Is Austin in a Housing Bubble?

Posted on Wednesday, December 3rd, 2014 at 7:21pm.

Is Austin in a Housing Bubble?

People are starting to wonder if Austin’s real estate market is a bubble about to burst. The Austin Board of Realtors recently released an article to reassure area home buyers and sellers that the Austin market is healthy and is NOT experiencing a housing bubble. Let’s take a look at the facts and pop the bubble myth.

A housing bubble occurs when home prices rise due to demand and speculation, among other factors. Speculation is when a buyer purchases a home with a small down payment with the intention of “flipping” it quickly to make a large return on their investment. Speculation can cause prices and demand to increase further, adding to the potential of a bursting real estate bubble. In addition to speculation, loose lending standards can also contribute to a housing bubble.

The good news for Austin is that jobs and population growth, NOT speculation and loose lending, are fueling the demand for real estate in our area. Austin’s unemployment rate is 1.5% below the national average at 4.6%. High-paying jobs in Austin make up about 42% of the total job market, and middle wage jobs grew 16% in the last 5 years*. As for population growth, it is estimated that 110 people move to Austin every day, but after subtracting those who leave the area, the actual number is closer to 54*. Either way, the fact remains that lots of people are moving to the Texas capital to take advantage of available jobs. In addition, since the recession in 2008, lending standards across the country have tightened to help ensure that only individuals who can afford a particular home (great credit/substantial down payment) have access to financing.

So, although Austin home prices are on the rise, the strong demand for Austin homes is driven by job and population growth - signs of a healthy market, not a bubble about to burst. Our agents have years of experience working in the Austin area and know how to navigate the ups and downs of the market. If you have any questions about buying or selling a home in Austin, please contact us today!

*Source:  Austin REALTOR Magazine Nov/Dec 2014, Brian Kelsey, founder of Civic Analytics

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