Austin Texas Real Estate Blog

October 30th, 2007 10:54 AM

As a Realtor in Austin’s ever changing market, I often get questions about the bubble. Sometimes, I even get the uninitiate investor’s summary of a plan that involves waiting for the bubble to break and then swooping in and offering seller’s pennies on the dollar for their real estate. I RUN, not walk away from these investors.

As far as I can tell, there is no bubble in the Austin/Central Texas real estate market. We tend to see regular, steady appreciation in our market. We have a reasonable amount of inventory, property taxes high enough to keep rampant speculators at bay, and a strong economy and work force that is supporting our growth. That said, the Austin Texas real estate market does fluctuate from a buyer’s market to a seller’s market to a balanced market. Like most markets a broad generalization such as “Austin is a buyer’s market” is usually wrong. The market can be segmented various ways and those segments are whatreally shoudl be commented on. As an example, ACTRIS (the Austin Central Texas Realty Information System - our MLS), shows over 15 months of inventory for homes over $1MM and only 4 months of inventry for homes up to $100k. Clearly both market segments are different for the buyers and sellers playing in those markets.

The excerpt below from The Neal Spelce Austin Letter (www.AustinLetter.com) supports the idea that we’re not facing a dwnturn in the market.

Austin area home values, as reflected by sale prices, continue to rise. This is in sharp contrast to the housing downturn in the former go-go states along the east and west coasts. For years we’ve been telling you of the insane skyrocketing of home prices on the two coasts. Others likened it to an ever-increasing bubble that was sure to burst when it was stretched beyond reality. In some cases, home prices soared 20%-30% per year in the first part of this decade. Well, no surprise, the bubble did burst and this was a trigger to the current housing crisis in those cities and states.

The Austin metro was different. New home prices have steadily increased over the past three years, not skyrocketed.Mark Sprague, the Austin area partner for Residential Strategies Inc. (RSI), points out the median home price in the 3rd Qtr 2005 was $181,108, in the 3rd Qtr 2006 was $197,103 and in the 3rd Qtr 2007, it was $208, 583. “The area median new home price is up 5.8% for the past 12 months,” he noted. Bottom line: there is no bubble to burst in the Austin area.

Another factor to consider is the number of vacant, developable, lots. Currently, Sprague estimates there are 26,058 lots and at the current absorption rate, this represents a 22.3 month supply. RSI, a market research and consulting firm, considers a 24-month supply to represent equilibrium. As Sprague put it: “The fact of the matter is that, although the housing market has slowed over the past year, Austin doesn’t have the problematic excesses of lot and housing inventories that are prevalent in most other major markets of the United States.”