Hey Steve (Austin, Atlanta: rentals, house, neighborhood)

[10scoachrick]

As a wise man once said, "There are lies, damned lies, and then there are statistics.".

[atxcio]

Supply may not increase, but demand falls as prices rise.

This is true, but it is a much more natural and less volatile force. In established neighborhoods, pricing has steadily increased over time... if people start listing their houses for 10% more, demand isn't going to all of the sudden plummet.

Originally Posted by LinusK

Consider this: there are any number of desirable houses in desirable locations located throughout Southern CA -- which have fallen 10, 20, or 30% or more in the last couple years. Why?

I dont' think this is the case. The price drops you are referring to in CA are in generally in undesirable or outlying areas that were worth very little before, then rose quickly during the boom.

In fact, many of the existing desirable areas -- for example West L.A., Bev Hills, South Bay, Malibu, Pasadena -- have not seen much decrease at all. Some are still increasing.

[cub77cub]

Originally Posted by atxcio

This is true, but it is a much more natural and less volatile force. In established neighborhoods, pricing has steadily increased over time... if people start listing their houses for 10% more, demand isn't going to all of the sudden plummet.



I dont' think this is the case. The price drops you are referring to in CA are in generally in undesirable or outlying areas that were worth very little before, then rose quickly during the boom.

In fact, many of the existing desirable areas -- for example West L.A., Bev Hills, South Bay, Malibu, Pasadena -- have not seen much decrease at all. Some are still increasing.

Where are you getting your information regarding CA real estate? You refer to "undesirable or outlying areas that were worth very little before..."

We sold in the San Diego area in August. This is far from an undesirable (or outlying) area. Property values have decreased, and are continuing to do so.

[carlym]

Does anyone out there know how area 10 (Bannister South) is doing? Any predictions for the next 6 months? I'm in that preretirement zone. I see a couple sitting here on Bannister that haven't moved at all. Maybe one even lowered their price. Thanks

[atxcio]

Originally Posted by cub77cub

Where are you getting your information regarding CA real estate? You refer to "undesirable or outlying areas that were worth very little before..."

Why, the City-Data forums of course! (plus some other sites ) I mainly read the LA city forum, and have been trying to help a friend find a deal on a single family house in Pasadena or Burbank. Despite the huge property value decreases you hear about, there are still areas of LA which are hot commodities, and you won't find anything decent going for 30% off what it was a year ago.

I probably shouldn't have said "undesirable" areas, because I'm sure there are some nice areas of SoCal that have seen some big decreases. But none of the ones we were looking at did... perhaps the sellers are just playing chicken, or don't really need to sell.

But bringing this back on topic, my point was just that if you can buy in a desirable, established close-in location in Austin it's probably a safe bet your investment will increase in value. And if it decreases in value because of a bad overall market, it will decrease less than more speculative transition neighborhoods or outlying areas. From a pure investment standpoint, location trumps anything else.

[LinusK]

Years ago there was an investment fad that centered around investing in what was called the "Nifty Fifty". The idea was that the companies were so good, so solid that it didn't matter how much you paid - the price would always go up.

People who bought into that idea were eventually punished - not because the Nifty Fifty went bankrupt, or because they stopped earning money - but because no matter how good a company is, there's always a price that's simply too much.

I don't know what price is 'too much' to live in Central Austin - but I know that there is one. And I know it's related to what's happening in the burbs - there's a point where you're people are no longer willing to settle for a 900 sf 'fixer-upper', when they can get a real house, for less money, by living a little further out.

People are willing to pay a premium to live close-in, but not an infinite one.

[10scoachrick]

As long as we are getting academaniacal, riddle me this...your house on PCH washed down the cliff a couple of years ago. Do you still own the piece of Cali directly below where your property was? There were homes literally 100' above the coast highway that were supported by stilts, waiting to be torn down...could the homeowners rebuild on the land that remained below?

[fil]

If we go back to the point of this thread and my comments yesterday:
1- The eal estate market in Austin is correcting, like it is elsewhere in the country
2- If you're investment minded, buying central continues to pay dividends in the short and long terms
3- The market is slowing down in Austin and well-priced, attractive homes continue to drive up the median home prices

[fil]

Originally Posted by LinusK

I don't know what price is 'too much' to live in Central Austin - but I know that there is one. And I know it's related to what's happening in the burbs - there's a point where you're people are no longer willing to settle for a 900 sf 'fixer-upper', when they can get a real house, for less money, by living a little further out.

People are willing to pay a premium to live close-in, but not an infinite one.

I agree, but if you look at Tampa this is exactly what's happened.

We are thinking of buying there and you can't get a 3000+,4/3 for less than $900K in Tampa and known "good area" close in without renovating. The prices keep going up in the central area there and does not seem to be a ceiling, just a high entry cost of buying into that market.

Do I see this in Austin? No, so I agree that there eventually will be a market correction...I think we're hitting it in Austin outside of the core. Perhaps in a 1-3 years we'll see the land valuations level out or the demand for the older, non-updated inventory decline in the central region.

That said, I think we'll be on of the last hit by the current market.

[austin-steve]

I don't know what price is 'too much' to live in Central Austin - but I know that there is one.

It use to be that sales and rent prices ran in a relative relationship to one another. If we chart that on a line, it held true from after WWII up until about 2001 and the lines have not yet migrated back together. So, in a broad sense, when monthly rents are less than 0.5% of sales values, as they are in some Central Austin areas, either the rents are too low or the sales prices are too high. Why pay $450K for a tiny dump when you can rent it for $1800/mo?

That said, maybe the historic rule that held for 50+ years is no longer valid due to the psycological alteration that has occurred in the housing consumer's mind as a result of too many fix-and-flip shows and the mentality that real estate is a game to be played instead of a sourse of shelter and lifestyle.

Steve