So Sick of the Negative Media (Houston, Dallas: short sales, foreclosures, mortgages)

[handy dan]

The implosion of the credit bubble will reduce the rate at which our economy can grow and this will adversely impact employment rates and income growth for several years.

Austin will see the median home price decline by at least 30% from here, and if the Federal Reserve were to raise interest rates to north of 12% to protect the greenback from collapse, then we'll see prices drop by at least 50%.

Those who have the patience should wait for about 3 years to purchase a house and they'll get some incredible properties for much less than what they'd pay today.

[Indigoblue]

We did two house hunts and a very large number of the houses we saw are still for sale. I don't know if that's normal for the area. But one of the houses we wanted to buy went under contract before our realtor called to ask about it, and another turned into a bidding war the first week it was listed (we backed out). Both, maybe not cooincidentally (as far as selling quickly) had insanely exceptional back yards (no pools, just gorgeous for other reasons). So my impression over the summer is that the market has slowed down some though if you have a fabulous property it will still sell fast of course As for us, we were so traumatized by the bidding war and so close to the start of the school year that we've decided to rent for a year and revisit the buying a house thing next year :P If your house isn't selling this is a good time to put it up for rent before the school year starts! It's almost here

[Jennibc]

Kingfish08, are you trying to sell a house right now? I've been watching the market in Austin since April as we are hoping to relocate down there. What I've seen is that some houses sell very fast and some have been on the market since then. I have a feeling it has to do with the quality of the house and the price. We sold our house down there in 2001 and according to Zillow it has only increased about 40-50K in value since we sold it. That is only about a 25% increase in almost 8 years. I am not sure where you are getting a "doubling of value every ten years."

It's true that in the late nineties the Austin area was the second fastest growing part of the country. Invariably that drove up prices rapidly because there were so many newcomers driving up demand. But it's difficult to believe that housing doubled in value from say 1985 to 1995. If I am wrong, please point me to some verifiable numbers.

[centralaustinite]

I am guessing that Kingfish08 was not in Austin during the S&L collapse and scandal! Real estate can go down in value and it has, talk to people who bought houses in Austin in 85-86 and tried to sell in 90-91!

This time around California is leading the real estate crash not Texas -- we were protected by our incredibly high property taxes that kept our prices more in-line with area incomes. But the Austin is definitely softening. I am both selling and buying right now in central Austin, I will get much less for my home than I expected and less than neighbors who sold 18 months ago BUT I will also be paying less for my next home than I thought.

Right now, volume is down, prices will start coming down next. I see it in northwest Austin and Eanes right now.

[atxcio]

Have to agree with Steve here, and disagree with Dan. Often in the housing market as well as the stock market, the "smart" thing to do in the long run is the opposite of what everyone else is doing. Since most people fear going against prevailing wisdom, the ones that do will benefit the most... but sometimes at great risk.

However, I don't believe the risk is that great in our area. Yes, I expect house values to decrease as a result of the overall crisis, but I'd bet they don't fall 30% here in Austin. We've seen appreciation, but haven't seen the bubble that other markets have seen. And as with any market, the right areas are always safer in terms of property values.. even in the worst markets.

Regarding interest rates, I believe they will rise, but we won't see 12% to save the dollar. The dollar has already collapsed to a certain extent, and we've seen the fed willingly increase money supply to save the banks... and that means dollar-wise, you're property value is being somewhat protected.

With rates on CDs and treasury yields flat (so far), while inflation (gas & food prices especially) is ticking up... the last thing I'd want to do is keep a big chunk of dollars in the bank for the next 3 years as I sit on the sidelines. That's probably what a lot of people are doing, and as usual, they'll get burned by those who can stomach a contrarian move.

I predict that in 3 years, property values in Austin may be a little higher, a little lower, or unchanged... while interest rates will certainly be up... maybe not to 12%, but perhaps 9.5% or something. So you can watch your dollars fall in value in a savings account, or watch them dip a little or rise a little in what is essentially a real estate/land commodity. All the while, you've had 3 years to build equity, 3 years to enjoy deducting mortgage interest and/or, in the case of rental property enjoy cashflow and repair/maintenance deductions -- all while making lower payments on a 6.5% loan vs. the 9.5% loan the sideline-waiters end up with.

I'm confident enough with the above assumptions that I too am looking for another property. It will be either a vacation property in an outside-Texas market that has been hit hard, or possibly a downtown condo in Austin if the glut in that specific sub-market drives prices down.

[AustinGuy]

Originally Posted by atxcio

I predict that in 3 years, property values in Austin may be a little higher, a little lower, or unchanged... while interest rates will certainly be up... maybe not to 12%, but perhaps 9.5% or something. So you can watch your dollars fall in value in a savings account, or watch them dip a little or rise a little in what is essentially a real estate/land commodity. All the while, you've had 3 years to build equity, 3 years to enjoy deducting mortgage interest and/or, in the case of rental property enjoy cashflow and repair/maintenance deductions -- all while making lower payments on a 6.5% loan vs. the 9.5% loan the sideline-waiters end up with.

If mortgage rates do go up to 9.5%, chances are property prices are going to come down quite a bit. Many people base what they are willing to pay for a home on the monthly payment, and a 9.5% mortgage rate jacks up the monthly payment and therefore reduces the amount of home the averge joe can afford.

Unless of course everyone gets a huge jump in average salary which could happen but seems unlikely in the current scenario.

[atxcio]

Originally Posted by AustinGuy

If mortgage rates do go up to 9.5%, chances are property prices are going to come down quite a bit. Many people base what they are willing to pay for a home on the monthly payment, and a 9.5% mortgage rate jacks up the monthly payment and therefore reduces the amount of home the averge joe can afford.

Unless of course everyone gets a huge jump in average salary which could happen but seems unlikely in the current scenario.

Yes, I am making an assumption that inflation will continue or get worse -- meaning salary will come up a little bit (witness the increase in minimum wage), so that people can (barely) afford $6 gas and $4 loaves of bread... and yes, a higher mortgage or rent payment. This is all based on the continued devaluation of the dollar, even in the face of higher (but not high enough) interest rates.

I'm also guessing that lending practices will stay strict, so most people will be buying with 20% down... which they will miraculously have saved because they didn't invest in a home when money was cheap.

[handy dan]

Right now, volume is down, prices will start coming down next. I see it in northwest Austin and Eanes right now.[/quote]

Good observations.....price follows volume and right now, the volume of transactions is in a pretty steep decline and you'll start to see prices fall sharply in Austin over the next 6 to 12 months.

[cpucore]

Originally Posted by handy dan

Right now, volume is down, prices will start coming down next. I see it in northwest Austin and Eanes right now.

Is Eanes falling because of difficult to get Jumbo mortgages or because it is not worth the asking premium or both?

We looked at a couple of new houses in an area called Senna Hills (on Bee Caves) and really liked. Is that area getting soft too?

[centralaustinite]

Well, I should clarify, I think Eanes as a whole is probably pretty solid, I can't speak to the impact of Jumbos because I intend to do a conforming mortgage (the rates on Jumbos, ouch!), but what I have noticed is increasing numbers of properties in Eanes that are falling into my price range. (All are older and need some updating but they seem like solid houses). There is a reduction in the premium Eanes commands for average houses. Newer homes and fancier homes seem to be holding steady but I'd ask a real estate agent to be sure.

I follow prices more closely in Northwest Austin, and I have seen 2 million dollar listings come down closer to 1.2, and LOTS of 750K listing come down to the 699 range and some are still looking for buyers even below that. Lots of homes that started at 600+ are have now dropped 75K.

Right now, it does seem to be a volume and velocity issue -- people want to buy but they can't sell their existing home, so the dominos aren't falling. Credit is tight, the California investors are gone, and newcomers are deciding to lease!

I think I saw that June pendings were running 50% behind last years pace, that's a huge drop.