The Epicenter Of The Next Housing Crash: Austin, Texas
Summary
TLDRThe 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
- ๐๏ธ 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.
- ๐ After the sharp interest rate hikes in 2022, Austin's housing market experienced a significant downturn, suggesting a potential real estate crash.
- ๐ 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.
- ๐ 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.
- ๐๏ธ Home builders in Austin went on a construction spree, leading to an oversupply of homes that is now exacerbating the housing market downturn.
- ๐๐ 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.
- ๐ Inventory levels in Austin have increased substantially, with a 74% rise in active listings, indicating a growing market imbalance.
- ๐ 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.
- ๐ฐ Sellers in Austin are struggling to adjust their expectations to the new market reality, with many homes likely being overvalued by 20 to 30%.
- ๐ Historically, Austin has been vulnerable to economic downturns, shifting from oil dependency to tech industry reliance, which could make it susceptible to another crash.
- ๐ฎ 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
๐ 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.
๐ก 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.
๐ 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.
Mindmap
Keywords
๐กHousing Bubble
๐กReal Estate Crash
๐กMigration
๐กTech Hub
๐กInterest Rates
๐กInventory
๐กOverbuilding
๐กZillow
๐กMarket Correction
๐กDistressed Properties
๐กVolatile Market
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
for free if you use the link provided
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