Is Austin real estate market due for an adjustment in 2009? (Round Rock: appointed, for sale)

[Blackfield]

According to the following article, there is going to be market adjustment on many cities at CA in 2009.
10 worst real-estate markets for 2009 - Los Angeles (1) - FORTUNE

Austin average home price is hovering around $240K (Austin Housing Sales, Prices and Listings). The monthly inventory has risen to six months, a level that we have not seen since first half of 2004.

If the market in many cities at CA drop for 20% or more and Austin market remains stable in 2009, the average home price in CA are going to be quite competitive to Austin.

I am not in real estate, so maybe I am way off on this. I understand real estate market is also very local thing, it is not exactly apple to apple comparison, when I compare CA vs. TX.
In addition to this, I just moved to Austin three months ago, . So far, I have been enjoying the city so much that I am thinking to purchase a house here, next year.

I would like to hear your insight on this.

[Jennibc]

I am not a realtor but have been watching the market closely for about eight months. It seems like some houses that are priced right, in good areas, where no further development is possible seem to sell rather quickly. Others that have been sitting a while started our ridiculously overpriced.

The thing about Austin is that although the prices rose rapidly in the late 90s that was due to growth in the area and the not the "housing bubble" that the rest of the country experienced in 2003 -2007. During that time period, Austin's housing didn't rise as quickly in terms of percentage as did the rest of the country. All the price falls in other parts of the country is the result of the bubble prices correcting themselves. If there is no such correction needing to occur in Austin prices aren't going to fall all that much.

When we were down there last week securing temporary rental housing I also had a chance to go see some houses for sale with our realtor. One thing I noticed, the lowest priced houses are short sales and foreclosures. My realtor told me a lot of the short sellers were speculators from outside the area that had the homes built and were "planning" on renting them out for a year or two until they would sell them at twice the amount what they paid. What they didn't realize that in TX there is plenty of room to build and property taxes are staggering so they lost their shirts pretty quickly.

I am not sure there is enough of the above scenario to adversely affect Austin housing prices though. That said, I think if you look now you might be able to find some good deals on those short sales. I think I've also read elsewhere, sorry I cannot cite my source, that housing value increased in Austin 4% last year while it was dropping in nearly every other market.

[mark311]

I personally don't believe that we're going to see any large price adjustment (more than 5%) in just about any area in or around Austin.

Just by looking at that article, almost every single location in the 10 worst list are areas that people were forced to move to because the most desirable area was already too expensive or because the areas grew too fast. The area of L.A. that is mentioned is the Long Beach-Glendale Metro area. Notice they didn't mention the Westside. You won't see Santa Monica or Pacific Palisades on that list.

The point is that the desirable areas won't see that dramatic drop. There is no Austin equivalent to Riverside where everyone fled to in order to escape the outrageous prices. The truth is that people like yourself are still moving to Austin from areas like California and as long as people are still moving here, then the demand will keep the prices fairly steady. Almost the entire Austin metro area is still desirable in my opinion. I didn't WANT to live in Riverside County, and that's why I moved here 3 years ago. I still would never want to live in Riverside no matter how low the home prices get. Now, if I could get a similar home in Del Mar or Laguna Niguel for the same price as Austin, then I would think about it.

[Jennibc]

Considering most of those markets are in CA, do you think that some Californians that moved here looking for cheaper housing and have been somewhat disappointed with the area might move back?

[AustinGuy]

Texas is a boom and bust state. I'd say the chances of us entering the "bust" phase are relatively high given the dramatic decline in the price of oil these last several months.

How that will impact the Austin job market and housing market is unknown at this point, but it is likely to be a negative impact.

[jobert]

Prices would only correct themselves if the homes were overvalued in the first place. The only scenario where a correction could occur is the downtown hi-rise condo market or generally the closer-in areas of Austin where 1000 sf barns are going for 500k+. The employment stats are good in Austin compared to nationally. I believe unemployment is around 5% or less here. Then look at the average home price, Look at the average family income for Austin The ratio should be around 3:1. Take a place like Seattle where this ratio is 10:1 and you see why there is an elephant in the room. This is fuzzy math, so please verify these statistics if further interested. Austin real estate is very attractive and always has been.

Most importantly, follow your gut. If you feel you are being ripped off, you probably are. There is no justification for paying $500/sf for a hovel except greed.

[mark311]

Originally Posted by Jennibc

Considering most of those markets are in CA, do you think that some Californians that moved here looking for cheaper housing and have been somewhat disappointed with the area might move back?

It's possible, but in my opinion, the people that would consider moving back to THOSE areas on the list would prefer it here. Again, those areas on that list are not the "California" that you see on TV. The more desirable areas are still a lot more expensive, especially the nice suburbs within 30 minutes of the major cities.

So, the person here that paid $200,000 to $300,000 for a nice suburban house in Round Rock, Cedar Park, or South Austin with good schools still has no equivalent place to go in California. Now a person that paid $500,000 for a place in Central Austin has more options to move back, but unless they have family there, really miss the Ocean, or can't handle the Austin summers, then I can't think of many other reasons to go back. Again, this is just my opinion as a former Californian now living in a suburb of Austin.

[Jennibc]

Originally Posted by jobert

Prices would only correct themselves if the homes were overvalued in the first place. The only scenario where a correction could occur is the downtown hi-rise condo market or generally the closer-in areas of Austin where 1000 sf barns are going for 500k+. The employment stats are good in Austin compared to nationally. I believe unemployment is around 5% or less here. Then look at the average home price, Look at the average family income for Austin The ratio should be around 3:1. Take a place like Seattle where this ratio is 10:1 and you see why there is an elephant in the room. This is fuzzy math, so please verify these statistics if further interested. Austin real estate is very attractive and always has been.

Most importantly, follow your gut. If you feel you are being ripped off, you probably are. There is no justification for paying $500/sf for a hovel except greed.

Not to be nit-picky but shouldn't we be looking at medians instead of averages?

Your numbers for Seattle are a bit off. The median price for a house is now under 500K and the median family income is nearing 70K.

I am of the school of thought that medians don't matter that much, what matters is how much housing is available and how many people are chasing it. The thing that makes the Austin area more affordable than water locked cities like San Francisco or Seattle, is there is still plenty of room to build whereas in those other cities, things are built out. There's still room in the suburbs of Seattle but there are so many regulations on building that prices are driven up because of the increased cost. Seattle is falling a little bit but I don't think it will be dropping in the neighborhood of 25% the way those markets in CA are. Too many wealthy people want to live there and with sizable down payments and access to capital they have driven up prices.

[ioda006]

I've been examining numbers on this for the past few months. From what I've gathered:

• Austin was hit by the housing boom, but not as bad as FL, CA, etc. (obvious). Their numbers inflated 2x+. Austin's went up less than, but close to 2x.
• The rest of Texas was not nearly as affected as Austin.
• Not sure how to attribute prices to growth and demand. Austin is a very fast-growing area, but other areas with similar growth rates have taken a huge hit from the bust when Austin has not.
• The boom hit in a wave and Austin was seemingly hit and the very tail end of the wave. At a glance it looks like Austin might be 2 to 3 years behind other parts of the country. My guess is that it will take 1-3 years for Austin to catch up with the bust.

Another factor to consider is how inflation will affect things. Assuming we pay for the bailouts and other recession problems and the rest of our country's expenses by inflating the currency (which is the current plan shown by dropping the rate to 0.00-0.25%) we will see inflation rise (and housing prices increase). The dollar is already falling rapidly as a result of the rate drop. Should it take Austin 3 years to catch up with the bust and inflation rises at a more rapid rate than 'usual' (1-5%) you might see prices just level off where they currently are or go up with it.


A lot of stuff in the suburbs of Austin was affected differently. You'll see a lot of composite data for Austin + Leander + Round Rock + Cedar Park + Bee Cave, etc etc. In the suburbs prices aren't that outrageous, but still high compared to the rest of Texas. $90/sqft is pretty common to see in Pflugerville, Leander and Cedar Park.

[AK123]

Whatever the case... I think now is probably a great time to buy for anyone who has been waiting.