market in Texas, including the five-county Austin region.

More: Austin Housing Market Crystal Ball: What Do Some Experts Predict for 2024?

Caballero, a top-ranked real estate agent, is the founder and CEO of HomesUSA.com. He compiles his report using Multiple Listing Service data from the real estate associations in the four largest Texas metros: Austin, Houston, North Texas (Dallas-Fort Worth) and San Antonio.

New home sales in the Austin area were the lowest among the four largest Texas metros, Caballero said. According to his three-month rolling average, which tracks the market’s seasonality, the Austin area had 955 sales in May, up from 917 in April.

Despite the month-over-month increase in May, Caballero is concerned about signs he says are “weakening the outlook” as new home inventory continues to rise.

Pending sale flat

“While new home sales in Austin were slightly higher in May, their muted seasonal strength does not bode well for the rest of 2024,” Caballero said. “Pending sales numbers — an indicator of future sales — are flat, confirming my concerns.”

More: Economic headwinds are hampering new home sales in Austin, an expert says.

Caballero’s figures show the three-month average of pending new home sales in the Austin area was 1,370 in May, down from 1,399 in April.

Challenges in inventory

“Additionally, the number of active listings for new homes increased nearly 9% year-over-year in May as builders in Austin struggle to sell inventory amid higher interest rates,” Caballero said.

The supply of new homes in May was also higher than in April. The three-month moving average of active listings was 5,789, up from 5,701 in April.

“Local builders are working hard to reduce that inventory,” Caballero said. “Based on the pending and active sales numbers released last month, the outlook for new home sales over the long term would be worse if it weren’t for the underlying strength of Austin’s economy.”

Prices drop slightly

Homebuyers in the Austin area paid slightly less for a new home in May, with the average price for a home over a three-month period being $520,281, compared to $522,799 in April.

Elsewhere in Texas

Like the Austin region, new home sales in Texas’ three other major metro areas rose in May compared with April, Caballero said.

The three-month rolling average of new home sales in Dallas-Fort Worth was 1,986 in May, up from 1,892 in April. In Houston, the May rolling average showed 2,093 sales, up from 2,036 in April. And in San Antonio, the May rolling average totaled 1,073 sales, up from 1,054 in April.

But unlike Austin, the average price of new homes rose over the past three months in May in Texas’ three other largest markets.

In Dallas-Fort Worth, it was $486,197, up from $475,516 in April. In Houston, it was $411,767, up from $405,602 in April. And the three-month average price of a new home in San Antonio was $353,388 in May, up from $348,830 in April.

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