AUSTIN (KXAN) — The city of Austin has the second most overvalued housing market, Forbes reports.
According to data from Fitch Ratings, Forbes reports the Austin market is overvalued by 17 percent with a median value of $286,400. Austin is second to San Antonio which Fitch shows is overvalued by 18.6 percent with a median value of $202,600. The valuations are worse than in Las Vegas, Phoenix, or Portland, Oregon.
The ratings were determined using data for nominal income growth, population growth, unemployment, change in rental prices and change in home prices.
The full methodology is available at Forbes.
On Thursday, the Austin Board of Realtors released its mid-year housing market report that shows single-family home sales across the Austin-Round Rock MSA increased 2.8 percent year-over-year to 14,958 home sales and median home price rose 6.4 percent year-over-year to $300,000 during the first half of 2017.
Alex Acosta moved into his Easton Park home in southeast Austin about six months ago after reaching his breaking point in the renting world.
“The prices of apartments weren’t getting any cheaper so it was time to put that money elsewhere,” Acosta said. But the cost came with questions for the first time home buyer.
“It’s still a question of whether or not, you know, was I sure that my job and the job market was going to continue to stay as strong as it is?” he said. “Is the trajectory of the home prices going to continue to increase? You certainly don’t want to be on the tail end of – what people call ‘a bubble.’”
KXAN met with the Home Builders Association of Greater Austin, which says southeast Austin and northwest Austin are two areas where they really anticipate the next big boom.
“It’s definitely a target area of our whole MSA, where lots of development will continue to show up over the next few years,” Emily Blair, executive officer for the Home Builders Association of Greater Austin said.
Discussing Forbes’ findings that the Austin housing market is overvalued, she said confirms what people already feel.
“I think our builders definitely feel that on a daily basis too, just the ability to deliver a product that people can afford. It’s much more challenging every single week, every single month, and as the market goes, so does the cost,” Blair said.
As for any bubble? She said it’s something the association talked about during it’s outlook for the next few years on Wednesday.
“The sentiment in the room is that we’re going to be in this same path for a little bit. I mean people keep coming to live in Austin, it’s still an amazing place to live. It draws people from all parts of the country and we don’t foresee that slowing down,” she said, adding even if the market stays the same for the next few years, that’s a good thing.
A good “rule of thumb” is for 25 percent of your income to go toward housing costs. But in Austin, the home builders association says they’re seeing easily 30-40 percent.
The Austin Housing market has changed drastically over the last decade. In June of 2006, the median price of a home in the area was $182,000. Even when the housing crisis began in 2008, the price was still up in Austin. It leveled off statistically for a few years. Then, in 2012, prices started shooting up. Five years later, it’s nearly $100,000 more.