The Epicenter Of The Next Housing Crash: Austin, Texas

Summary

The video discusses Austin, Texas, as a potential epicenter for the next housing crash. From 2016 to 2022, home prices surged by 101%, fueled by tech industry growth and Californian migration. However, the market nosedived after 2022, with interest rate hikes and a tech market downturn. The city's rapid growth and overbuilding, coupled with a significant increase in housing inventory, suggest a looming real estate crash, with home values already dropping 177% from their peak. The video warns of Austin's vulnerability due to its heavy reliance on the tech sector, drawing parallels to its past oil dependency and subsequent housing correction in the late 1980s.

Takeaways

• 🏙️ Austin, Texas has seen a dramatic increase in home prices, with a 101% rise from June 2016 to June 2022, making it a center of housing bubble discussions.
• 📉 After the sharp interest rate hikes in 2022, Austin's housing market experienced a significant downturn, suggesting a potential real estate crash.
• 📈 The influx of Californians and tech companies like Oracle, Tesla, Apple, Facebook, and Microsoft into Austin contributed to its rapid growth and high-paying job market.
• 📊 Home prices in Austin have dropped significantly since their peak in 2022, with a 177% decrease in value, which is more severe than the 2007 recession.
• 🏗️ Home builders in Austin went on a construction spree, leading to an oversupply of homes that is now exacerbating the housing market downturn.
• 📈📉 The number of job postings for tech positions in Austin peaked in the summer of 2022 and then plummeted by over 70% in the following two years.
• 📈 Inventory levels in Austin have increased substantially, with a 74% rise in active listings, indicating a growing market imbalance.
• 📉 The 78746 zip code in Austin is experiencing a decline in home values much worse than the metro area's average, with a rapid increase in inventory.
• 💰 Sellers in Austin are struggling to adjust their expectations to the new market reality, with many homes likely being overvalued by 20 to 30%.
• 📊 Historically, Austin has been vulnerable to economic downturns, shifting from oil dependency to tech industry reliance, which could make it susceptible to another crash.
• 🔮 The video suggests that while a housing crisis like 2007 may not occur in other cities, a strong market correction is likely for Austin, making it one of the most vulnerable cities in the US.

Q & A

What was the percentage increase in home prices in Austin, Texas from June 2016 to June 2022?

Home prices in Austin, Texas skyrocketed by 101% during this period.

Why is there concern about a housing bubble in Austin?

The sharp increase in home prices coupled with a downturn in the housing market after interest rate hikes in 2022 has raised concerns about a potential housing bubble and subsequent crash.

What major tech companies have significantly increased their presence in Austin, contributing to its growth?

Tech companies such as Oracle, Tesla, Apple, Facebook, and Microsoft have greatly increased their presence in Austin, turning it into a new tech hub.

How did the influx of people and high-paying jobs affect the Austin housing market?

The influx of people, especially from the West Coast, and the high-paying jobs from tech companies led to a massive increase in home prices and a housing boom in Austin.

What was the typical monthly mortgage payment for a house in Austin in the summer of 2016?

In the summer of 2016, the expected monthly mortgage payment for a typical house in Austin was around $2,500.

How much did the typical monthly mortgage payment increase by the summer of 2022?

By the summer of 2022, the typical monthly mortgage payment had increased by 140% to nearly $4,900.

What happened to the number of job postings for software developers and IT positions on Indeed after peaking in the summer of 2022?

The number of job postings dropped over 70% in the next 2 years, indicating a significant change in the tech market.

How much has the typical single-family home in Austin lost in value since its peak in 2022 according to Zillow?

The typical single-family home in Austin has lost 177% of its value since the 2022 peak.

What was the trend in residential building permits in Austin from 2018 onwards?

There has been an excess of homes being built, with a 989% increase in building permits compared to the levels during the last major recession.

How has the real estate inventory in Austin changed from February 2021 to the present?

The real estate inventory has increased by 74%, from about 1,300 homes actively for sale to 10,913, indicating a growing supply in the market.

What historical event in Austin's housing market is the current situation being compared to?

The current situation is being compared to the housing market crash in the late 1980s, which was largely due to falling oil prices and a significant housing correction.

What is the role of foreclosure.com as mentioned in the video script?

Foreclosure.com is a premier resource for distressed homes for sale in the United States, offering a vast repository of listings including foreclosures, pre-foreclosures, bankruptcies, tax leans, and other distressed assets.

Outlines

00:00

📈 Austin's Housing Market: A Boom and Bust Story

Austin, Texas has experienced a dramatic housing market boom from June 2016 to June 2022, with home prices skyrocketing by 101%. This rapid increase has led to concerns about a housing bubble, especially after the sharp interest rate hikes in 2022 caused a significant downturn. The influx of Californians and tech companies like Oracle, Tesla, and Apple turned Austin into a tech hub, leading to high-paying jobs and soaring home prices. However, the market has since cooled, with migration slowing, interest rates jumping, and job postings in tech plummeting. Home values have dropped significantly, and overbuilding during the boom period is exacerbating the decline. With inventory levels rising sharply, Austin's housing market is flashing red warning signs of a looming crash.

05:00

🏡 The Reality Check in Austin's Housing Prices

The Austin housing market is seeing a stark disconnect between seller expectations and market reality. In areas like the 78746 zip code, home values surged from $500,000 to $2 million in a few years, but now inventory has increased dramatically, and prices are dropping. An example is a home listed at $1,275,000 that has seen multiple price cuts due to lack of interest. This pattern is common, indicating that many homes might be worth 20-30% less than what sellers believe. Historical sale data shows how home values have outpaced inflation, with recent years showing unprecedented growth. Given the current inventory levels, Austin could become one of the most volatile markets in the U.S., with a significant market correction on the horizon.

10:00

🔍 Detailed Analysis and Future Outlook

Austin's reliance on the tech industry makes it vulnerable to economic shifts, similar to its dependence on oil in the 1980s. The city experienced a significant housing correction during the early 1990s recession due to falling oil prices. Today, a tech sector downturn could similarly impact Austin's housing market, which is already struggling. The current market conditions suggest a steep decline, with many believing Austin could become the epicenter of the next housing crash. While it might not be as severe as the 2007 crisis, a strong market correction is highly probable. The next Austin crash might mirror the late 80s, confined to this unique market. Viewers are encouraged to subscribe to the speaker's Substack for more detailed analysis and check out foreclosure.com for distressed property listings.

Keywords

💡Housing Bubble

A housing bubble refers to a situation in a real estate market where property prices are based on levels that are significantly higher than the underlying economic conditions can support. In the video, Austin, Texas is described as being at the center of discussions about a housing bubble due to the rapid increase in home prices, which then experienced a sharp decline after interest rate hikes in 2022.

💡Real Estate Crash

A real estate crash is a rapid and severe decline in property values, often following a period of overvaluation. The video suggests that Austin may be on the verge of a real estate crash due to factors such as a downturn in the tech market and an oversupply of homes being built during the boom period.

💡Migration

Migration in this context refers to the movement of people from one region to another, often for economic reasons. The script mentions that Austin became a go-to destination for tech companies and workers, particularly from California, which contributed to the housing market boom.

💡Tech Hub

A tech hub is a geographic area with a high concentration of technology companies and startups. The video describes how Austin became the new Texas Silicon Valley, attracting major tech companies and high-paying jobs, which in turn fueled the housing market boom.

💡Interest Rates

Interest rates are the cost of borrowing money and can significantly impact the housing market. The script notes that sharp interest rate hikes in 2022 contributed to the downturn in Austin's housing market, making mortgages more expensive and less affordable for potential buyers.

💡Inventory

In the context of real estate, inventory refers to the total number of homes available for sale. The video discusses how Austin has seen a significant increase in real estate inventory, which is putting downward pressure on home prices.

💡Overbuilding

Overbuilding occurs when there is an excessive supply of new homes being constructed, often in response to high demand. The script points out that Austin experienced overbuilding during its housing boom, which is now contributing to the market's decline as the excess supply meets reduced demand.

💡Zillow

Zillow is an online real estate database that provides information about homes for sale or rent and home valuations. The video uses Zillow's data to illustrate the significant drop in home values in Austin since the peak in 2022.

💡Market Correction

A market correction is a decline in the price of an asset, often a stock or real estate, to bring prices in line with their actual value after a period of overvaluation. The video suggests that Austin's housing market is undergoing a correction, with prices dropping from their previously inflated levels.

💡Distressed Properties

Distressed properties are real estate assets that are in some form of financial hardship, such as foreclosure or bankruptcy. The video mentions foreclosure.com as a resource for investors looking for distressed properties, indicating that such assets may become more prevalent in Austin's market.

💡Volatile Market

A volatile market is one that experiences significant price fluctuations. The video suggests that Austin's housing market could become one of the most volatile in the US due to the combination of a sharp price decline and an oversupply of homes.

Highlights

Austin, Texas has seen a 101% increase in home prices from June 2016 to June 2022, becoming a center of housing bubble discussions.

The housing market in Austin took a downturn after sharp interest rate hikes in 2022, suggesting a potential real estate crash.

Austin's appeal as a tech hub, attracting companies like Oracle, Tesla, Apple, Facebook, and Microsoft, has fueled high-paying jobs and equity distributions.

Migration to Austin slowed down, and the tech market vibe dropped off significantly after summer 2022.

The number of job postings for software developers and IT positions on Indeed.com peaked in summer 2022 and dropped over 70% in the next two years.

Austin's rapid growth post-pandemic has led to it becoming a place people are now trying to escape from, with worse weather being a factor.

Zillow data shows a 177% loss in value for the typical single-family home since the 2022 peak, indicating a significant market correction.

Home builders in Austin went on a building spree during the boom, which is now contributing to overbuilding and a growing inventory in a declining market.

Residential building permits in Austin have been alarmingly high since 2018, indicating a potential surplus of homes for years to come.

Austin's active real estate listings have surpassed the 2019 numbers, with a 74% increase, putting pressure on prices and buyers.

Specific neighborhoods like the 78746 zip code are experiencing a decline worse than the metro area's average, with rapid normalization of home values.

Inventory levels in Austin are signaling a serious concern for the housing market, with prices on a downtrend.

An example home's value has outpaced inflation by a factor of four, reflecting the explosive growth seen in Austin's real estate market.

Austin's market correction is already on the horizon, with significant declines in home values that many have not yet realized.

The city's reliance on the big tech industry makes it vulnerable to a potential downturn similar to the oil industry in the late 1980s.

Austin's housing market is undergoing a correction, and if a tech crash occurs, it could lead to significant home price declines, making it highly vulnerable.

The video suggests that Austin's next housing crash could mirror the one in the late 80s, confined to its unique market conditions.

Transcripts

out of all the cities in the United

States none has received as much hype in

The Last 5 Years as Austin Texas from

June 2016 to June 2022 home prices in

Austin have skyrocketed by

101% this has made the city the center

of talk about a housing bubble after the

sharp interest rate hikes in 2022 the

housing market here took a nose dive

it's one of the few places in the

country where I truly believe a real

estate crash is looming if you're

familiar famil with my videos you know I

usually stay positive about the overall

US housing market but Austin is a rare

exception here to crash may have already

started and we're now in the middle of a

huge downturn that began back in 2022

and it might get even worse to

understand why we need to start with a

bit of History if you were a buyer back

in the summer of 2016 you would have

expected to pay around $2,50 a month for

a typical house in the Austin area with

a standard 30-year mortgage just 6 years

later in the summer of 2022 that typical

payment had shot up to nearly

$4,900 a month a 140% increase fueled by

a massive influx of Californians and

other West coasters moving to this hyped

up Texas Mega Hub Austin became the

go-to destination for everyone

especially tech companies Oracle Tesla

Apple Facebook Microsoft almost every

big name greatly increased their

presence here with with that came

high-paying jobs and massive Equity

distributions turning Austin into what

is essentially the new Texas Silicon

Valley but after the summer of 2022

things began to change dramatically

migration slowed down interest rates

jumped and the overall vibe in the tech

Market dropped off the number of

postings for software developers and

other it positions on indeed peaked that

summer and then dropped over 70% in the

next 2 years it could be said that

Austin grew way too fast in the Perfect

Storm following the pandemic what was

once an affordable and cheap City

compared to the well-known Tech hubs

quickly became the kind of place

everyone was trying to escape to but

with worse weather Austin essentially

turned into the very same town they were

all running from now why do I think the

housing crash has already started here

well just look at the data according to

Zillow the typical single family home

here has lost 177% of its value since

the 2022 Peak that's a significant drop

and the future does doesn't look bright

either the decline is even bigger than

what Austin experienced during the 2007

recession when home values Across the

Nation dropped at the worst rate since

the Great Depression in fact during the

last crisis Austin was pretty resilient

with prices only declining about 5% that

makes today's drop about three times

worse but it doesn't end there while

this massive price boom was happening

home builders in the area went on a

building spree thinking they had struck

gold and for a while they did as they

built home prices soared in ways they

never could have imagined were possible

but they didn't know when to stop and a

mix of greed and blindness took over if

you look at the number of residential

building permits pulled for the Austin

area you'll see an alarming Trend over

the last 7 years since about 2018 there

has been an excess of homes being built

which was great while the town was

riding the hype train up now that it's

plateaued or arguably on a downtrend

this overbuilding is coming back to

haunt Austin broken down by month you

can see how excessive it got during

their recent boom with a

989 increase compared to the low levels

during the last major recession home

builders have cooled off recently but

these are permits meaning that these

structures won't even go for sale for

years after the permit is recorded right

now the level of homes being built

remains High which tells us that for the

next year or two there will be growing

new inventory in an already declining

market and speaking of inventory Austin

has some of the worst stats in the

nation according to realtor.com the

Austin metro area has already surpassed

the number of active listings it saw in

2019 while their charts only go back to

2017 it's clear that the trend is

sharply upward during the low point in

February 2021 there were about, 1300

homes actively for sale in the entire

metro area putting massive pressure on

prices and buyers today that number has

skyrocketed to

10,913 representing a

74% increase in real estate inventory

typically tells the tale and with prices

already on a massive downtrend this

correlation is flashing red there are

very serious concerns for the Austin

housing market and you can just browse

redin or Zillow for yourself to get a

glimpse of this to make it even more

apparent we can look at the reventure

app for specific neighborhood

information in the

78746 zip code there are clear signs

that this part of the city is

experiencing a decline even worse than

the metro area stats suggest this has

always been a pricey area but home

values here took a massive plunge

following one of the biggest rises in

the US with median values skyrocketing

from half a million to 2 million in a

matter of years it's no surprise that

we're seeing this part of the city

normalize rapidly inventory has gone

from just 39 homes to over 150 and there

are real life examples of buyer delusion

where sellers still believe in the peak

prices their neighbors once got despite

the market reality on the ground for

example this four bed 2 and A2 bath home

purchased in 1983 for

$103,000 is now listed for

1,275 th000 however the owners are

struggling to attract buyers initially

listed at 1,

155,000 in April the price was slashed

to

1,475 th000 after 2 months without any

interest despite this significant

reduction no buyers emerged leading to

another cut down to 1,27 75,000 a total

discount of 18% 2 weeks later the house

remains on the market this scenario is

common throughout the Austin area

highlighting the disconnect between

Market reality and seller expectations

many homes might be worth 20 to 30% less

than what sellers or Zillow believe

likely causing prices to drop even

further examining the sale history of

this random home reveals just how

dramatic the real estate market has

become in this part of Texas over the

past few years years originally sold in

1983 for

$103,000 the home changed hands again in

1987 for

$131,000 and in 1991 for

120,000 you might think that 1991 was a

long time ago and money had more

purchasing power back then which is true

however this doesn't fully account for

the explosive growth seen over the past

30 years adjusted for $224 the 1991

price of $120,000 was be approximately

280,000 this means the home's value has

outpaced inflation by a factor of four

examining the graph it's clear how

dramatically home values have surged in

the past 5 to 10 years what started as

steady normal growth has turned into a

parabolic rise with prices escalating at

an unprecedented rate for instance in

2022 this home's value increased by

27% and in 2021 it Rose by 20% these are

extraordinary annual returns for real

estate and given the current inventory

levels Austin could become one of the

most volatile markets in the US as

sellers are discovering values aren't

what many believe and there have already

been significant declines that most

haven't realized while a crash like the

2007 housing crises in other cities may

not occur a strong Market correction is

already on the horizon and seems highly

probable for neighborhoods throughout

this city this region has been

increasingly relying on big Tech

shifting away from the oil dependency at

had in the 1980s however transferring

Reliance from one industry to another

means that a city heavily dependent on a

single sector is still vulnerable Austin

experienced this firsthand with oil in

the late 1980s while the rest of the

nation only slightly budged during the

early 1990s recession Austin faced a

significant housing correction this was

largely due to Falling oil prices that

devastated the local economy the market

peaked in April 1986 then fell for over

4 years bottoming out in 1990 after a

dramatic 27% decline it began a slow

recovery not surpassing the 1986 price

until the summer of 1994 nearly 8 years

after the crash started you can clearly

see the effects of this trend by examing

our example house purchased in 1987

shortly after the crash had begun for

131,000 it was sold 4 years later in

1991 for

120,000 while not as dramatic as the

local chart suggests it is evident that

Texas was experiencing significant

declines during that period with so much

money and so many jobs reliant on the

big tech industry today Austin is once

again vulnerable to the same type of

decline if something were to disrupt the

booming Tech sector Austin's Market is

already struggling and undergoing a

correction if a tech crash were to occur

combined with the existing unbalanced

inventory Austin will be a prime

candidate for significant home price

declines making it one of the most

vulnerable cities in the US for such a

downturn as this peak becomes more

apparent and the decline becomes steeper

questions surrounding Austin will

continue to surface many believe that

this is just the beginning and that

Austin is already becoming the epicenter

of the next housing crash while there

are some concerns I tend to think that

the next Austin crash will mirror the

one we saw in the late 80s with its

dangers confined to this specific

incredibly unique Market thank you guys

for watching as always please make sure

you hit that like and subscribe button

if you enjoyed this video I will be

releasing a detailed written piece

complete with more in-depth analysis and

charts on my brand new substack if you

have a chance please subscribe the link

is in the description finally I want to

give a shout out to foreclosure.com they

are the premier resource for distressed

homes for sale in the United States

offering a vast repository of over 1.8

million listings including foreclosures

pre- forclosures bankruptcies tax leans

and other distressed assets if if you're

an investor please take a moment to

click the link below you'll get one week

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