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Housing-Bubble

Released by Austin Board Board of Realtors 10/14/14

There’s been some buzz about Austin being in a “housing bubble” and poised for a crash, but we want to give you the facts. Is the Austin real estate market in a bubble? The economic experts say, “no,” and here’s why. Real estate bubbles are driven by speculation. Prices rise not because demand for housing is increasing, but because buyers believe prices will continue to rise in the near future, increasing the value of their investment and presenting the potential to “flip” properties quickly. That type of speculation is not what is Austin’s current housing demand.

 

POPULATION AND JOB GROWTH: KEYS TO A HEALTHY MARKET

In Austin today, housing demand is being driven by population growth. According to Austin City Demographer Ryan Robinson, there are 110 people moving to the Austin area everyday and our unemployment rate in August 2014 was 4.6 percent, which is 1.5 percent below the national average.

Our population is growing and new residents have jobs, which means demand for homes is increasing. And, as we know, prices rise with demand, especially when supply is low, like it is here. Population growth and job growth have always been the foundations of a healthy market and those two factors – not speculation – are driving price increases in Austin real estate.

LENDING STANDARDS HAVE CHANGED

Due to the housing crash last decade, lending standards for homeowners are some of the most stringent seen in recent years, so only those who can afford a home have access to the financing to buy it.

SO, IS AUSTIN OVERVALUED? NO!

Recent reports paint an incomplete picture of the Austin market. They use only ratios comparing income to rents or home prices, leaving out the two key variables of job growth and population growth. Without understanding how increased population and availability of jobs affects demand for real estate, a market can’t be properly valued.

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