Austin Homes Most Overvalued in the US (Houston, Dallas: sale, rental)

[Ivory Lee Spurlock]

Originally Posted by mark311

I'm not sure how the article can state that Austin is sitting on a bubble that could burst. Are they suggesting that people would move to the "undervalued" areas mentioned in the article like Detroit? The people that I know who are sitting on a lot of equity all say "where am I going to move to if I sell? I'd end up buying a house for almost the same."

If the "bubble bursts" here then yes, new home builds will stop in Leander and Kyle, but unless it happens nationwide none of us could move back to the overvalued places that we came from because housing is still more than it is here. My $250k home in Cedar Park still doesn't exist in CA anywhere with even average schools. If prices go down here, we'll just get even more people from CA and NY moving here in my opinion. Maybe someone at Trulia wants housing to go down so his family can move here.

But in a place like Muncie, Indiana you could buy 6 pretty nice ranch stlye houses on quarter acre lots for $250K.

[Trainwreck20]

But in a place like Muncie, Indiana you could buy 6 pretty nice ranch stlye houses on quarter acre lots for $250K.

But doing what to pay for food? Unemployment is north of 10% (~5% in Austin)....

And per capita income is 17k vs 31k in Austin.

So you will have a cheap house, but half as likely to have a job, and if you do it pays half as much...

[Ivory Lee Spurlock]

It's all according to where a person is coming from. If you're coming from just about anywhere on the West Coast, the Northeast, DC, or South Florida, a 250,000 $$$ house in Austin would be a real bargain for what you get. Coming from a place like Muncie, Indiana, a 250,000 $$$ house in Austin would seem outrageous for what you get. An average ranch style house built in mid 70's In Cherry Creek runs about 250,000 $$$. A similar house in Muncie in a similar area runs about 60,000 $$$. I cannot in good conscience reccomend a blue collar worker in Muncie move to Austin. I'm glad I got here whenI did, when Austin was still cheap and I could live decent on 5 $ an hour.

[Trainwreck20]

I cannot in good conscience reccomend a blue collar worker in Muncie move to Austin.

Again, very dependent on the situation. What if an unemployed blue collar worker could move to Austin and get a job making $20/hr (~$40,000/yr)? Yes, housing is more expensive, but depending on exactly where you bought or if you rented, you may come out ahead.

And I have clients in the area that struggle to fill their $20/hr jobs working in quarries or other outdoor work.

[Aquitaine]

'Overvalued' or 'undervalued' seem to have obviously different meanings depending on whether we're talking about an entire market or one family's preferences. When I lived in NYC, I found the whole place 'overvalued,' but that doesn't mean it's a market bubble. My own value estimation of any particular piece of real estate has got next to nothing to do with the whole market. That's why my attitude as an ex-New Yorker of 'wow, Austin is cheap!' is just as useless as the guy who has been here for forty years and thinks it's nuts that people will pay $650k to live in Central Austin. We're both 'right' but that it's got nothing to do with market bubbles.

For any market to be a bubble, the value has to be inflated beyond any tether to an objective valuation - that being very difficult to come by to begin with! As an example, imagine if the government relaxed lending standards so that anybody could borrow any amount of money they wanted. The sudden, easy access to capital would inflate the value of homes: if everyone can suddenly borrow a half million bucks, then necessarily the purchasing power of a half million bucks will decrease in much the same manner as if minimum wage were raised to $20/hr. This is one of the strongest arguments against an Austin bubble: we may not be able to parse things like 'how cool is Austin' but we have numbers on supply and demand: it is meaningful that 110 people move here per day just as it is meaningful that builders have been going berserk and that people will pay a half million bucks for a tract house on the border of Hays County.

You also have to imagine some even that could burst the bubble. This could be national as well as local, of course; if the economy crashed and banks tightened lending standards, the sudden scarcity of capital could dent the higher end of the market since the supply of buyers would decrease. But we'd have to be able to imagine a sufficiently bad event that is likely enough to consider: to say that traffic and sprawl are making Austin less desirable is absolutely true, but even less desirable Austin is still more desirable than a lot of the coastal cities where the cost of living has driven folks out by the thousands.

[north2south.]

Just bought a house and came from Chicago.

To me, you get way more here for what you spend housewise. No way could I get a 2000sq ft home for under 200k- and if I did it wouldn't be newer and would probably need tens of thousands in fixes and upgrades. Now the home prices here are skyrocketing and don't add up completely if you're from here.. The same homes selling for 180k were selling for 140k 5 years ago. I think in those terms they are a bit over-valued however I think the fact that more than half the homes we looked at sold the same day they were posted tells you a lot. The demand is driving up the home prices.. Even homes posted above what you would think it should go far is being scooped up in a day and multiple offers shoot it up. I think as long as austin and the metro continue to grow and people continue to move here home values are only going to keep increasing.

[atxcio]

Perhaps Austin was just undervalued for many years.

One thing I've noticed, and you see it on this forum, is that many people who have been in Austin for a long time have multiple properties here. Maybe they realized, consciously or not, that what they had was was worth more to keep than what they'd get from selling at the time. I don't think they intended to be real estate investors.

Now, today the homes may indeed be overvalued or right at their proper value. We really can't know whether homes are over or under valued *right now* until a few years later -- and the market has moved up or down. So when articles say the homes are overvalued, what they really are saying is that they expect the housing market here to go down... and we've heard that many times before. Will it be true this time? We'll see when this thread is a couple of years old.

[austin-steve]

Originally Posted by Aquitaine

'...
For any market to be a bubble, the value has to be inflated beyond any tether to an objective valuation...

The primary and necessary ingredient for a speculative bubble to exist is easy lending (stated income loans, 100% cash out refi, loan fraud by lenders, etc) sand/or access to windfall cash (ike during late 1999s Dot Com bubble when Austin prices took a big jump before leveling out 2001-2005).

We have neither at present.

Steve

[texan2yankee]

I think housing in Austin, especially near to downtown, is overvalued because people are buying based on the hype that Austin is the place to make money. I hope the PR and real estate agents' crap dials down.

[sojourner77]

I think there are bubbly pockets, but don't see any reason why they would deflate. The only catalyst I could put my finger on would be property taxes, and their deflationary effect on the price of real estate. Landlords unloading a tax burden, for example - or homeowners downsizing. If property taxes were non-existent, then we would have a very volatile situation on our hands.