Home prices have taken a roller ride in the last three years. Low-interest rates helped drive home prices higher in the first part of this period. Mortgage rates dropped as low as 3%. People began to move from expensive coastal cities inland, in some cases because they could work from home. COVID-19 was one of the largest engines of migration in US history.
The migration was from large and expensive coastal cities, including New York, San Francisco, and Los Angeles. Population metro relocations included Boise, Salt Lake City, and some Texas metro areas. Austin was one of the most popular cities of all. Home prices rose sharply there, and now, according to Goldman Sachs, they will drop 19%. Houses are overpriced, and owners must drop them to get sales. And developers overbuilt on the theory the population would continue to expand. (These are America’s fastest growing cities.)
Austin has suddenly become one of the most expensive housing markets in the world, with median home prices near $700,000 against a national median price of just under $400,000. Migration accounts for part of this. The other reason is that Austin has more than its share of tech jobs, which usually pay well.
Austin’s overbuilding has also overwhelmed infrastructure. This is true with roads and the water and sewage systems that serve the city.
As interest rates move about 6%, Austin’s real estate will become even more expensive. A home with a monthly payment of $3,000 a little over a year ago could be $5,000 today.
Few people believe that home prices will implode and foreclosures will rise as they did during The Great Recession. During that time, hundreds of thousands of subprime mortgages tended to be default risks. Austin almost certainly has very few of these.
Austin’s home price challenge is much simpler. Over-pricing and over-building will drag home prices down. (Click here for other cities where homes prices are dropping.)
Want to Retire Early? Start Here (Sponsor)
Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?
Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.