Austin Housing Bubble???? by Jeff Stewart, CCIM
by Jeff Stewart, CCIM
By now, half of America has heard that Trulia.com has named Austin as the most over-priced housing market in the U.S. Ouch. I would find that extremely alarming if I thought it were true. Let’s take a closer look.
Trulia conducted its own research and has produced a report that states seven of the largest 100 metro areas in the country are over-priced, by their estimation. Of the seven markets that were deemed to be over-priced, Austin topped the list. Trulia found that the Austin residential market was priced 19% above what market fundamentals should support. Further down the list were #4 San Francisco at 12%, #6 Honolulu at 10%, and #8 Houston at 8%. It is worth noting that of the seven markets listed as over-priced, only Austin and Houston were seen as not grossly over-priced in 2006 by Trulia’s criteria.
It is true that the MLS reported the median priced home in Austin had jumped 11% in August 2014 compared to the year before. Is that the definition of over-heated? Perhaps, but RealtyTrac offers us a different perspective. According to RealtyTrac, the median-income worker has to spend 31.3% of his or her income in order to afford the median-priced home in Austin. This is a little higher than the historical ratio of 26.7%, but is that enough to warrant Trulia’s headlines? By comparison, San Francisco housing costs 85% and Jackson Hole costs 84%! Which location would seem to have the biggest potential downside? I do not think it would be Austin.
But home ownership is only part of the equation. According to PolitiFact.com, most Austintes rent. So how do they fare? The Austin Letter reported that Nerdwallet.com took a look at the expense of renting in various cities. They found that Austin workers in science, technology, engineering, and math sectors (or STEM as they called it) make an average income of around $79,433. Unfortunately, the average rent is about $978 a month. Compare thatto the same ratio of $81,215/$877 in Dallas or $94,766/$873 in Houston. Obviously, our rising housing costs are a growing concern . . . especially for the young and for retirees.
We can agree that housing is relatively more expensive in Austin than other parts of the state. It has been for quite some time, and will likely remain that way as long as job hunters can vote with their feet. Jobs are driving the market. It is clearly a free market situation, driven by outstripped demand and what seems to be minimal speculation. Are we high? Yes. Are we leading the nation in a bubble market? I do not think so.
Jeff Stewart, CCIM, SRES Stanberry & Associates, Realtors