New Article: Austin Tx Is Most Over Valued RE Market

[John Thedford]

Here is the link:

http://finance.yahoo.com/news/10-most-overvalued-undervalued-housing-131550950.html

Also from the article:

The most overvalued market in the U.S. was Austin, Texas (overvalued by 19%), followed by Los Angeles (15%), Orange County (15%), San Francisco (12%) and Riverside-San Bernardino (11%). In fact, the median price for single-family homes in Austin jumped 11% year-over-year in August to $247,500 and the average price rose 9% to $311,414, according to data released last week by the Austin Board of Realtors.

[Lynn Currie]

@John Thedford and @J. Martin 

You can't just look at the percentage that the prices increased in value and say it's over-valued without looking at the reasons for the rise in prices.

I do think that we've had a crazy couple of years in the Austin market, with prices going through the roof, and I do think we'll see a correction, but not a catastrophic one. Since the late 80s, Austin has been pretty solid. Just like in LA and SF, if you are in it for the long haul, your chances are pretty good for success.

In the short run, I think prices will hold steady and maybe have a small dip (10% or so?). This will happen when inventory for the houses in the neighborhoods that people really want to be in increases enough to provide some competition and longer days on market.

We saw a little of this around the end of summer, when there is a natural slowing of home sales, but from what I'm seeing we're already picking up again.

Over the long haul though? I think we're going to continue to see a rise in prices. 

• We're a city that young folks want to move to from more expensive markets like LA, SF, NYC, and DC. To them, our housing is affordable because they've often made money on the sale of a house in those areas. 
• Companies that hire young people continue to move significant parts of their operations to Austin and open Austin offices.
• Our population is expected to double by 2020. That's a lot of people buying or renting houses. The current estimate is that 110 people move to Austin every day.
• Austin has been a desirable market for a very long time. I moved here in 1989 and since then, there have been very few opportunities to get a bargain in the more highly desirable areas.

So what can really hurt us?

• Of course, a national crash, especially one that makes mortgages hard to get like we saw in 2009.
• Our property taxes. They're high at about 2.4% and our home values are always going up. That means on a $500,000 home, you're paying about $13k a year in property taxes.
• Traffic. As of yet, we have no solution for a problem that keeps getting worse and worse. This combined with a pathetic public transportation system is a really bad thing.
• Water. We've been in a pretty bad drought for a few years. This has to be figured out.

So what am I doing? I'm staying put. I'm not being naive and thinking that the money machine that we've seen over the last few years will continue to run. That's just foolish. I am still picking up projects and doing deals. The biggest problem I'm seeing right now is that investors are getting cocky. They think that the increase that we've seen over the last 3 years will keep repeating itself. I'm conservative with my projections by nature, so I don't count on that when I buy. It's getting harder to find the properties on the front end, but that's okay. I'll wait until the price is right.