Monday, June 06, 2005

Very Interesting Article

I was browsing the Austin-American Statesman's Sunday paper yesterday, and lo-n-behold on the front cover was an article about housing trends and the "bubble". The story goes on to say how many areas in the country (particularly California, Florida, and the Northeast) are experiencing unsustainable appreciation rates, while Central Texas has been pretty much stagnant the last few years. The premise of the story is how Central Texas will is primed to be the next big RE appreciation magnet, because of its lower-than-normal housing prices.

The graph they used, for example, shows the median housing price in the U.S. to be $203,800. In the Austin/Round Rock region, the median price is $158,300. Also noteworthy was this:

    In fact, some economists predict that prices [in the Central Texas region] are headed up.

    If the region's job growth continues to improve "I think you're probably going to see a 5% to 7% price increase for the next couple of years," said Mark Nash, a Chicago-based real estate broker and author. "Once the word is out that you're coming out of the flatline of appreciation, you'll have a lot of people jumping into the market, which will accelerate the price increas."

    The word already is out for investors looking to snap up property in a market in which prices are poised to rise.

Very interesting news and something I've been saying myself. The dot-com bust hit this region hard in 2000-2001, and we still haven't fully recovered. Forecasts for business growth for this year and next has been very positive, which will help boost sales of houses and increase prices.

I know there are several ustin-area REI's who read my blog, and this is very good news for us. With the ever-increasing amount of foreclosures in Texas, and, specifically, this area, coupled with this bit of good news, the future looks promising indeed.
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2 comments:

Steve said...

In my particular area, there are very few opportunities for apartment investing (not saying there aren't any - I just haven't seen them). There are a good amount of du-/tri/quad-plexes, though. If I see anything, though, I'll definately call you first.

Jun 6, 2005, 11:43:00 AM
Anonymous said...

I actually think that interest rates are also very much to blame for the increase in property values. As interest rates dropped, people were ablet to afford more and more expensive houses. What that means is that I think we'll probably see a decline in prices based on interest rate increases alone, never mind the speculative appreciation values! I've written an article about this recently at: http://www.followsteph.com/News/Howinterestratescandrasti.html
which shows the graph of how interest rates can greatly affect the affordability prices of mortgages.

For example, if you want to keep a monthly payment of $1000/mth, and if interest rates climb up 2-3% from todays lows of 5% then you are looking at a 20-30% drop in mortgage affordability! In detail, if you have an interest rate of 5% and you can only afford $1000/mth mortgage payments, then you can afford a mortgage of up to $186,281.62. If interest rates climb to 7%, then this number drastically drops to $150,307.57, a $36k difference, or about a 20% drop in price!

Jun 10, 2005, 12:04:00 PM

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