There’s No Bubble Here (aka “Have I already missed the boom?”)

No!

There were a series of events that led to the West Coast’s run-up in property values over the last few years, including tight supply constraints, high personal incomes, as well as a flight of capital from the stock markets into property.

Not surprisingly, the real estate market on the coasts was not immune to economic gravity, and the music stopped playing with some owners having no place to sit down. In fact, the National Association of Realtors projects 2007 to be the first year since they started keeping records that the median home value in the country will actually go down.

Central Texas residents, therefore, should “knock wood” about the fact that we haven’t seen even the slightest blip of a slowdown. Our market continues its steady (key word is steady – you can’t have a bubble if demand continues increasing along with supply) climb upwards, and some believe we will have the best performing market in the United States this year.

Bubbles are created when the fundamental value of real estate (which we believe to be, simply enough, the income you derive from the property vs. its purchase price) becomes too high to support the income generated from the property.

Our median home value just recently crossed the $200,000 line, and we regularly help 20 or more investors per month find investment properties in that price range that cash flow quite readily with 20% down.

As long as our market continues to add jobs and grow, and as long as our fairly civic minded and progressive city council continues to put curbs in development of new competing inventory, Austin has a bright future ahead of it with regard to equity and rental values.

NEXT >> Supply and Demand – “Save Our Springs” & The University of Texas at Austin Effect