Austin Suburb Housing Market (best city, mortgage, new home)

[Torontonian]

I see more houses for sale in 78613 (Cedar Park) right now than it was in spring. They are not moving as fast as used to be. I see 10 to 20K price reductions on some of the houses as well

Austin-steve - don't underestimate the number of houses purchased by the out-of-state investors. Somebody said: "all real-estate markets are local but financials are global these days". It would be interesting to see how this mess with subprime and Alt-A mortgages will unfold

[achtungpv]

Originally Posted by Torontonian

Austin-steve - don't underestimate the number of houses purchased by the out-of-state investors.

I sold my house last year to an investor from San Diego sight unseen. My realtor's firm (one of the largest in town) had guys that flew to CA every few weeks to go to RE investment seminars and sell houses. Never put a sign in the yard. Took about 200 pictures of it and put 'em on CD for my agent. They went to SD and came back with an offer within 3 weeks.

A friend of mine was outbid on 4 houses in Steiner Ranch and one other subdivision that I can't remember all by investors from CA.

[FromCalitoSteinerRanch]

Originally Posted by achtungpv

It crashed last time in the early 90s. Some areas of CA saw a decline of over 40% in value. It took over 10 years for a lot of areas to get back to the pre-crash price levels.

History always repeats itself because people have a short memory.

Tell me about it! I thought I got a deal when I finally finished my University, and got a HUD forclosure for $85K for 704 sq. ft. When the same units about 14 months later were going for about $55K at auction, I was not happy.

In the end, I made enough money in '98 to move up, but I would not have minded getting in around $60K!

Oh, to add perspective, these same units were going for about $250K towards the end of '05... Hindsight truly is 20/20.

[TheHarvester]

Originally Posted by austin-steve

Austin has always been a boom/bust economy, but it's leveling out as we become a bigger, more diverse metropolis.

First, great post (as usual.) You're well-informed and you make solid arguments.

Now I'm going to argue back!

Wouldn't you say that Los Angeles is a "bigger, more diverse metropolis"? If your theory about market stability is correct then LA shouldn't experience the wild price swings that it has been going through. There simply isn't a place that is safe from real estate cycles other than isolated places that are extremely unique, such as Jackson Hole, Carmel Valley, Bainbridge Island, and Aspen. It's not their size or diverse economy that makes them perennially strong, it's their scarcity and their perceived value for wealthy people who wish to be in a low-crime, high-amenity location where they can enjoy some privacy. Often the second-home market sustains these places.

Austin doesn't have scarcity. There is definitely a boom in the downtown condo/loft scene, and last I heard the sales were going 60% to Californians, many of them investors who don't plan to live here. This is foolish if it's true, you probably have access to better stats so please correct me if I'm wrong.

When I see soaring prices in soaring new skyscrapers, I think "there's no direction it can go but down after it reaches the top." Yes, it's uber-hip and many of us would love to live in one of those places, but when the starting prices are over a half-million then I smell trouble. Developers are counting on a non-stop influx of big money to downtown Austin and there's no precedent for such a thing to happen, regardless of the diversity of the economy. People have choices. At some point they're going to say "These prices are stupid, we could have a nice mini-mansion in a nice development in Round Rock or Cedar Park, be closer to nature, have plenty of shops, be close to jobs and parks and recreation" --- Austin is competing against itself and there will be winners and losers. I fear that the downtown frenzy is a bit over-the-top. I've seen run-down 2 bedroom houses in the middle of high-crime sections of east Austin priced at $300,000 --- that might make sense to a Californian, but for Austin it's just ridiculous.

I agree 100% with the rest of your post. The only thing I dispute is the idea that there isn't a perch from which Austin prices can fall. Watch those condos in about 3 years. If they're holding their current value then I'll buy you lunch at the restaurant of your choice.

[Austin97]

Originally Posted by TheHarvester

First, great post (as usual.) You're well-informed and you make solid arguments.

Now I'm going to argue back!

Ultimately what drives prices is the general economy. If Austin doesn't have money flowing in from other places, then Austin prices will only grow at the pace of inflation. I was at a CEO forum last year where an economist predicted the following: 2007 is an up year but decelerating growth. 2008 starts the decline. The bottom happens in 2009 (in real estate).

There are any number of factors that would cause this:

Less relocations to Austin
National companies based in austin get hit hard (like semi conductor) causing big layoffs
Interest rates are high meaning less people can afford expensive homes
The stock market is down meaning people feel less rich

None of this has come to pass, yet. But I know several business owners who are selling their companies now in anticipation of the 2009 crash. Sell high, buy low.

[Phisch]

Originally Posted by Jazzedforhim

Sigh...I'm getting depressed!

Don't worry too much about it (worrying won't make it sell faster!).

We did the sell/buy thing twice now and each time it was a looooong process of 6+ months.

This last time, I didn't worry to much about keeping things terribly **** and span. The days we left a mess in the sink and a pile of laundry in my bedroom were the days we folks stop by who were really interested. They were also parents with little kids so they could relate. The person who finally bought it was someone who was an investor (I guess) who was going to remodel the whole place. Even though it took 7 months to sell (Nov. to Jun.) I was happy because the timing was perfect.

It'll work out

[austin-steve]

The only thing I dispute is the idea that there isn't a perch from which Austin prices can fall.

Well, we may be on the same page with a degree of separation.

I think the extreme run-up in prices that happened in these other areas is not happening, or going to happen in Austin.

As I said, the vehicle for those run-ups were the loan products combined with salivating hoards of wannabe investors (three of which I've seen featured on Nightline and two other nightly newscasts recently - all with multiple homes heading into foreclosure).

Without the loan products and mass number of naive buyers, Austin simply doesn't have the mechanism in place to duplicate the irrational run-up in prices that California, etc. saw.

Our appreciation currently is driven by job growth and a strong economy. There are in fact "markets within the market" though, where some areas are in fact appreciating very rapidly while others are not.

You make a good point about L.A. and a diverse economy. Mainly I was thinking back at how hard the tech bust hit Austin in 2001, which turns out to have been a good thing in the long run I think. We are still very tech-heavy, but it's shifting somewhat, which makes us less dependent on high tech.

Steve

[Jazzedforhim]

Originally Posted by Phisch

Don't worry too much about it (worrying won't make it sell faster!).

We did the sell/buy thing twice now and each time it was a looooong process of 6+ months.

This last time, I didn't worry to much about keeping things terribly **** and span. The days we left a mess in the sink and a pile of laundry in my bedroom were the days we folks stop by who were really interested. They were also parents with little kids so they could relate. The person who finally bought it was someone who was an investor (I guess) who was going to remodel the whole place. Even though it took 7 months to sell (Nov. to Jun.) I was happy because the timing was perfect.

It'll work out

Thanks, I guess I have been spoiled. The last two times we sold we had a buyer in the first month.

It's more stressful this time around as we don't have time on our side since hubby's company needs him there now...but we can't afford a place here AND a place there. They are going to have him work here in California for now...but how long can that go on?

Sorry for venting, it's not like me to be this discouraged. I guess we all have phases we go through. But...thanks for the encouragement, I know it will work out in the end.

[TheHarvester]

Originally Posted by Austin97

Ultimately what drives prices is the general economy. If Austin doesn't have money flowing in from other places, then Austin prices will only grow at the pace of inflation. I was at a CEO forum last year where an economist predicted the following: 2007 is an up year but decelerating growth. 2008 starts the decline. The bottom happens in 2009 (in real estate).

It's interesting to go to those seminars, but after you've been burned about 500 times by forecasts from "experts", you start to question their credibility. I don't think there's any reason to put more faith in the words spoken at that CEO Forum than you should put in your own intuition.

The "experts" are WRONG most of the time. Nobody can predict human behavior. I'd like to see one accurate forecast from 20 years ago regarding how the nation looks today. They're ALL wrong. They do their best. I got my Masters in Econ, I have respect for the struggle to comprehend markets. Respect for the struggle doesn't translate to trust in their forecasts, though.

I look around me and see miles and miles of Texas. Without scarcity, there is high risk because Austin could, for any number of reasons, go south economically and there's no built-in value in owning Texas land. Compare that to owning land on the California coast --- I'll take the California investment (long term, not short term.) You can't replicate that idyllic climate, topography and natural beauty.

The scarcity that DOES exist in Texas is in terms of natural resources, not land. That's a dangerous combo. Texas is extremely dependent on cheap energy (few would live here without AC and a car), and water. This year we're not worried about water, but it's inevitable that we'll have a multi-year drought and it will be harsh.

Texas has its nice qualities, I choose to be here because of them, but a lot of what is special about this place is being rapidly destroyed by the developers who are cashing in on the destruction of the few natural treasures that Texas has to offer. After Barton Springs closes due to ground water pollution, after the rivers are all lined with developments and all the highways are clogged, what's left to keep people here?

You're probably right about west Austin, though. It has a unique combination of natural and social/cultural amenities. That's why I think the best investments for the long term are to be made in the hill country to the west of Austin and San Antonio. And.... that's sad, because it used to be so beautiful and wild in those lands only 15 years ago.

[AllAroundAustinRES]

Everything I have read or watched on TV has stated that Austin is one of the 7 continually growing markets in the US. I have even seen us ranked all the way up to #4. With that said, being in the business of Real Estate in Austin, I am consistantly busy.