Trulia & Zillow put Austin on their bubble ‘watch list’ recently. They even take it a step further and predict as much as a 20% burst. Yikes! Los Angeles, Orange County and San Francisco are all also on the list.
With Austin making every ‘best of’ list in the country I guess it’s time we are picked on a bit in the media. Last month Forbes reported Austin as the best city for job growth. This morning on the radio I heard we were even in the running for the best restroom.
I do not want to downplay the seriousness of an overvalued market. As a former real estate agent in Phoenix I pay close attention to data trends. In Phoenix, pre-crash, everyone was a real estate investor. Mid-2005 the amount of rental homes in the Phoenix Metro MLS was over 15,000, with single family homes less than 5,000. Nobody was renting – everyone was buying. Most investors who jumped in during the boom were losing money monthly because the market rents were so low due to oversupply. What happened to those 15,000 vacant rental homes? You guessed it, first to flood the inventory. Late 2005 my family decided to sell our Arizona home and moved to Central Texas. My clients thought I was crazy when I said we were moving to Austin to avoid a market crash. I gave up a successful real estate business and moved half way across the country. Sadly, that bubble was real and the burst still impacts many homeowners in the area today.
What’s so different about the Austin market today? While the Austin market certainly has a percentage of investors, the majority of closings are owner occupied. As of today, the Austin Board of Realtors MLS has 1,800 homes for rent. Texas is doing an excellent job at attracting employers. The Austin Business Journal reported last month that the area ranked fifth in the nation for its high-tech market, per the 2014 Jones Lang LaSalle report. The average high tech wage in Austin is $100,431; certainly capable of maintaining the home prices in the area. In 2005 the Phoenix economy was not so great outside of real estate. Prices continued to soar despite high gas prices and local layoffs. Anyone could buy a home – bad credit, no cash, no job - no problem. Over 40% of the Phoenix metro economy was tied to the real estate industry, which only magnified the impact of the crash even further. Austin’s job market is highly educated and more diverse than ever before. Mortgages are so difficult to obtain that even Bernanke got denied his refinance.
In an ideal world we want a balanced inventory, slow and steady growth in equity, and affordable housing options for everyone in the community. This hasn’t been the case in Austin most recently… and perhaps a small shift is needed. But impending doom does not seem to be a fair prediction for this market. If you are moving to Austin for the long term then let’s find you a home. Inventory is slightly up and sellers are negotiating. With job growth steady, the Austin real estate market will continue to be a sound investment.
Trulia & Zillow may have algorithms, but they don’t have a crystal ball. Texas is a non-disclosure state which greatly limits the accuracy of their data. Los Angeles, Orange County, San Francisco and Austin. Which one is the odd man out? Affordability in Austin still exists, as well as jobs and an excellent lifestyle.
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