Austin Business Journal April 1, 2021 |Residential Real Estate| “NOPE” “Experts agree: This isn’t a housing bubble” by Colin Pope
Read the article for all detail.
Summary of the Article
“Austin’s [has a] super housing market-and it will remain relatively sky-high for years to come, experts agree. According to Kara McGregor (SVP Independence Title) “A bubble bursting means demand will go away, and with job growth in Austin the way it is, it’s hard to see how that will happen.” Even dire scenarios like “a recession” and “a global public crisis...” didn't stop demand from rising in 2020.
Can prices continue to rise?
As of January 2021 Austin median home price surged to $395,000 or 22% higher than January 2020. While such upward momentum can’t continue long-term experts predict double digit increases will continue for a couple of years. So far in 2021 demand for housing in Austin remains unabated driven by corporate and personal relocations.
Are we experiencing a real estate bubble?
Compared to historic bubbles like in California in 2008, presumptive borrowers now are subject to greater investigation of their credit-worthiness and speculation or flipping of single family homes is low. Indeed, deals are closing fast and typically at prices well-above the asking price. “The biggest culprit to rising prices: supply and demand.” Prices are stable when the market has six months of inventory but we are currently as low as 0.4 months and in selected areas, like near the Apple campus, “housing inventory has been clocked as low as three days.” Kevin Burns (Urbanspace Real Estate + Interiors) commented “The sell as fast as they come on the market.”
How did this rise in demand and price evolve?
Inventory and demand.
Between 1990 and 2012 inventory fluctuated mostly between two and six months but has dropped precipitously in the last year or so from slightly more than two months to 0.4 months.
In the 1990s median prices nearly doubled from $71,000 to $136,564, 2000s $132,872 to $186,860 and the biggest jump which most of us recognized was 140% from $174,386 to 319,570 between 2010 and 2020. In aggregate, that’s a 350% increase since 1990. Having noted the price increase in Austin the area is still “far below places such as San Francisco, San Diego, New York and Boston where the median price can be two to three times as high.”