It has been a banner year for Austin real estate, with record-braking sales and a strong, competitive market. Morgan Smith and Shannon Schmitz of The Shannon Schmitz Group shared their predictions for 2015.
A rendering of the new 5th + West building slated for completion in 2015.
There has been a lot of press lately about Austin real estate being way over-valued, or that Austin is facing another housing bubble. But many experts don’t seem to agree. Mark Dotzour, an economist and head of The Real Estate Center at Texas A & M University says the rising prices are due to organic causes like the steady stream of people moving to Texas from out-of-state, and the supply of homes not keeping up with demand.
“I think it’s a case of websites trying to get clicks by spreading bad news. These claims don’t hold up when you look at them,” said Morgan Smith of The Shannon Schmitz Group. Shannon Schmitz believes 2015 will be another strong year of growth for Austin. “It is very much based on potential job growth for our city. Our job market is still very strong and jobs drive real estate.”
Although final 2014 statistics aren’t out, home prices rose about 5.4% in Texas’ major metro areas combined. Economist Mark Sprague also doesn’t buy the bubble theory. His assertion is that Austin is 2 years into a 10-year upswing in luxury real estate, specifically, and that the rising prices are at normal levels, historically. Five percent is slightly high for a year-over-year increase, but certainly not to panic levels. Here’s a frame of reference:
• Home prices in Texas increased in 31 of the past 38 years
• The highest rate of appreciation was 17.8 percent in 1981
• House prices increased by more than 10 percent in five of those years
• Texas home prices declined in six of the past 38 years
• Four years of decline occurred in the 1980s when the oil market collapsed
• Two years of decline were during the Great Recession in 2009 and 2010
• The largest decline was in 1987, when prices fell 9.6 percent
“I don’t see it as a bubble. It’s merely an issue of supply and demand,” said Smith. “Austin is an extremely desirable place to live.” Schmitz agrees, “I saw a stat this week on Broker Underground claiming that in the City limits of Austin there are 1,191 homes pending and about 1,240 homes active, which makes for about .59 months of inventory. The discussion was that this is clearly an issue of supply and demand and not a bubble.”
What about possible challenges in the coming year? Schmitz says, ”Potentially the decrease in oil prices could become a problem in the future and the fluctuations in our stock market are also cause for pause. But whenever we have a dip in our market lately it bounces right back. It seems that most people strongly believe in our financial markets and economic future.”
Smith sited interest rates as a possible factor: “Interest rates are low, so we’ll probably see a continuation of the strong market until that changes, around mid-year, and then we may see a slight dip.”
According to Sprague, “The good news is the real estate and housing market will increasingly depend on fundamentals such as job growth, rising incomes, and more household formation which are all strong in Texas, but challenged nationally.”
For more information on Austin real estate, contact Shannon Schmitz and Morgan Smith at The Shannon Schmitz Group. Thinking about moving?
About The Shannon Schmitz Group at KW-Austin Portfolio Real Estate:
The Shannon Schmitz Group is known for the signature service they provide to their clients, customizing every detail to their specific needs. Powered by Austin Portfolio Real Estate and Keller Willams Luxury Homes International, these professional, hard-working Realtors® and their dedicated, technologically-savvy marketing team work together to provide the utmost in service to their clients for buying or selling real estate all over Austin. This includes the surrounding Texas Hill Country Area, including Spanish Oaks, Bee Cave, Lakeway, Lake Travis, West Lake Hills, and the famous Austin zip codes of 78703 and 78704.