The 2015 Austin Real Estate Forecast

Talk around many Austin neighborhoods has become, with mouths agape, “Did that house really sell for that amount?”

In Austin and surrounding areas, the news is reporting that Austin is in a housing bubble that is sure to burst. Mark Sprague, a well regarded Austin economist with Independence Title, wrote an excellent article in which he pops the Austin real estate bubble rumors. Sprauge explains that based on supply and demand, we are not seeing the beginnings of a bubble. He continues to say that “overvalue is overstated presently in the local and regional markets” and while it may be true that there are some individual listings are overvalued, the overall Austin real estate market is not overvalued. Sprauge points out that Austin appreciation has actually been one of the lowest in the country over the last 10 years.

In fact, it is true demand and not irrational exuberance or speculation that is currently driving prices higher in Austin. Sprague states, “as supply gradually begins to catch up with demand, with current absorption and employment projections, it will be another two to three years before rising home values could become an issue.”

The real estate and financial world has changed dramatically since the financial crisis of 2008, the pendulum has swung, and as a result “the ability to have a bubble in real estate is more restrictive now.” Instead of anyone and everyone having access to mortgage money, a leading cause of the previous bubble, now younger families and first-time homebuyers are less able to qualify as credit is much tighter than it was in the pre-bubble years. When the housing bubble burst in 2008, there was more lenient lending process and far less regulations in place.

The outlook for the Austin real estate market this year is sunny and bright! Overall it is predicted that Millennnials will account for 65% of first time home buyers sales. Existing home sales will increase by 8%. Home prices will go up 4%-5% (previous average was 3%), and mortgage rates will be at 5%.

There is no way to predict the future, but as for Austin, I think we will continue with the steady uptick of demand and prices.