Is Austin Real Estate Overvalued?

If you’ve been in Austin for any amount of time you’re likely to have come across the “Welcome to Austin. Please Don’t Move Here!” stickers. There is good reason many local Austinites feel this way, especially homeowners and those looking to buy real estate. With Austin appraisal values rising, and property taxes along with it, it’s not hard to understand the sentiment.

According to Jed Kolko, the head economist on Trulia, one of the largest real estate websites online, Austin comes near the top of the list for overvaluation of real estate. Other locations on this list include two hot spots in California: Orange County and Los Angeles. Austin real estate prices are considered 10% higher than what would be a fair price on today’s market.

Kolko’s “Bubble Watch” report tracks areas where the real estate market is overinflating just as they did before the 2007 housing bubble burst. These bubbles, which saw home prices up to 24% over fair market value, and their eventual collapse were a major trigger for the global economic recession we are still struggling with. He states that several markets in Texas, California and Hawaii are following the same pattern of real estate inflation as seen before.

Where else are these real estate micro-bubbles forming? San Antonio and Houston in Texas, Oakland, Riverside-San Bernadino and San Franciso in California and Honolulu, Hawaii are experiencing real estate prices 4-7% over value. Kolko’s methods of figuring out these bubbles take into account long term trending prices, price to income and price to rent ratios of the areas.