Austin Tx- The next great Boomtown!

[pennypincher76]

My family and I relocated from Denver to Austin last year for my wifes job (and to be closer to grandparents) and have found ourselves in a difficult spot and wanted to seek the advice of some like minded mustachians. Austin real estate has gone up 32% since this time last year. Housing is going at an all time high, most purchases have bidding wars, and it is not uncommon to see the sale price go 10-20% above the total list price (even when the list price is high). People from the west coast are coming here and throwing out cash with no concern that they might be paying above market value. (example, We just bid on a house where the home across the street sold for $577k on May 7th (similar size, floor plan etc) and we came in at $615K and were out bid by $75k. Coincidentally rents are going nuts too. A friend just bought a home and the landlord turned around and rented the home for $700/mo. more that what they were just paying and they already had high rent. I have also heard of landlords doing bidding wars between potential tenants to see who gets the lease.

Needless to say, I personally feel the fundamentals of this economy are not sound. Plus the "boomtown" pitch from Elon Musk and similar types has created a tremendous amount of hype. Many seem to be acting on emotions (trying to escape a bad situation) and have disregarded any sort of financial responsibility. The problems is I have 3 kids I am feeling the pressure. I don't want them to have to switch schools again but this is absolutely crazy...I am in a pickle of "do I risk paying inflated rent or just try to settle on a house and pay way to much"? Many are saying buy now cause the Californians are going to just keep coming for the jobs but the fundamentals of this economy just seem so flawed....

[MaybeBabyMustache]

COVID has changed a lot of real estate dynamics. Housing in California has been historically significantly higher than Austin. As job flexibility due to COVID gives people the chance to shift locations, you have folks leaving CA with a lot of money from their own home sales, & going elsewhere. This is occurring in other markets, as well.

I guess the question to ask yourself is your priority for 2021+. Do you want stability? Do you want a good value? Are you sold on a particular neighborhood? If you're looking for value, and/or a reasonable price point for a house, this is likely not the time to buy. That said, I moved to the bay area from Seattle in 2013, and was so unimpressed with the market (& what I considered the "bubble" of pricing) that we waited to buy for four years. And, ended up paying a lot more than we would have in 2013. This is, of course, just a personal anecdote, so make of it what you will.

[jeromedawg]

If you're looking for value, and/or a reasonable price point for a house, this is likely not the time to buy. That said, I moved to the bay area from Seattle in 2013, and was so unimpressed with the market (& what I considered the "bubble" of pricing) that we waited to buy for four years. And, ended up paying a lot more than we would have in 2013.

So are you saying that you should have kept waiting to purchase? Or that you should have purchased in 2013? It *sounds* like you're suggesting the same thing that you did in 2013... but I'm probably misreading something.

[srad]

The next great boomtown, has been happening for the last 10 years.  If you are looking for a deal in Austin you needed to buy in 2011. 

The fundamentals are strong, its supply and demand.  Now that Silicon Valley has planted some serious roots there, get ready for more and more of those 200k+ household incomes moving into the area and bidding up all the sub 700k homes.  Seriously, you sell your 900 square foot 2 bed 1 bath house in the San Jose area for what 1.4 mil? Paying 675k for a 3/2, 1800 square foot home in Austin is nothing... This isn't like the South Dakota boom/bust oil fracking towns recently.  Texas's business regulations and tax benefits to both corp and individuals won't be discouraging businesses/people from moving there anytime soon. More people, more demand which means price is going to be increasing in the near future. 

My advise, if you are going to stay long term, go find a house you can afford.  It may take a while, but keep looking. 

[Paper Chaser]

People leaving high tax locations (CA, IL, NJ, etc) for lower tax locations (TX, FL, etc) has been a pretty consistent migration trend for several years now. COVID allowing WFH policies to spread is only aiding that trend. I wouldn't count on any sudden change in those migration patterns. Austin seems to have really accelerated in the last 18 months, but it's been booming for a decade now. If you're committed to living in that area, (and can afford/stomach paying for a place) then it might make sense to buy now rather than take your chances over the next 12-24 months based on most predictions:

http://www.metrodepth.com/austin/

[MaybeBabyMustache]

If you're looking for value, and/or a reasonable price point for a house, this is likely not the time to buy. That said, I moved to the bay area from Seattle in 2013, and was so unimpressed with the market (& what I considered the "bubble" of pricing) that we waited to buy for four years. And, ended up paying a lot more than we would have in 2013.

So are you saying that you should have kept waiting to purchase? Or that you should have purchased in 2013? It *sounds* like you're suggesting the same thing that you did in 2013... but I'm probably misreading something.

In my specific case, we absolutely should have bought in 2013. The prices have continued to climb steadily.

[jeromedawg]

If you're looking for value, and/or a reasonable price point for a house, this is likely not the time to buy. That said, I moved to the bay area from Seattle in 2013, and was so unimpressed with the market (& what I considered the "bubble" of pricing) that we waited to buy for four years. And, ended up paying a lot more than we would have in 2013.

So are you saying that you should have kept waiting to purchase? Or that you should have purchased in 2013? It *sounds* like you're suggesting the same thing that you did in 2013... but I'm probably misreading something.

In my specific case, we absolutely should have bought in 2013. The prices have continued to climb steadily.

Ah ok. Makes me wonder about home prices in my current area (SoCal/Orange County. Everyone keeps talking about how there's a growing 'exodus' of people from CA to other states. You'd *think* that kind of news would result in there being less competition for homes around here but not the case. So I wonder if it's investors and foreign money that are pouring into California, buying up the homes of the people who are leaving the state...? If not investors, exactly who are the people buying all the homes (and paying all-cash for them) around here? This is one of the top-of-mind questions I have in my market...

[pennypincher76]

If you're looking for value, and/or a reasonable price point for a house, this is likely not the time to buy. That said, I moved to the bay area from Seattle in 2013, and was so unimpressed with the market (& what I considered the "bubble" of pricing) that we waited to buy for four years. And, ended up paying a lot more than we would have in 2013.

So are you saying that you should have kept waiting to purchase? Or that you should have purchased in 2013? It *sounds* like you're suggesting the same thing that you did in 2013... but I'm probably misreading something.

In my specific case, we absolutely should have bought in 2013. The prices have continued to climb steadily.

Ah ok. Makes me wonder about home prices in my current area (SoCal/Orange County. Everyone keeps talking about how there's a growing 'exodus' of people from CA to other states. You'd *think* that kind of news would result in there being less competition for homes around here but not the case. So I wonder if it's investors and foreign money that are pouring into California, buying up the homes of the people who are leaving the state...? If not investors, exactly who are the people buying all the homes (and paying all-cash for them) around here? This is one of the top-of-mind questions I have in my market...

JeromeDawg...Spot on! California, Washington, Oregon...all the places people are supposedly fleeing are at record highs too. Not to mention random places like Pueblo CO, Cour delane Idaho, and other places on the outskirts due to remote work. So shouldn't Real estate in metro areas be cheaper? It just make me think the interest rates and stimulus coupled with the worst year (in my lifetime) and people acting more financially recklessly has created a perfect storm for the real estate market. Take for example stocks...they have been at an all time high but we just had one of the worst years since the great depression financially. It just doesn't make sense.

[MaybeBabyMustache]

If you're looking for value, and/or a reasonable price point for a house, this is likely not the time to buy. That said, I moved to the bay area from Seattle in 2013, and was so unimpressed with the market (& what I considered the "bubble" of pricing) that we waited to buy for four years. And, ended up paying a lot more than we would have in 2013.

So are you saying that you should have kept waiting to purchase? Or that you should have purchased in 2013? It *sounds* like you're suggesting the same thing that you did in 2013... but I'm probably misreading something.

In my specific case, we absolutely should have bought in 2013. The prices have continued to climb steadily.

Ah ok. Makes me wonder about home prices in my current area (SoCal/Orange County. Everyone keeps talking about how there's a growing 'exodus' of people from CA to other states. You'd *think* that kind of news would result in there being less competition for homes around here but not the case. So I wonder if it's investors and foreign money that are pouring into California, buying up the homes of the people who are leaving the state...? If not investors, exactly who are the people buying all the homes (and paying all-cash for them) around here? This is one of the top-of-mind questions I have in my market...

I've certainly had that same question about the bay area. For us, I think it will continue to be a desirable place to live (well, wildfires/climate change may impact that), but there are many people who want to become homeowners during/post COVID. I live in a suburban part of the bay area, and there has been somewhat of an exodus from the city to more suburban areas. What does it mean long term? Hard to guess. I think a major correction would be unlikely, but a slow down of property value growth might be the next step, as people leave the state.

[srad]

There still are major tech companies california, yes people are moving, but not all of the rich are leaving.  With the limited supply and buyers with a lot of money, its still going to be ugly there.  If you are planning on living in this home for several years, there's no reason for you to not try to buy. 

These low rates also aren't helping reduce housing costs. 

4% rate on a 440k mortgage = $2100
3% rate on a 500k mortgage = $2100. 

This is the field you are playing on right now.

[jeromedawg]

If you're looking for value, and/or a reasonable price point for a house, this is likely not the time to buy. That said, I moved to the bay area from Seattle in 2013, and was so unimpressed with the market (& what I considered the "bubble" of pricing) that we waited to buy for four years. And, ended up paying a lot more than we would have in 2013.

So are you saying that you should have kept waiting to purchase? Or that you should have purchased in 2013? It *sounds* like you're suggesting the same thing that you did in 2013... but I'm probably misreading something.

In my specific case, we absolutely should have bought in 2013. The prices have continued to climb steadily.

Ah ok. Makes me wonder about home prices in my current area (SoCal/Orange County. Everyone keeps talking about how there's a growing 'exodus' of people from CA to other states. You'd *think* that kind of news would result in there being less competition for homes around here but not the case. So I wonder if it's investors and foreign money that are pouring into California, buying up the homes of the people who are leaving the state...? If not investors, exactly who are the people buying all the homes (and paying all-cash for them) around here? This is one of the top-of-mind questions I have in my market...

JeromeDawg...Spot on! California, Washington, Oregon...all the places people are supposedly fleeing are at record highs too. Not to mention random places like Pueblo CO, Cour delane Idaho, and other places on the outskirts due to remote work. So shouldn't Real estate in metro areas be cheaper? It just make me think the interest rates and stimulus coupled with the worst year (in my lifetime) and people acting more financially recklessly has created a perfect storm for the real estate market. Take for example stocks...they have been at an all time high but we just had one of the worst years since the great depression financially. It just doesn't make sense.

I did some 'stalking' and a quick survey of some of the profiles of people buying $1mm~ homes in my area. In summary, the employment profiles are: Software Engineering/IT, key account manager, dentists, a CFP, program managers, realtor, and a COO (I'm sure a missed a few). A majority of them are dual-income earners...except for I think the CFP and COO go figure hahaha.
I think some have moved from out of the area from the Bay Area.
One stand-out profile - one of these couples, who I think is older aged (but not yet retired), sold their 4/3 2-story home w/ a pool for $905k in a neighboring city and 'downsized' to a smaller single floor ranch style 3/2 home for $65k~ MORE, and it's literally 5 minutes away. I guess they couldn't handle the stairs and pool maintenance so paying $65k more was worth it for the convenience factor lol.

[jeromedawg]

There still are major tech companies california, yes people are moving, but not all of the rich are leaving.  With the limited supply and buyers with a lot of money, its still going to be ugly there.  If you are planning on living in this home for several years, there's no reason for you to not try to buy. 

These low rates also aren't helping reduce housing costs. 

4% rate on a 440k mortgage = $2100
3% rate on a 500k mortgage = $2100. 

This is the field you are playing on right now.

Makes sense. To expand on this example for homes in my area. Let's say you have a down payment amount of $500k and are looking at homes and see a nice one listed for $940k....
It makes sense that a lot of people might think:
"Well, a year ago when interest rates were 4% my mortgage amount would have been $2100/mo. But now that interest rates are 3%, we could manage have this *same* mortgage amount if we offered $60k more! So let's offer $1mm for this house: win-win because we'll outbid the other competition and still pay the same that it would have been a year ago"

When you put it in that light, it makes home buying now even more salient and desirable

[dang1]

If you're looking for value, and/or a reasonable price point for a house, this is likely not the time to buy. That said, I moved to the bay area from Seattle in 2013, and was so unimpressed with the market (& what I considered the "bubble" of pricing) that we waited to buy for four years. And, ended up paying a lot more than we would have in 2013.

So are you saying that you should have kept waiting to purchase? Or that you should have purchased in 2013? It *sounds* like you're suggesting the same thing that you did in 2013... but I'm probably misreading something.

In my specific case, we absolutely should have bought in 2013. The prices have continued to climb steadily.

Ah ok. Makes me wonder about home prices in my current area (SoCal/Orange County. Everyone keeps talking about how there's a growing 'exodus' of people from CA to other states. You'd *think* that kind of news would result in there being less competition for homes around here but not the case. So I wonder if it's investors and foreign money that are pouring into California, buying up the homes of the people who are leaving the state...? If not investors, exactly who are the people buying all the homes (and paying all-cash for them) around here? This is one of the top-of-mind questions I have in my market...

https://www.ppic.org/blog/whos-leaving-california-and-whos-moving-in/
People who move to California are different from those who move out. In general, those who move here are more likely to be working age, to be employed, and to earn high wages—and are less likely to be in poverty—than those who move away. Those who move to California also tend to have higher education levels than those who move out—an especially important factor given the state’s strong need for college graduates. Notably, this gain in educated residents is concentrated among young college graduates. California has been losing lower- and middle-income residents to other states for some time while continuing to gain higher-income adults. In the past five years the flow of middle-income residents out of the state has accelerated.


https://www.statista.com/statistics/424167/venture-capital-investments-usa-by-state/
In 2020, the state which had the highest value of venture capital (VC) investment in the United States was California. The value of VC investments made in California amounted to approximately 84.2 billion U.S. dollars in 2020, followed by New York with approximately 18.1 billion U.S. dollars worth of VC invested. The top three is completed by Massachusetts, wherein approximately 17.4 billion U.S. dollars in VC was invested.

[jeromedawg]

If you're looking for value, and/or a reasonable price point for a house, this is likely not the time to buy. That said, I moved to the bay area from Seattle in 2013, and was so unimpressed with the market (& what I considered the "bubble" of pricing) that we waited to buy for four years. And, ended up paying a lot more than we would have in 2013.

So are you saying that you should have kept waiting to purchase? Or that you should have purchased in 2013? It *sounds* like you're suggesting the same thing that you did in 2013... but I'm probably misreading something.

In my specific case, we absolutely should have bought in 2013. The prices have continued to climb steadily.

Ah ok. Makes me wonder about home prices in my current area (SoCal/Orange County. Everyone keeps talking about how there's a growing 'exodus' of people from CA to other states. You'd *think* that kind of news would result in there being less competition for homes around here but not the case. So I wonder if it's investors and foreign money that are pouring into California, buying up the homes of the people who are leaving the state...? If not investors, exactly who are the people buying all the homes (and paying all-cash for them) around here? This is one of the top-of-mind questions I have in my market...

https://www.ppic.org/blog/whos-leaving-california-and-whos-moving-in/
People who move to California are different from those who move out. In general, those who move here are more likely to be working age, to be employed, and to earn high wages—and are less likely to be in poverty—than those who move away. Those who move to California also tend to have higher education levels than those who move out—an especially important factor given the state’s strong need for college graduates. Notably, this gain in educated residents is concentrated among young college graduates. California has been losing lower- and middle-income residents to other states for some time while continuing to gain higher-income adults. In the past five years the flow of middle-income residents out of the state has accelerated.


https://www.statista.com/statistics/424167/venture-capital-investments-usa-by-state/
In 2020, the state which had the highest value of venture capital (VC) investment in the United States was California. The value of VC investments made in California amounted to approximately 84.2 billion U.S. dollars in 2020, followed by New York with approximately 18.1 billion U.S. dollars worth of VC invested. The top three is completed by Massachusetts, wherein approximately 17.4 billion U.S. dollars in VC was invested.

Also, it sounds like there are definitely more people leaving CA than coming in. Which leads me to believe that probably a good chunk of the home buying activity going on is people migrating between the Bay Area and SoCal regions... those people might be newly minted WFH or of 'retirement' age wanting to 'downsize' (even though they're paying more downsizing to a smaller place than their last).

[Saving in Austin]

This is a good analysis of taxes and migration between California and Texas:

https://t.co/H9R5Pd1vaK?amp=1

We're thinking of going contrarian: I bought in Austin in early 2011 and my house value has more than doubled. I'm thinking of selling next spring and moving to San Diego (and renting for a while or maybe forever) where the prices are 30% higher. This isn't a financial move. We went to college in San Diego and many of our best friends still live there. I'm trying to figure out if we've saved enough for a cost of living increase.

I don't think the prices are going to come down in the cities any time soon. Maybe at the next recession or when supply catches up to demand or both.

[Abe]

Even though people are moving out California, those people are generally renters (for reasons detailed above). That, and the baseline lack of available housing, keeps prices high. Even though people left, there's still greater demand than supply. That's why houses in Bakersfield costs more than $1000 (I kid).

I am planning to retire back to California, and have thought about what the water situation will be there long-term. The likelihood we will have any sane regulation of agricultural water in the American West is low, so cities will take a hit. I think in my lifetime there will be enough migration out because of that (and all the trees dying off) for prices to drop. Maybe we'll come out of the megadrought earlier than predicted (years instead of decades) and none of that will matter. In which case: house prices to the moon! <rocket emoji>

[norajean]

Austin has been booming and busting for decades. I moved there for college in 1987 and it was in total collapse after a massive boom in the early 80s.  I rented a modern 2-bed duplex with a huge yard near 45th and Duval for $400/month and shared with a friend ($200/each).  I had several other rental places in succeeding years from landlords who had fled town for work and were renting their home for a fraction of the mortgage payment.  Some of them very cool places in Westlake Hills and Westfield. A friend bought a $3 million mansion on Lake Austin for $700K. The city is booming today, again, but the bust will come at some point.  We moved away after school as we couldn't take the allergies.

[J.P. MoreGains]

If you're looking for value, and/or a reasonable price point for a house, this is likely not the time to buy. That said, I moved to the bay area from Seattle in 2013, and was so unimpressed with the market (& what I considered the "bubble" of pricing) that we waited to buy for four years. And, ended up paying a lot more than we would have in 2013.

So are you saying that you should have kept waiting to purchase? Or that you should have purchased in 2013? It *sounds* like you're suggesting the same thing that you did in 2013... but I'm probably misreading something.

In my specific case, we absolutely should have bought in 2013. The prices have continued to climb steadily.

Ah ok. Makes me wonder about home prices in my current area (SoCal/Orange County. Everyone keeps talking about how there's a growing 'exodus' of people from CA to other states. You'd *think* that kind of news would result in there being less competition for homes around here but not the case. So I wonder if it's investors and foreign money that are pouring into California, buying up the homes of the people who are leaving the state...? If not investors, exactly who are the people buying all the homes (and paying all-cash for them) around here? This is one of the top-of-mind questions I have in my market...

JeromeDawg...Spot on! California, Washington, Oregon...all the places people are supposedly fleeing are at record highs too. Not to mention random places like Pueblo CO, Cour delane Idaho, and other places on the outskirts due to remote work. So shouldn't Real estate in metro areas be cheaper? It just make me think the interest rates and stimulus coupled with the worst year (in my lifetime) and people acting more financially recklessly has created a perfect storm for the real estate market. Take for example stocks...they have been at an all time high but we just had one of the worst years since the great depression financially. It just doesn't make sense.

What are your thoughts on Pueblo, CO? I live here now and see some potential, yet it's still kinda cheap and run down. I think just being on the front range eventually home values here will rise and the place will change.