All across the country, residential real estate continues to go up and up. In areas such as Austin, TX, these annual jumps are approaching and even occasionally exceeding double digits. For people who already own real estate or are building new homes, this is fantastic news for certain. For those who are looking to enter into the market, the picture is more of a mixed one.
Hurry, Hurry, Hurry
With selling prices accelerating every day, buyers are under the gun to get deals done as soon as possible. After all, they will just end up paying more for the same house if they buy it next week rather than tomorrow. Yet they too will start to profit from equity buildup once they are settled into their new home.
Timing Is Everything
The great wild card in this for both buyers and sellers is how long will it last. There are signs of caution already present in the Austin real estate market. Perhaps the biggest one is that the home affordability index keeps dropping. What this means is that the amount needed to pay for buying a new home in Austin continually creeps up and consumes greater proportions of the average disposable income. Bit by bit, more people are simply being priced out as their calculated mortgage payments begin to outstrip their monthly paycheck.
This can continue for a while, so long as a fresh supply of well-heeled buyers continues to enter the market from places like California that make Austin prices seem dirt cheap in comparison. Yet every day, another slice of buyers (more likely to be locals rather than transplants) are getting kicked off the train. A snapping point will eventually be reached for many buyers, which will in turn throttle back those double digit annual gains and bidding wars for desirable properties.
Tick, Tick, Tick
Of course everyone hopes the show will go on indefinitely, but it never does. The question is simply, how close are market conditions to reaching a point of stasis and then perhaps to eventual decline? Recent announcements of new corporate entities moving to the area would seem to indicate that demand will remain strong for quite some time.
On the other hand, what if some of these behemoths change their mind? Is the market pricing things in as a certainty which are merely strong probabilities? Also, if Austin goes California so far as its housing market is concerned, does this not seem to open up more opportunities for bedroom communities to house those who are priced out of the direct Austin market itself?
Taken as a whole, however, those concerns seem to be more of a down-the-road issue. At the moment, the local market is very strong, and a huge volume of new economic activity is heading into Austin from elsewhere. It seems likely that blue skies will be the order of the day for the Austin real estate market in 2021 at the very least.