Austin housing bubble (Houston, Dallas, Sugar Land: big home, school, income)

[blameyourself]

Originally Posted by CarnivalGal

If you look at the houses currently for sale in 78732, the average / median price is lower than a year ago. And seeing as these houses are staying on the market much longer, I don't think there's reason to believe they are going to get the 20 offers over list price they were getting last year. Even if they were all to close at 103% of the asking price, which isn't going to happen when inventory is much higher and houses are on the market for longer, the average / median sold price will still not be what it was last year.

And?

We can speculate all we want but ultimately a flattening out of this market is not going to magically make things more affordable for those on the outside looking in. Why would it? Houses have essentially doubled over the last 3 years. The real estate market always has ebbs and flows, but I think it's unrealistic to think there's going to be some dramatic shift in prices of homes similar to what we saw in 2008. I think the term "bubble" is overused and not a good description. With the amount of businesses and new jobs coming to the area, it's hard to imagine any kind of significant price drops. Combine that with higher interest rates and new buyers are really not in any better position with a small percentage drop in prices. I think it's time to stop calling the market a bubble and rather accept that the area is in a "new normal".

We'll see what happens but I think those hoping to get in on some significant price drops are going to be sadly disappointed. Those that locked in on past prices and interest rates are really the ones that are the beneficiaries (shy of the property tax increases).

[LocalPlanner]

The term "bubble" really wasn't appropriate, at least in terms of the housing market. Nationwide, what it suffered was extreme demand / supply imbalance, with ultra-low mortgage rates further facilitating price increases. In Austin specifically, you had a combination of both strong high-income job growth (tech industry) and relocating former coastal homeowners bringing lots of equity with them.

For prices to really come down in the Austin area, the tech industry will have to undergo a significant contraction. Which, yes, can happen (ask folks who had lived in Silicon Valley for a long time - tech crashes are a real thing).

Short of that, the main thing to hope for in Austin is that the supply / demand situation moderates enough to slow the price increases (this is happening but needs to happen more). The metro area communities MUST allow the supply of housing to increase to meet demand in an efficient and timely way, and without putting a bunch of extra costs on developers and builders. That includes the City of Austin, despite many of its residents strenuously disagreeing. This is how historically Houston and DFW avoided massive price increases, despite massive job growth.

[riaelise]

The reality is that homes aren't going to return to "affordable for the masses" unless something catastrophic happens. A 500k home in 2019 that has shot up to 900k in 2022 isn't going to return to 500k anytime soon. It will probably go down to the 800s, though.

The playing field for ownership of single family housing has changed.

Dual incomes are now almost a must in just about every city in the Austin MSA. A modest home under 1500 sq ft in RR that has now dropped to 329k is still unaffordable due to the high interest rates, etc.

Buyers need to have more saved money in order to put bigger downpayments and offset the rates. Putting down 10% translates into a much higher monthly payment. It's like you have to put down at least 20.

Conversely,

Sellers who need to sell now are finding themselves waiting...and waiting. More inventory has popped up, only to be met by a stagnant buyer pool. I noticed that the IMM home for sale in my neighborhood was pulled off the market and will probably re-enter the market at a lower price.

Gone are the "waiting lists" and "bidding" for new construction. Now the builders are hoping that people don't cancel their builds, considering buyers are becoming gunshy about paying 1MM for a home that isn't worth that now. No buyer wants to see any type of negative math going in to the deal. even if the negative math is a part of the housing correction.

I think sellers and buyers are doing the waiting game right now, seeing how things will play out. I wouldn't want to sell or buy right now as both scenarios aren't the best.

[Need4Camaro]

Pretty much the only way you’re buying a house is with equity or with a life savings.
It ain’t just Austin either. I was looking at places in Oak Ridge and Harriman TN (just outside of Knoxville) and saw prices in the 600’s thru 800’s.

[Austin97]

I had several friends that sold close to the peak. One moved to their ranch about 45 minutes outside of austin and two others were remodeling a home they bought right before the covid jump and managed to sell their old home right at the peak. The first sold their house for 1.3 in steiner, the other sold theirs for around 1M in riverplace and great hills. I think all three bought originally for under 300K. The remodels were essentially paid for by the sale of their old home

I moved around 2017 and sold my house for about 650K (up from around 300K in 2000). However the house is now prob 1.2M. It actually is a pretty good location (feeds into westwood) so is probably holding value. Great hills is a great location but somehow didnt get the pop of other areas until that last 5 years.

[LocalPlanner]

Originally Posted by riaelise

The reality is that homes aren't going to return to "affordable for the masses" unless something catastrophic happens. A 500k home in 2019 that has shot up to 900k in 2022 isn't going to return to 500k anytime soon. It will probably go down to the 800s, though.

The playing field for ownership of single family housing has changed.

Dual incomes are now almost a must in just about every city in the Austin MSA. A modest home under 1500 sq ft in RR that has now dropped to 329k is still unaffordable due to the high interest rates, etc.

Buyers need to have more saved money in order to put bigger downpayments and offset the rates. Putting down 10% translates into a much higher monthly payment. It's like you have to put down at least 20.

Conversely,

Sellers who need to sell now are finding themselves waiting...and waiting. More inventory has popped up, only to be met by a stagnant buyer pool. I noticed that the IMM home for sale in my neighborhood was pulled off the market and will probably re-enter the market at a lower price.

Gone are the "waiting lists" and "bidding" for new construction. Now the builders are hoping that people don't cancel their builds, considering buyers are becoming gunshy about paying 1MM for a home that isn't worth that now. No buyer wants to see any type of negative math going in to the deal. even if the negative math is a part of the housing correction.

I think sellers and buyers are doing the waiting game right now, seeing how things will play out. I wouldn't want to sell or buy right now as both scenarios aren't the best.

While I agree in general about much of your post, your labeling of interest rates as "high" indicates you must be under 35 if not younger.

Sub-6% rates would historically be regarded as pretty good, even somewhat low. The issue is that they're substantially higher than in autumn 2021, when they were still absurdly - one might even say insanely - low.

While the shift in the market itself is jarring for those who let themselves get used to the conditions over the last 2 years, if anything it's approaching a more "normal" market, albeit one that still suffers problems with supplies, materials, and labor that affects new builds and rehabs / updates.

[riaelise]

Originally Posted by LocalPlanner

While I agree in general about much of your post, your labeling of interest rates as "high" indicates you must be under 35 if not younger.

Sub-6% rates would historically be regarded as pretty good, even somewhat low. The issue is that they're substantially higher than in autumn 2021, when they were still absurdly - one might even say insanely - low.

While the shift in the market itself is jarring for those who let themselves get used to the conditions over the last 2 years, if anything it's approaching a more "normal" market, albeit one that still suffers problems with supplies, materials, and labor that affects new builds and rehabs / updates.

Lol no I’m 46 and have owned homes since 1997. I just had a slip of the brain because interest rates were below 5 percent in 2016 when we purchased our current home. Can’t remember what the rate was in 2005 when we bought our previous home, probably 5 percent.. I don’t know.

So yeah I forgot that the rates were worse years ago but the prices were also much lower as well.

[ScoPro]

My nephew’s FIL bought 200’ of Lake Austin frontage and built a 2,000 sq.ft.weekend house on the lot for under $100k sometime in the 1970s. It is located up near the Steiner Ranch area but on the opposite shore.
He sold it earlier this year for over $4 million, and the buyer will bulldoze the ‘70s house to build……?

Sounds crazy, but the 40+fold appreciation over 45 years is apparently in keeping with the typical Austin properties we have followed.

[blameyourself]

Out of curiosity, has anyone had any luck on their property tax protest (if you did one)? We paid a service and they couldn't get a dime pulled off so we're at the original estimate (our home is in Round Rock).

[Austin97]

Originally Posted by blameyourself

Out of curiosity, has anyone had any luck on their property tax protest (if you did one)? We paid a service and they couldn't get a dime pulled off so we're at the original estimate (our home is in Round Rock).

a got a tiny reduction. My home went from 1.2m to 2.4m, protest took it to 2.1m. I do expect it to go back down naturally before the end of the year (for next year).

the travis county estimated tax calculator (based on proposed rates) actually has my tax bill dropping by a few hundred dollars. I think the lack of homestead on commercial properties has actually helped homeowners a lot.