Is Austin Housing Market Inflated? Is there a Bubble? (Round Rock: renting, insurance)

[austin-steve]

Originally Posted by verybadgnome

I put my modestly-sized home here in S. Austin on the market Thursday and just got an offer $8k (5.6%) above the list price. I still don't get it and maybe its an anomaly but its possible the market is turning around.

One of our buyers just lost out on a multiple listing situation in S. Austin. They went $5K over the list price, offer was clean as a whistle, perfect in every way. Agent emailed back the next day that the seller had taken another offer.

The market is so neighborhood and price range specific that it cracks me up when these armchair quarterbacks come on here saying Austin is in trouble. It's so untrue in some instances, yet correct in others. But it's like trying to argue that the temperature in the U.S. is 75 degrees and falling.

Steve

[inthecut]

That's just a few deals....and lower end ones at that......taking into acount the ENTIRE Austin RE market, and looking 1-3 years into the future, is a entirely different picture.....

[AustinGuy]

Originally Posted by verybadgnome

I put my modestly-sized home here in S. Austin on the market Thursday and just got an offer $8k (5.6%) above the list price. I still don't get it and maybe its an anomaly but its possible the market is turning around.

Well, you can look at it as your buyer essentially putting in an offer at your ask price and kicking the 8k the government is giving him back to you.

[gpurcell]

Originally Posted by sliverbox

I think Austin could just as easily fall into a decline. In my opinion just from browsing ads, some neighborhoods in Austin are grossly overpriced. Given the taxes there, a $400,000 house might as well be a $600,000 house in SF.

Even then, a $400K house can get you into many of the best neighborhoods in Austin. $600K doesn't go nearly as far in SF.

[sliverbox]

Yeah, at the peak of a huge bubble. We've not had a bubble in Austin.

You sound EXACTLY like someone from the Bay Area. I'm sorry, but a $400k house that comes with an automatic 3% property tax is in fact an overpriced house.

There were many, many, many people just like you in SF, who had this sort of "we will never fall because we're perfect" sort of attitude. But the number don't lie and as such they do show declines in sales and prices in the Austin area. I can also guarantee that as the market continues to slide, you'll be just as happy go lucky as ever because that's also what I see out here: People who are either real estate investors or homeowners who just know that things are going to go right back to where they were. Sorry, but what we just went through was the largest bubble in US history. It won't be repeated and those counting on it are only going to be disappointed.

Lastly- the land argument holds true. Out here in the SF Bay Area, people willingly commute 60-70 miles out to work in the city. There are houses as far as the eye can see. You have to drive for hours to get out of the developments. That was not what I saw in Austin. Took us a total of maybe 10 minutes before we were back in the sticks. That alone shows anyone from a major metro like myself that there is absolutely no pressure on the supply of land or housing. As long as there is land, companies will build houses and build them cheap to get them off their books.

[riaelise]

Property taxes are a big issue. Our home is in the 250K price range and we pay 5,400 in taxes. Our house payment is over 2100/mo. When the taxes go up, our house payment goes up. Even my friend in the same neighborhood with a lower priced house pays over $1500/mo, when you figure in the taxes. A 400K home plus taxes, I'd think, can be a bit much. In NY, the purchase price is higher but the taxes are lower.

Is the housing market inflated? I think so. I think 240,000 in Leander is a bit steep for the square footage (barring Chrystal Falls). Leander is not particularly close, and some of the draws of the suburbs are bigger lots, and bigger homes. I moved out to Pflugerville/RR area because I wanted a lot of room and a lot bigger than .17. I think people paying 500K for homes in some of the Austin neighborhoods aren't really going to see their money double, that's for sure. The 'lucky' folks are those who have always lived here, who paid $120,000 for their Crestview homes, and are reselling them to transplants paying thrice that amount. Anyone else, not so much. Which is why homes are made for living. I can't count on them to add any additional income anymore. I managed to cash out at a good time when I left NY and I don't see myself seeing that situation anytime soon.

[Jennibc]

Originally Posted by sliverbox

You sound EXACTLY like someone from the Bay Area. I'm sorry, but a $400k house that comes with an automatic 3% property tax is in fact an overpriced house.

There were many, many, many people just like you in SF, who had this sort of "we will never fall because we're perfect" sort of attitude. But the number don't lie and as such they do show declines in sales and prices in the Austin area. I can also guarantee that as the market continues to slide, you'll be just as happy go lucky as ever because that's also what I see out here: People who are either real estate investors or homeowners who just know that things are going to go right back to where they were. Sorry, but what we just went through was the largest bubble in US history. It won't be repeated and those counting on it are only going to be disappointed.

Lastly- the land argument holds true. Out here in the SF Bay Area, people willingly commute 60-70 miles out to work in the city. There are houses as far as the eye can see. You have to drive for hours to get out of the developments. That was not what I saw in Austin. Took us a total of maybe 10 minutes before we were back in the sticks. That alone shows anyone from a major metro like myself that there is absolutely no pressure on the supply of land or housing. As long as there is land, companies will build houses and build them cheap to get them off their books.

How so? Doesn't an area's median income combined with supply and demand determine whether a house is overpriced or not?

[sliverbox]

The median income for Austin is around $68,000. The median home price in the area is as of now $191,000. Rule of thumb says a house should not be over 3x's earnings. Thus if you compare medians to medians, Austin's prices are actually overinflated by around $12,000 on average. So yes- Austin has a bubble-albeit perhaps not "as bad" as other areas, but a bubble just the same.

riaelise, How in the heck are you paying $2,100 a month for a 250k house? That's the same that I would pay if I bought a $375,000 house in the Bay Area. Did you put anything down?

[Jennibc]

Originally Posted by sliverbox

The median income for Austin is around $68,000. The median home price in the area is as of now $191,000. Rule of thumb says a house should not be over 3x's earnings. Thus if you compare medians to medians, Austin's prices are actually overinflated by around $12,000 on average. So yes- Austin has a bubble-albeit perhaps not "as bad" as other areas, but a bubble just the same.

riaelise, How in the heck are you paying $2,100 a month for a 250k house? That's the same that I would pay if I bought a $375,000 house in the Bay Area. Did you put anything down?

Ok, but I still don't see how a 400K house with a 3% tax rate is automatically overpriced. What if we are talking about 3000 squarefoot waterfront home with a pool? Something like that would be a steal. You might argue that the same thing out in the 'burbs on .2 acre lot would be overpriced. I suppose I take issue with the idea that you can throw out a number and say it is "In fact" overpriced.

[sliverbox]

Jenn,
We actually drove around a lot of neighborhoods in Austin. We racked up over 1,200 miles in 4 days, much of it in various neighborhoods. We would take samples from each neighborhood of houses for sale. I felt that the prices were really all over the place. There were an awful lot of 450-500k houses that I was like WTF? Like why is this sort of so-so house in a not very interesting neighborhood this much money? I found out from locals that some of these areas were expensive because the schools were supposedly good. That's a whole lot of moolah just to live near a good school. Send your kids to private school because for Chrissakes it would be cheaper than paying $8,000 a year forever on a house per year.

Yes- there were some nice houses in the hills. I understand why some were more than others. But in the Bay Area you pay more because you live near the ocean or because the scenery is amazing. But in Austin I didn't feel that some of these pricey areas were all that different from the cheaper areas. It gave me this impression that there's a pretty clear separation of class there and people like to let people know that they have the money- thus they live in a neighborhood that looks in my opinion the same as others costing 50% less.

I also think there's probably a lot of people who moved in from out of state, saw the prices, and didn't think about the taxes. All they thought "was-oh goody, look, a 300k house which is cheap compared to NY/CA/MA, etc etc. Its so cheap!" I wonder how many of them are now screwed financially. All it would take is a job loss and the taxes will eat them alive.

After driving around, I have a good idea where we would look for houses. I also have no desire to pay anything over 150-200k max for taxes alone.