Austin is now a market that I would call a real estate bubble. Why is that? I explain in this week’s video and hope you’ll take the time to watch it.
According to data from Zillow over the last 24 months Austin house prices have risen 71%. I remember when I was a real estate broker in Florida before the housing crash when we had 150% appreciation over a five year period. Austin prices are unbelievably high compared to pre-pandemic days.
What is the definition of housing bubble? Bankrate.com says this,
“A real estate bubble, also referred to as a “housing bubble,” occurs when the price of housing rises at a rapid pace, driven by an increase in demand, limited supply and emotional buying. Once speculators recognize that housing prices are on the rise, they enter the market, further driving up demand. The phenomenon is called a bubble because at some point it will burst.”
So, here’s the questions:
- Has Austin had rapid price increases. Yes.
- Does Austin have high buyer demand. Yes.
- Is there emotional buying going on. Yes.
- Are investors AKA speculators buying houses here. Yes.
Every indication is that Austin is in a real estate bubble. One point to note though is that since the end of 2019 new construction builders have not been selling to investors. They are selling only owner occupied homes. However, in resales, investors have been strong participants in buying.
What happens when a bubble pops?
I was a real estate broker in Florida when the bubble burst in 2008. I saw prices drop 45% in some areas. It was devastating to some. Foreclosures and short sales flooded the market. People lost jobs. Landlords had to evict tenants and then suffered when rent prices plummeted. It wasn’t a pretty picture.
Is that what’s going to happen in Austin. I doubt it. Austin has a strong economy, a strong job market, and is an attractive place for buyers. Yet, should we face some sore of economic shock this bubble could burst. Rising interest rates and a looming recession will be something to watch.
