While at a brunch this weekend, I found myself sitting in on a conversation that turned to the group talking about the Austin real estate market. Naturally, being a broker in the industry, I joined the conversation and we got to talking about how competitive the market has become.
One guy was talking about how his friend submitted an offer and there were multiple offers. Another was talking about how they wanted to buy, but may wait until the market cools off. After that brief discussion, they looked at me and asked for my opinion. Before I could start, one said “well of course you’d tell us to buy right now, you’re a Realtor.” Although I completely understand Realtors are a sales based industry, I found that interesting he would assume I would tell him to buy no matter what.
We’re at a tipping point in the Austin real estate market and Gen Y is prime for entering the home buying market. Because I want my friends and clients to make the right decision, I feel it’s important you have the right information to make the right decision for yourself. Here are my thoughts on the current housing market in Austin.
So What’s Going on in the Austin Real Estate Market?
Let’s throw the hard facts out there – housing inventory is at an all time low, there’s an influx of people moving to Austin and they need a place to live. Some are renting and we’ve noticed rents go up. Some are buying and we’ve noticed home prices go up since there is a limited amount of inventory.
In the next six months, sellers will start to take notice at the rising home prices and say “oh, I’d consider selling” and we’ll see more home inventory on the market. This will curve the demand a little, but we’ll continue to see more buyers entering the market as well.
So let’s discuss some of the comments I heard while discussing the Austin real estate market.
Should I Wait Until the Market Cools Off to Buy a Home in Austin?
Unless there is a disaster that has an impact on the national economy, or maybe Kim Jong-Un actually finds a way to attack Austin, then the Austin market won’t be cooling off anytime soon. Once the market does cool off, probably in 2016, we’ll see prices level out and start a slow and steady climb. Since the market has almost corrected itself, we shouldn’t see a depressed market like we saw in 2008 to 2011. And what’s happening with interest rates?
So now is the right time to buy?
Yes and if you need a second opinion, ask your CPA or financial planner. Interest rates are at an all time low and I expect them to slowly start increasing next year. Every time the interest rate goes up, the amount of home you can afford goes down. Combine that with increasing home prices and that would absolutely suggest that now is the time to buy. By 2014/2015, interest rates will start to slowly rise. In addition to interest rates, there are a few other indicators you’ll want to monitor.
Which Indicators Should I Watch?
Once we start to see unemployment decrease, or inflation starts to increase, the Fed will stop printing money and we’ll start to see mortgage interest rates go up. You can visit Yahoo Finance to see what mortgage interest rates are doing (Stock Symbol: TNX). We’ve seen home prices go up in Texas. California, Florida, and Arizona home prices are starting to increase, and the Midwest should start to see home prices increase over the next 6-12 months. By 2014 we should be back to levels we saw before the recession and you’ll start to hear the news stations covering the real estate market again.
Why Shouldn’t I Buy Right Now?
If there was a reason I felt you shouldn’t buy, I would tell you. In most cases I would advise against buying if you don’t plan to stay in Austin for the next five years. Because Austin is a great market to own real estate, you may still want to consider buying for the tax benefits and renting if you plan to move to a market that is more expensive. At least you’ll get the benefits while living in a place like California or New York. But if you need the money for where you are moving to, and don’t have much in savings, then I would advise you to not worry about buying real estate at this point. But if you plan to be here for at least five years, it’s worth having a discussion.
So I Should Buy Right Now?
If you plan to buy something within the next five years, you’re going to get the most house for your money right now. You can get a home loan through by obtaining an FHA loan and you only have to put 3.5% down with 2-3% closing costs. There are benefits to putting more down, but this is the easiest way to get into a home. Even if you don’t have the money, an FHA loan allows you to get gift money from family or friends. But real estate prices are only going to rise and interest rates are the lowest they’ve ever been. Although supply and demand will fluctuate a bit, we plan to see a strong demand for Austin real estate for the next few years.
If you want to discuss your current financial situation, and see whether buying a home makes sense for you or not, I’d be happy to have a 10-15 minute discussion. If you need a second opinion, I encourage my clients to talk with family and I can even provide several mortgage lenders that will talk to you about the market and your financial situation. My goal is to get my clients into the largest home, for the least price, and as close to town as possible. In the end, you’ll have an asset that is part of your long-term investment strategy or, at minimum, the knowledge to understand whether owning is right for you or not.
You can call me at 512-297-8242 with any questions or search homes at REATX.com.