Among the 100 largest markets tracked by Black Knight, a leading provider of financial/mortgage software, only Austin (-0.33%) saw a seasonally adjusted home price decline between April and May. Because inventory is so tight, the other 99 markets saw a home price increase. Nationally, seasonally adjusted house prices rose 0.71% between April and May.
Back in February, we learned that-- since peaking in June 2022-- U.S. home prices had fallen 2.7% on a seasonally adjusted basis. This was described as the second-largest home price correction of the post–World War II era. To the disappointment of some homebuyers, however, the housing market proved surprisingly resilient throughout the first half of 2023. House prices firmed up very quickly-- except in Austin. On July 7, we learned that only Austin saw a month-over-month home price decline in May. The other 99 markets tracked by Black Knight saw a home price increase. Seasonally adjusted house prices rose nationally 0.71% between April and May.
Austin had been notable for benefiting greatly from the pandemic "work-from-home migration." Californians, seeking familiar weather but at a lower cost of living, were particularly drawn to Texas. During the same period, many Fortune 500 companies-- including Hewlett Packard Enterprise, Oracle, and Tesla-- relocated their headquarters to the Lone Star State from California, perhaps due to more favorable tax rates. Statewide as of May 2022, according to the Florida Atlantic University researchers, Dallas was overvalued by 46%, San Antonio was overvalued by 30%, and Houston was overvalued by 28%.
For perspective, Dallas was ranked No. 18 most overvalued in the nation, while Austin was the second. The median home in Austin was worth $589,600 at that time: 66% above the $354,600 limit that the Florida Atlantic University researchers said could be supported by underlying economic fundamentals. Only Boise, Idaho, was overvalued by more, at 75%. Another source, Moody's Analytics, said Austin home prices were overvalued by 63.7% at the height of the boom in the first quarter of 2022. Anything above 25%, Moody's considers "significantly overvalued."
Texas had also been the only exception to the 2008 housing. Peak-to-trough, home prices in markets like Austin and Dallas only fell 8.5% and 10.5%, respectively, while house prices tracked by the Zillow Home Value Index (ZHVI) fell 63.9% in Las Vegas, 56.4% in Phoenix, and 52.2% in Miami between their peaks around 2007 and bottoms around 2012.