Home Prices are Destined to Fall - Right?

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In April 2021, the Austin-area housing market continues to demonstrate strength.  In the city of Austin, low levels of inventory drove the median home price up 31.7% year over year to $550,562—an all-time high for any month on record.   At the county level, the median price for homes in Travis County increased 37.8% year over year to $537,500.  In Williamson County, the median price rose 45.4% to $430,000.  In Hays County, the median price for homes increased 33.3% to $380,000.  These are amazing numbers that demonstrate how great the Austin-area real estate market continues to be. 


However, one cannot help but ask the question:  Are we experiencing a bubble in our housing market?  Is this the height of the market?  Should Buyers wait to buy?  Prices are destined to fall, right?  Rising prices have got to stop!  Mark Sprague an economist who knows the Austin-area real estate market says we are not experiencing a bubble.  We are playing catch-up for costs over the past 10 years.  It could take 2-years to catch up.  The desirability of Austin and its job market are as strong as ever.  Supply and demand are dictating the values of the homes in our market.  Multiple offers have become commonplace.  Winning offers are averaging about 30% above the list price.


Mortgage lending requirements are still exceptionally strict which means Buyers in today’s market are strong and have plenty of cash to purchase the home they desire.  And, Sellers have enough equity in their home to sell to not need to come to closing with cash.  Also, mortgage rates are expected to remain low for at least another couple of years.  And there currently is no indication that inflation will rise to a point high enough to impact them.


People are griping about a great real estate market!  But I do get it!  Wages are not keeping up with housing prices.  Many home buyers are being priced out of the market.  This does feel very unfair.  However, the reality is if you have the cash there is no better time to buy real estate than the present. 


Some real estate phases/quotes (not exact wording) that I think are noteworthy:

·      Don’t look at your shelter as purely an investment.

·      The “market” dictates the sales price of housing, not Realtors or sellers.

·      Real estate is an excellent long-term investment but there will always be fluctuations.  As Warren Buffet has said, hold it, because the market will come back to you. 

·      Historically home appreciation has outstripped inflation, proving real estate is an excellent investment.

·      Be careful to do your research before engaging in a cash-out loan on the equity in your home.