Is Austin in a Real Estate Bubble?
What is a real estate bubble? If you look it up on Investopedia you will find this, “A housing bubble, or real estate bubble, is a run-up in housing prices fueled by demand, speculation, and exuberant spending to the point of collapse. Housing bubbles usually start with an increase in demand, in the face of limited supply, which takes a relatively extended period to replenish and increase. Speculators pour money into the market, further driving up demand. At some point, demand decreases or stagnates at the same time supply increases, resulting in a sharp drop in prices—and the bubble bursts.”
Our Austin home prices are up 42 percent from this same time one year ago. Listings are selling within hours. Multiple offers are all but assured. Buyers in the $400,000-$500,000 price range are offering $100,000 or move above the list price. Doesn’t that sound like a bubble?
I was a real estate broker in Florida during the real estate bubble and market crash of 2007. Here’s the signs I witnessed in that bubble:
- Prices went up 150% in 5 years
- Buyers with poor credit, no job, and no income could get a mortgage
- Speculation was rampant. House flippers were everywhere
- Inventory was available, yet gobbled up quickly.
That market had all the signs of a bubble.
This market is different. At least, here in Austin. Here’s what I’m witnessing.
- Prices are going up, fast. Yet, research indicates we have been underpriced for years.
- Buyers face strict lending requirements. Buyers must have adequate income and good credit to get a loan.
- Speculators make up less than 10% of our buyers.
- Inventory is almost non-existent with only a 2 week supply of homes.
Our strong seller’s market is driven by demand. Demand is so much greater than supply prices are rising rapidly.
When will that change. Well, it takes about two years for a new housing development to be ready for sales. Builders are working as fast as they can. But one can expect this seller’s market to continue for at least the next two years.
Are you thinking about buying or selling in Austin, Cedar Park, Leander, Liberty Hill, Pflugerville, Round Rock, Georgetown? If so, give me a call at 512-516-4666. Dan Forbes, Broker, Forbes Realty.
