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Real estate in all the "hot" markets that are now falling was a pyramid scheme. Investors selling to investors. Great way to raise prices but sooner or later someone has to make a payment.
Just browse houses for rent in Phoenix on Craigslist. Phoenix is arguably the biggest bubble market and is sliding fast. For $1500/mo you can get 2500-3000 sq ft, new construction, with a pool...houses that sold for over $500K. Do you think $1500 is covering that mortgage payment or are they just trying to get what they can get to keep the pyramid from collapsing?
Those are good points about the impact of investors/realtors in pyramid-mode trying to keep the bubble going... there is a great site regarding that, and market strengths in general: Bubble Markets Inventory Tracking
Another investor-related aspect which may also hurt the Austin market: The out-of-state investor component is not insignificant here; I think some investors were chasing the appreciation that was no longer happening in the bubble markets. However, as pricing comes down in those markets -- especially if it drops significantly, like it may be doing in Las Vegas, Phoenix, and Miami -- smart investors will start going back in to those places, and stop coming here.
Personally, I think I will enjoy things either way the local market goes (bust or steady). The historical bust, if it happens again, is probably just the thing to bring back some of the funkiness here. Just imagine -- musicians and artists will once again be able to live around S Congress, or maybe in the downtown condos which owners will have to rent for ANYTHING... unemployed workers wanting to stay in Austin will add to the artist, musician, and just plain slacker population. Traffic may ease up a bit. Austin will start to return to it's slower, more easy going self.. until the next boom.
I'm almost mad at you for being so much more eloquent about this than I was in my comments...
I'm just glad you brought up the point in the first place.
When I was looking at Austin as a place to move to I had no idea the enormity of people cashing out from other states and moving here.
I was moved here strictly for a quality of life reason. I left a high paying job and a $670.00 mortgage in Las Vegas. That included taxes & insurance by the way
If the property taxes were sane in Texas, Austin would be ruined with investors.
It's impossible to talk about Austin in broad general terms of the real estate market. There are many sub-markets.
In general, appreciation is still strong, though a slowdown in number of sales and increase in inventory is marking a shift of some sort. Meanwhile, we keep getting multiple offers on our listings, so from where I sit, things are good.
Quote:
However, as pricing comes down in those markets -- especially if it drops significantly, like it may be doing in Las Vegas, Phoenix, and Miami -- smart investors will start going back in to those places, and stop coming here.
Trust me, "smart" is not the term best used to describe most of those investors. Many are losing their shorts. Going to and fro and chasing markets across the US in different cities is stupid. It's best to pick an area and stick with it long term. Austin is still a good place to invest, but not for everyone.
Trust me, "smart" is not the term best used to describe most of those investors. Many are losing their shorts. Going to and fro and chasing markets across the US in different cities is stupid. It's best to pick an area and stick with it long term. Austin is still a good place to invest, but not for everyone.
I agree that most of these investors may not be very wise; however, the facts indicate there are many people investing here from other parts of the US. For those people who are investing in areas outside their home city, or just trying to diversify their investments across multiple markets to maintain a decent return, it only makes sense that they would start to look at the free-falling markets at some point. When that point happens, whatever appeal Austin might have had a real estate investment will diminish as the savvy investors pick up the bargains in other markets.
I'm making this point only in reference to how it might affect the market here...
Maybe those investors are all idiots and will lose their money, but if I were in their shoes... Beach access condos in Miami might be looking pretty good soon.
Just a random opinion here --- Every market in Texas, including Austin, has a history of boom and bust. There is no security in buying real estate here. There is very little property in Texas that has any lasting unique value. Just because Austin is a real estate hot spot right now doesn't mean that it won't be an economic wasteland in 10 years.
If I were a gambling man, I'd bet that Austin will retain most of its value based on certain natural and cultural amenities. But it has a lot of risk built in to its foundation. It's in the middle of Texas, which is not promising. It has horrific summers. There is endless land in all directions which can be developed. There's no built-in scarcity here to support high prices. I predict it will hold value well but I don't think that's a solid prediction and I don't think anyone has any basis for saying that Austin is going to be a good market for years to come. There are countless reasons why it could collapse as it has in the past, not the least of which is the fact that the housing boom here has been driven largely by Californians who are now getting stuck in California because they can't sell their over-priced homes. Tread with caution.
While I generally agree with you, I would like to say that like every other
investment, real-estate has a cyclical term associated with it. If you
want to live in your house for 3-5 years, you might see a dip next year,
but it will matter in the long run, only if the market cools off for a
long period. Otherwise, you should be fine.
It seems to me that the nationwide cycle is ahead of us by six months
to a year, which means that investors will find better bargains elsewhere.
This can stabilize the prices here, and I would expect to see a decline
in property values in Austin in the short term.
In the long term, if Austin property values have to grow, we definitely
need business to thrive here. If nothing is done about traffic and
other infrastructural problems, people will go away.
Yesterday, it rained hard, I saw so many traffic lights go bust.
Never seen that anywhere else. In addition to traffic, to attract
commerce, Austin needs at least one direct international flight to a major
Hub in Europe (such as London or Frankfurt) and one to a major
hub in Asia (say Narita or Hong Kong). Dallas and Houston have many
such flights, and they can do wonders for the local economy.
It's impossible to talk about Austin in broad general terms of the real estate market. There are many sub-markets.
In general, appreciation is still strong, though a slowdown in number of sales and increase in inventory is marking a shift of some sort.
I love your posts. Couldn't give you rep because I've already given it in some other thread, so I'm posting it here. You provide some of the most informative, reasonable and balanced assessments about real estate issues and the Austin area of anyone on this forum.
I especially agree with your comment that you can't generalize about Austin because "there are many sub-markets." Amen to that. This is a very tricky area for investing. If you want to live in Austin for a long time and own your place for many years, then it's not so tricky. But for investors trying to do the quick turn-over deal, it's extremely subtle and you really need to know the area and the many factors that contribute to the rise and fall of prices on every block of every neighborhood. It's wild!
I love your posts. Couldn't give you rep because I've already given it in some other thread, so I'm posting it here. You provide some of the most informative, reasonable and balanced assessments about real estate issues and the Austin area of anyone on this forum.
I especially agree with your comment that you can't generalize about Austin because "there are many sub-markets." Amen to that. This is a very tricky area for investing. If you want to live in Austin for a long time and own your place for many years, then it's not so tricky. But for investors trying to do the quick turn-over deal, it's extremely subtle and you really need to know the area and the many factors that contribute to the rise and fall of prices on every block of every neighborhood. It's wild!
Thanks. I appreciate the vote of confidence.
We are, at present, at fork in the road in the Austin Real Estate Market. A shift has occured, but there are conflicting numbers. I just ran my monthly sales stats for July and August, and as has been the case since about the tail end of 2005, we are chugging along with wonderfully solid numbers overall, and good but not over-heated appreciation. Of course, specific areas are doing better or worse, but Austin overall looks great.
The concern though is that the number of sales is slowing as the inventory rises. This is not a good combination, yet the stats show no indication of prices being affected, yet.
For August 2007/2006 comparison....
Number Sold = Down 16%
There were 2703 sales in Aug 2006. 2258 sales Aug 2007 (single family homes, I exclude condos). That's a fairly hefty drop. 2006 was a breakout year, so we expected 2007 to have fewer total sales, but 16% is a big drop. For the year 2007 to date, through August, number of sales is down 3.7%, so you can see how the 16% number is outside what we were expecting for the last summer month.
Now for the good numbers....
Avg Sold Price = Up 7.4% to $264,763
Median Sold = Up 5.4% to $195,000
Avg price per sqft = Up 5.3% to $122/psf
Avg Days on Market = Down 5% to 57 (a great number)
Median Days = Down 2.8% to 35 (an outstanding number)
All of the numbers, with the exception of Number of Sales, are great, solid numbers that are the envy of almost any other real estate market in the U.S.
Nevertheless, something has shifted and it seems like the national lending debacle and gloomy real estate market elsewhere has begun to lap at our shores and erode local confidence, despite great unemployment, job growth, population growth, and a strong overall Austin economy. I don't know if this is a very minor breater, or an indication of further slowing of sales, which will eventually affect the other numbers.
Bottom line, it's still a great time to either buy or sell in Austin. If you're a buyer, you have more breathing room and negotiating room (in a broad, general sense -many neighborhoods are still very strong seller markets) than you did last year, or earlier this summer.
If you're a Seller, your home will sell fast and for a better price than it would have a year ago, but you better price it in the best 30% of the compitition, and you better put the staging and condition in the top 30% of the competition. Do that and you'll likely be one of the 50% that sell in 36 days or less.
Steve
Last edited by Trainwreck20; 09-13-2007 at 10:02 PM..
Reason: corrected numbers based on later post (now deleted)
According to the housing tracker web site Austin's Inventory change for the past week was 15.3% increase while median price 1 wk change was -2.4%. These are the highest numbers among all US cities in that list
Those are good points about the impact of investors/realtors in pyramid-mode trying to keep the bubble going... there is a great site regarding that, and market strengths in general: Bubble Markets Inventory Tracking
Another investor-related aspect which may also hurt the Austin market: The out-of-state investor component is not insignificant here; I think some investors were chasing the appreciation that was no longer happening in the bubble markets. However, as pricing comes down in those markets -- especially if it drops significantly, like it may be doing in Las Vegas, Phoenix, and Miami -- smart investors will start going back in to those places, and stop coming here.
Personally, I think I will enjoy things either way the local market goes (bust or steady). The historical bust, if it happens again, is probably just the thing to bring back some of the funkiness here. Just imagine -- musicians and artists will once again be able to live around S Congress, or maybe in the downtown condos which owners will have to rent for ANYTHING... unemployed workers wanting to stay in Austin will add to the artist, musician, and just plain slacker population. Traffic may ease up a bit. Austin will start to return to it's slower, more easy going self.. until the next boom.
I don't think it will return to a slower, more easy going self. Not unless you boot everyone out of here. Sorry, but Austin is growing and it will never be 1990 here again. Just an opinion.
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