Why did Austin never have an RE meltdown? (Vega, Happy: real estate, credit card)

[AD1985]

Can someone tell me why Austin never had a substantial real estate boom/bust cycle like most of the rest of the country?

Thanks

[Exiled Texan]

What is a meltdown? I know someone who sold their house this year (bought it 4 years ago) and lost $70K. Central/coveted neighborhood.

High property taxes helps mitigate real estate russian roulette. That said, I know folks who lost homes due to being out of work a year or who had to sell fast at a loss.

I think my house (which I bought in 2010) would have sold for at least 100K more in 2007. Market is still uncertain, albeit with a floor being created.

[hoffdano]

The single most important reason: relatively stable and relatively low unemployment.

[HappyTexan]

Our rules on HELOCS saved us. Plus Texas came to the HELOC party rather late.
Texas had a banking fiasco once before and the laws were put in place regarding homes and equity and how much you could take out.

That's what saved our butts.

[mark311]

Higher property tax rates than most other parts of the country helped out. In other areas people were able to do special financing ARMs on a $600K house even though they couldn't really afford it long term. Since you don't finance your property taxes, people in CA for example with a 1% property tax rate only had to pay $500 per month for property taxes on that $600K along with their short term ARM rate. Here, property taxes on a $600K house would be somewhere between $1000 to $1400 (2.1% to 2.8% of appraised value) per month even if they had that special ARM. Again, that money is out of pocket so it wasn't as affordable to buy a $600K house here even with creative financing due to higher property tax rates.

[N. Olikee]

Originally Posted by HappyTexan

Our rules on HELOCS saved us. Plus Texas came to the HELOC party rather late.
Texas had a banking fiasco once before and the laws were put in place regarding homes and equity and how much you could take out.

That's what saved our butts.

Exactly and rather well put!

[Gorfml]

ppl are losing big money on their homes right now!...

[JohnHenrySDM]

Originally Posted by HappyTexan

Our rules on HELOCS saved us. Plus Texas came to the HELOC party rather late.
Texas had a banking fiasco once before and the laws were put in place regarding homes and equity and how much you could take out.

That's what saved our butts.

Yup, that's how I see it

[austin-steve]

I agree with the previous posts.
Home Equity loan limits, high property taxes.

To that I will add that, having talked to a slew of "investors" by phone in 2005-2007 as Las Vegas, Phoenix, California, Florida markets started to play out, many were what I would call, in a word, "stupid".

I would always ask an investor prospect "So, what causes you to be interested in investing in real estate in Austin Texas?", then just sit back and listen. I couldn't believe what I was hearing. These were (for the most part) not people with investment strategies, wishing to invest excess discretionary income in real estate as a diversification strategy, having already maxed out all other prudent vehicles such as company matched 401Ks, etc. These were often dummies with maxed out credit cards, car payments, no returement savings, minimal income wanting to jump on a bandwagon of real estate speculation.

I'd say "we don't do that in Austin. Your numbers won't work here". And that would be that for many of them. They just went away. Because of the aforementioned taxes and loan limits preventing people from using home equity as a 120%-of-value ATM machine, we also didn't have locals catching that fever.

That said, we did sell to a lot of financially able investors who were more prudent in both their approach and expectations. This did cause a blip in 2006/2007 prices because we did have some investor vs. investor multiple offers in some areas, but this was minor and short compared to the 5+ year run the the boom/bust areas of the US experienced.

Steve

[AD1985]

I'm having trouble figuring out how home equity loans would be a factor (and I googled a fer queries). Is it because people elsewhere used HELOC money as a down payment on 2nd properties? Or something else?

Thanks