Austin & Texas Real Estate Market Forecast: Buy LAND!

Last night, I attended a real estate forecast at a CREW Austin event. CREW is a highly-respected organization for commercial women in real estate. It's a great group to be involved in because of the high level of trust and ample networking opportunities. I'd say 2/3rds of the attendees were women, but there were a lot of men present.

The forecast was given by Ted Jones of Stewart Title. He's a very entertaining guy and we had a lot of fun. We discussed the Austin and Texas real estate markets. According to Ted, we are currently overbuilding in Austin, as was happening in California and Florida years ago.

1. Problem #1. Many investors and home buyers are putting less than 10% down on their properties. Around 43% of homes sold in our area were zero down mortgages. Since appreciation is not slated to continue at it's current rate, these homeowners are going to be in trouble when more inventory is available.
2. Problem #2.  Investors and out-of-town buyers hit our market hard in the past 2-3 years. Since many of the homes sold are to people who do not plan to keep them, there will be a flood of inventory since most plan to sell within the next 2-5 years.
3. Problem#3. Ted compared jobs to home builds. We are at .70 jobs for every home that is built when we should be at at 1:1 ratio. Part of this goes back to issue of out-of-town investors and speculators, who are buying much of our inventory at full price even when the homes are overpriced.

Now the good news...

1. Good news#1. Job growth is on the rise in Austin and Texas overall. Many companies are relocating here and we also have a city push to grow current organizations. Commercial real estate is doing very well because of this. The office and retail sectors have never been better.
2. Good news#2. Homes appreciated, on average, about 9-10% last year. Previously, we were holding at a steady 4%. Although they are not expected to appreciate this much in 2007, we will at least maintain our home values for the next few years.

SUMMARY

• We definitely do not have a "bubble" because we are not so far ahead of ourselves that we're in a feverish market. Texas property tax rates are a little prohibitive and will usually help balance our markets.
• By all accounts, this means 2007-2008 is probably ok, but you may want to sell your property within those years before the market starts to cycle back down.  This is when demand should still be high, but inventory will not be. ALERT: Most of the new condo communities are slated for completion around the end of 2007-2008. If you have a condo, you may want to sell soon. Unless you have a rental, second-home, or long-term hold, the time to sell is before these other ones are complete.
• BUY LAND. Buy as much of it as you can because the true value any property is in land. Within the past few years, the cost of land in the City of Austin has grown at a much higher rate than before. I tried finding affordable acreage and could barely find any in Travis County, let alone the city. Smart investors will use  their 1031 exchange or Self-Directed IRA to buy land for later use or a long-term hold.

If you have comments, questions, or need advice, feel free to contact our team.