Austin Real Estate Market Q&A

Answering real estate questions from the housing market. Are we are in a bubble? What and things should you do if you are planning to buy or sell your home?

 

Hi, I'm Troy Schlicker, Owner and Broker of Reserve Realty here in Austin, Texas, and the host of the Austin Spotlight Podcast and TV show here on Austin, public TV.

Today, instead of having a guest, I wanted to answer some of the questions that I get as a real estate agent here in Austin, Texas, to help provide some value, and give you some clarity maybe around where the market stands today, because, what we've definitely have seen over the last couple of months, and especially the last couple of years is the rapid expansion of people moving to Austin while they'd been doing it for a number of years previously, the pandemic and the ability to work remotely and work from home, definitely accelerated the trend of people relocating here from other parts of the country, other parts of the state, due to the fact that we have great jobs, generally good weather, if not for the allergies and, just a great, quality of life, as is referenced by the fact that it's often considered one of the best cities to live in here in Austin.

Today I want to answer some questions you can always, if I don't end up answering your question today, you can always go ahead and reach out to me directly, happy to answer any kind of real estate questions that people may have, or find them in touch with people who can answer the questions. So one of the things I haven't done so far, in giving this information out to the Austin public TV services, is to kind of provide a little more of a way to get a hold of me to reach out if you have interest in real estate, but also a love, interest, love finding interesting guests. And so if you know of someone who you think I should interview on the Austin spotlight podcast, generally try to interview people that are all the time, small business owners, entrepreneurs, people who are doing fun, interesting things in the city, love to hear their stories, love to share their stories.

So if you know someone whose stories should be known, whose stories should be shared, I'd love the chance to interview them and get to know them a little better myself and share their experience with the audience here. probably the biggest question getting into the real estate questions that I get asked is are we in a real estate bubble, because of how fast home prices, rose over the last 18 to 24 months There's a lot of people who think that we're in a bubble because when they remember the last time of prices rising as quickly, they think back to 2006 through 2008 and how quickly home prices rose there and how that eventually led to a real estate bubble and a crash in prices throughout the country. The short answer to this is no, we're not currently in a real estate bubble.

fortunately back in 06, 07, 08, things didn't crash as much here in Austin and in Texas in general, as they did in a lot of other parts of the country. but the reason that things are different today than they were back then is the fact a few different things. One, people have a lot more equity in their homes. So people have been unable to purchase homes, generally with a hundred percent financing or even 95% financing for the last couple of years, just because so many people are putting 20%, 50%, a hundred percent cash offers on homes and people in a lot of cases have owned their homes for two or three years because there's just not been a lot of homes in the market. And so all of those people have a great amount of equity in their home, whether they recently bought and put down a lot of cash, or if they've been in their home for a couple of years, they've built up a lot of equity in their home.

And what that means is even if home prices were to dip down a little bit, come down 5%, coming down 10%. Part of the reason we're not going to see the same frenetic bubble is that they're not going to be the same level of foreclosures that there were in 2006 to 2008. That's because back then a lot of times when home prices came down, just a little bit, people got underwater very quickly. And when you were there upside down on their mortgage, meaning that their mortgage was more expensive than their home value, they decided just to walk away from their home, because it didn't make sense to make the mortgage payments. If worst case scenarios happen and home prices do drop five, 10%, or there are massive things that happen in the economy that hurt jobs and people lose jobs, which doesn't seem to be happening anytime soon.

But if that were to happen, people would still have enough equity in their homes that it would make sense for them to one either keep making the payments, or if they really couldn't make the payments, it would make sense for them to sell it through the regular market. So that way they can still get back some of the equity that they have in their home. So for someone I've been in my home now for almost 10 years, and I have almost $200,000 in equity in that home, if I were to lose some of that equity, because home prices came down and I really couldn't afford the monthly payments, it wouldn't make sense for me to let the home go to foreclosure because I could still sell it. And maybe I only get to take out a hundred thousand or 150,000, or even just $20,000 in equity.

If home prices really crashed that much, but it still makes sense for me at that point to sell my home through normal channels, meaning that we're not going through foreclosure, and you're not going to see a flood of homes on the market like that. There would be a much more systematic approach to those people who needed to sell in those cases. So that's the one main reason you're not going to see the same bubble that you saw in 2006, through 2008. On top of that, everything that we see in the market shows that home prices shouldn't drop at all. There's still very little supply of homes and a large demand of people looking to move to Austin. people that currently live in Austin looking to buy homes because it's a good, safe investment. People are having to spend more time than ever at home.

Dude, a lot of people working from home, working remotely. And so the supply and demand side of the way markets tend to work indicate that home prices, not only are they not likely to burst from a bubble anytime soon, but we're honestly likely to see home prices increase by 20% or more this year, similar to how they increased almost over 30% in most areas last year. So for all those reasons, we are not in a real estate bubble. There's nothing to indicate that home prices are going to come down at all. In fact, they're going to continue to rise, but definitely nothing to indicate that we're currently in a bubble at all. probably the S one of the second main questions that I get asked frequently is people want to know what their home's worth. And so, to do that, a lot of people go online and the most popular online site to look at homes is Zillow.

And so people wonder if the Zestimate is an accurate representation of what their home's currently worth. And unfortunately it's not, it would be awesome if it was as simple as going to a website, checking what the home price has there and seeing if it's, an accurate home price or an accurate valuation of your home. There's a couple of reasons that unfortunately Zillow is not accurate. First of all, Texas is a non-disclosure state, meaning that when you buy or sell a home, there's nothing in the public record that it gets disclosed as far as how much you purchased the home or sold the home for. So there aren't, isn't a way for a site like Zillow to gather all of the information that, on sales to calculate what those prices would be worth on top of that, even in states where that is the case where they can get that information, it's generally been shown that those estimates online tend to not be, super accurate.

I think personally, because it's a way for a company like Zillow, they're in the business of trying to make money. And they know that if they can trigger something from the people on their site, it's a way to generate business. So triggering that my home's worth XYZ, which is 10,000, 20,000, 30,000, more than it's really worth, might trigger them to reach out to an agent on that site and sell their home, or do something along those lines, which helps Zillow generate money. and so I think that also skews skews, those numbers in a lot of places, even here in Texas, but especially in states where they can get accurate information. Again, they can't get accurate information here in Texas. If for some reason you need to get that information. And there are some really important reasons why it's, it is a valuable one property tax season.

We are in the heart of Austin or Austin property tax season whether you are in Travis county, Williamson county, Hays county, they all are starting to release what they think your home values are, here in April. And that means that you have a limited amount of time to try to contest your property value. If you don't think it is out that much to try to get the property value lowered. So you end up paying less than property taxes. And so reaching out to a local real estate professional, who you trust is a great way to potentially get a valuation for your property that can help you fight your property taxes. There's also companies out there that will fight your taxes for you at no cost, unless they can actually win you some money back. And then usually you pay them a percentage of that cost.

So that's one of the main reasons that people knowing your property value can be valuable. It's also important for things like homeowner's insurance. If you don't understand how much your home's currently worth, if you've been living in it for five or 10 years like I have, and you don't realize that your home has gone up as much in value as it has, you might be under-insured in your homeowner's insurance, which if something bad could happen, like the tornado that we just had yesterday, this will come up in a few weeks. So it won't be as it was a couple of weeks ago for people watching Austin public TV. But if something like that happens in your under-insured, you might not be able to get your home built back to the same level of, pre-loss condition. And so as much as it's frustrating to have to up your insurance and up your home value there it's important.

The reason that you have insurance is to make sure that in a catastrophe that you can be made whole. And so knowing what your property value is, is important for that reason as well. Finally, another main reason that people want another property value is if they're planning to sell, they want to have an idea of what they can sell the property for how much they can make after they pay their mortgage. And any other expenses they may have to update and remodel it. And so knowing how much that the home could sell for and can be important. So that way, if you're relocating somewhere here in Austin or somewhere outside of Austin, and you have an idea of what you're going to net in the proceeds from the sale that home, and then can take that to purchase a new home, put it into savings or retirement or another investment, whatever that may be. So unfortunately, Zillow is not a great place for it. There are, places, myself happy to assist clients with, with finding out their home value. But there's, there are some reputable resources out there. Unfortunately, Zillow is not one of them.

Another major question that a lot of people start asking now is, should I be investing in Austin should I buy investment property And this is a little bit not quite as cut and dry as the last two, questions, right. I already said that we're not in a real estate bubble. So that should mean like, oh, I should potentially buy a property, but because home prices have risen as much as they have buying investment property in Austin is a little trickier than buying it, some other areas. So if you're a true, true hard bread investor, generally when you buy a real estate property, what you're trying to do is immediately have it cashflow meaning that the renters that you put into the property are able to pay for the expenses, the mortgage, the taxes, the homeowners, insurance gateway, all of those kinds of things.

And that is almost impossible to do right now in Austin, unless you buy the home with cash. And so from that standpoint, it's not necessarily the best investment because generally if you're going to buy for most people who don't have a lot of investments, they want to buy a single family home and just rent it out to a single tenant. If you're doing that, and you're only putting 20 to 25% down for your down payment, you're generally not going to be able to cover that payment, plus the property taxes, because property taxes are obviously a big expense here in Austin. And in Texas, you're not gonna be able to cover that with the tenant that you have in the property in most cases. however, I still have a lot of clients that are like, Hey, we know that we're going to have to still pay part of that mortgage ourself, but we still want to buy in Austin because it's in our home area.

We know it, or eventually we want to move here and then we'll have a property already. And we want to get in now before homes continue to appreciate even more. So from an appreciation standpoint, Austin can be a good place to invest because there's not necessarily, there are other places in the country, but not everywhere where home prices are expected to go up 20% or more again this year. And so if you're thinking about appreciation of your home, then Austin can be a great place to invest and down the road, as you've locked in that price, that mortgage, those taxes and rents continue to increase, you should start to get to the point where a tenant in three years in five years is covering the entire, entire mortgage. And so it can make, you know, you just have to be patient with that side of it.

So it kind of depends on what you're looking for with the investment. If you're looking to try to maximize the appreciation of the property value, Austin's a great place, because again, we're expecting 20% growth, in property prices this year. you know, obviously it's a little hard to say for 2023, but there's nothing, in the near future that seems like that's going to start to slow down dramatically. And so you get a lot of price appreciation, but expect to have to pay part of that mortgage every month out of your own income, because the tenant's not going to cover it. Unfortunately right now, the seller side of things, one of the questions we get asked is when is the best time to sell your home And, there is an, the most optimal time generally to sell your home is going to be spring and summer because it's when the most number of people are in the market looking for a home. And the reason that is, is because if they're moving from other parts of the country, especially selling in winter in parts of the country where it's snowing and super cold is an ideal from getting people in traffic into your home. But, and so that can be a good thing here. And all of a sudden, it's not quite as big a deal, easy to get out as long as we're not in a snowpocalypse situation, but you're not hard to get out in January, February. However, a lot of people who own homes tend to have families and for them, school is a very important factor.

And most of them don't want to have to switch the schools that their kids are going to by moving mid-year. And so a lot of people will tend to wait to when school is either almost out or out to make a move, sell a home and buy a home. And so, so that is when home prices always tend to peak in the calendar year is around, April, may, June and July, because that's when the most number of people are in the market looking for homes. So if you have the flexibility to choose when you want to buy, or when do you want to sell, excuse me, you're going to want to try to do that in those months, because it's going to give you the most potential buyers, the most potential interest in a home, and get you top dollar for your home.

That being said other times of the year, aren't bad to sell either. We see a little bit of a dead period, right When kids go back to school because everyone is getting in last minute vacations, getting used to people being back into school for the school year, doing sports. And so that mid part of August is pretty dead. Don't generally want to recommend then. and then a little bit around the holidays can be a little, can be slower, but still a lot of people that are very focused on buying will buy then too. so it really depends on your situation if those times make it easier for you, because the holidays is a time that you can push other distractions aside and get your home ready and have it looking its best, or when you can actually get updates or remodels done, because that's something you generally would like to do is have small or large things taken care of ahead of time.

So you can get top dollar, then it's not going to really matter. If you sell in July or October, having your home at its best stage to actually sell and look good and, and be applicable to a lot of buyers can happen in October. And you can definitely sell for top dollar then too. But if you're able to get all those things taken care of any repairs done, it's not an inconvenience to have people coming and taking a look at the home generally spring summer, April through July are going to be the best times to sell your home, to get top dollar, for this question, what is the number one mistake that homeowners make when selling their home And this one without a doubt is, generally selling the home or listing the home at too high of a price. it may seem like not the big of a thing because it's not one we're in a market where it seems like everything sells. even though that's the case, there are plenty of homes, couple of hundred homes currently on the market that have been sitting on the market because they'd been listed too high. but the, the reason you don't want to list too high is a couple of reasons. One when your home hits the market there, that's when it's going to see the maximum number of potential buyers that are looking at the home, because most home buyers have alerts set up to see the home, to see when new homes hit the market, because they know that they don't act fast, they might lose out.

And so if you have, you know, however many people during our seeing 3000 ish homes sell each month, if you have those many people looking at home 80 to 85% of them are going to notice it in the first seven days, maybe 14 days that the home hits the market. And so during that week or two, you have the homeless to too high, they're going to see it and be like, that's expensive for that neighborhood. I don't want to deal with it right now with the way the market is. Buyers are not going to come in and offer you, oh, it's a little high. Let's offer them 5,000 less because most sellers are not willing to negotiate. And so you can't off list it high, hoping that the seller or hoping that, excuse me, a buyer comes in and offers just a little bit less than the list price.

They're just not going to even bother with it because of that time, because they know they assume a seller isn't going to budge on their price. Then if you wait a couple of weeks and the home doesn't sell, because you test it out a high sales price, and then you decide, well, okay, fine. We need to drop it because it obviously hasn't sold yet. By that point in time, those 80, 85% of buyers have moved on to other new homes that are hitting the market. Most of them do not have alerts for a home that has dropped in price. And so you are potentially missing out on four to five times, the number of buyers being interested in your home, that they would have been when it first hit the market at the right price that have decided no, this isn't the right home and have moved on to other homes when you lower that price, they don't come back.

And so, yes, you will get a few people that maybe have alerts on for home prices that are dropping in price or some new people who have entered the market, who didn't realize that you listed the home high to begin with, but the majority of buyers we're going to have moved on to other homes. And so that means that when you lower the price to where it should have been from the start, yes, it's, it's still going to sell. You're going to be able to sell the home. But now you have a situation where maybe you only deal with one buyer and they're going to want to try to negotiate a lot more because they see that you've had to bring them home down in price. And so they feel like they have negotiating power. So they're going to try to negotiate you even lower, or maybe you have a multiple offer situation of two or three offers.

And so they can negotiate a whole lot, but it's only two or three offers. So you can't negotiate. You don't have a ton of negotiating power either. Where if you had listed the home correctly from the onset now instead of two or three buyers in a multiple offer situation, you likely would have had 10 or more. And now you have all the leverage in the world to accept exactly the terms that you want, whether it be only a cash buyer, whether it be the absolute highest price, whether it be giving you a lease back to live in the home for a little bit or a quicker, close to get out of the home to go find your next home. And so getting the home listed right to begin with is most, most definitely the biggest thing you can do to sell your home one quickly.

But two for top dollar, you will actually sell your home for more money by listing it properly right away. Then by bringing it down to that same price, two or three weeks later on that same thing, how do you deal with multiple offers as a seller, it seems like multiple offers can be a good thing and they, and they really are, but they can make the selling process a little extra stressful because now you're, instead of just having a hire, come in and be able to kind of deal one-on-one with that buyer and, getting things ironed out. You have to look at again, I've seen situations with 20 plus offers on homes, and now you're having to kind of analyze all of those one. This is why you want to make sure you have a good listing agent that you're working with because they're going to be invaluable in helping you to look over those and really compare what the difference is between them as what is actually the best offer for you.

Again, whether it's that all cash buyer, whether it's someone that's giving you top dollar for the home, what are the different types of leverage that the buyer may have Because once you go under contract and important thing to realize here in Texas is that the buyer has almost all the power. Once you get under contract, they can get out of the deal for a number of different reasons. And the seller has almost no way to get out of the deal unless the contract falls through. So you want to make sure that you're reviewing those contracts, have a good, trusted, real estate advisor to help, you know, the differences there, make sure that you have someone that's truly qualified and can get go through with the property. Because the last thing you want to do after dealing with all that is to have to put the home back on the market.

When that buyer backs out for one reason or the other, and it's going to happen sometimes, unfortunately there's just no way to completely eliminate the chance of that happening, but there are ways to mitigate that. So that way you can pick the best offer for your circumstance. Again, whether it be a quick close, whether it be the highest sales price, whether be the ability to lease back and live in it for a little bit longer and make sure you are working with a buyer who is going to be, following through on their side of things. So that way the process is as stress-free as possible

As a homeowner, whether you're planning to sell or not. One of the questions they could ask quite a bit is, what home improvements should I do to my home. And this really does kind of get delineated between people who own their home and plan to live in the home for at least three plus years or people who live in the home and are thinking about things they want to do, because they want to sell the home. If you're living in the home planning to sell, you want to make sure that the updates you do are cost-effective and are going to get you the return that you put into them. You want to make sure that you don't want to put in a pool because you're not going to make that money back. If you're trying to sell your home in six months, you want to do things to the kitchen.

You want to do things to the master bedroom, to the living room, because those are the areas that people really look at and say, yeah, this is the home that we want to live in. The other key thing that you want to do is to probably generally, you don't want to go too extreme in fancy over the top luxury type of items, unless you really have a multimillion dollar house that, that, where that could make the difference you want to do high quality products, hardwood, floors, tile, floors, things of that nature, but you don't necessarily want to spend the, at the highest, highest level. Because again, there's not usually a huge return on the investment for spending $10 a square foot on tile instead of $5 a square foot on tile. The other thing that you need to do as someone planning to sell is understand where current trends are in homes.

So, things like more color are starting to become more popular. Even things like black or green and blue are becoming more popular in homes, but you want to make sure you do them very carefully. So that way it appeals to the masses. Still a lot of whites, a lot of bright, living spaces is generally going to appeal to the most people. And so you want to make sure you are doing the home based on current trends and not personal preference, because you want your home to appeal to the most number of potential buyers out there. If you are planning to live in the home for the next three plus years, then you have the opportunity to do a lot of different things. You can get much more personal with the color options with the flooring options with, with any type of options, because it's something that you're going to enjoy.

And so doing it to your tastes makes a lot of sense, because if you decide to sell in five, 10 years, design chain design trends will have changed by then anyway, and you may need to update it to be more current at that point in time, regardless. So if you're planning to live in the home longer, then it can make sense to do stuff that's maybe more durable, maybe make sense to go from the $3, a square foot flooring to the five, because it's more durable and you have large dogs and kids and people that are going to be rough on the material. And so it makes sense to have stuff that's gonna last, maybe, you know, getting your favorite color is turquoise. I wouldn't recommend most people doing that, but if you want to put turquoise in a bunch of different areas, because you're going to live in the home and you're going to enjoy it, it's going to remind you of living by the ocean.

That can be a great thing to do for someone that is not planning to sell really not planning to sell soon. But, so you can get more personal with the accessories you put in the home, the colors you put in the home, all those types of things give you a lot more flexibility because it's your home in those cases. But that's kind of the biggest difference is you want to be current on trends. If you're planning to sell the home, you can get a lot more personal in the type of updates you do. If you plan to live in the home for an extended period of time. One of the other things that, I didn't have up geared to go as a question, but in the housing market, the big thing that we do see coming as far as, is now a good time to buy is the fact that, here we go is now a good time to buy a home is the fact that home prices are going to keep going up. So again, some people think that we might be in a bubble situation.

So another question we have is, is now a good time to buy a home. it's going to depend a little bit in your situation, right Like if you can't really afford a home, if you are planning to potentially move, or you're not really sure if you can live in Austin for the next three to five years, they may not be the right time to buy a home. However, if you do feel like that's the case, there's a few reasons why now could be a really good time to buy home. One again, we talked about real estate prices and home prices are going to continue to go up, especially this year and kind of for the foreseeable future as more and more people move to Austin. Secondly, interest rates are going to rise. And by the end of the year, we're expecting interest rates to potentially get up to 5%.

And so by buying now, not only are you potentially saving money on the price of the home, that's going to go up 10 to 15 to 20% this year. But by getting an interest rate, that's closer to 4% than 5%. You're going to be saving money on that monthly payment and interest over the life of the loan. So as frustrating as it can be right now to try to buy homes, because there's not much available because you have to deal with the multiple offer situations. If you're going to be here in Austin for the next five years or so, even if it's the next three years, it can make a lot of sense to look at buying now, because you're going to lock in that interest rate. You're going to lock in that price, on the home. Now, as both of those things are expected to rise significantly over the course of the year, which means it's just going to get harder to afford a home. in 12 months, in all likelihood.

Those were the majority of the questions that I had, had that I wanted to kind of talk about today. I could talk about the Austin real estate market, probably for a couple more hours. I know for most people that's more than they would really want, but if you do have additional questions that about their Austin real estate market, about things that you would potentially want to do to your home, but mortgage about really anything Austin related. I love having those conversations and helping people, getting them the right resources and doing it Ken. So feel free to reach out. we have my social media handles here, so it's easy to find me on Facebook or Instagram. you also can use the old fashion, give someone a call, shoot someone, a text, information there says it's, across the street phone number (512) 809-6166. troy@reserverealty.com. So love to answer any questions that I can that may help you, whether that be dealing with a property taxes this year, whether it be getting ready to buy or sell a home, something in between. Happy to answer those questions. Like I mentioned, as well, too, love to, interview guests have more guests interviews lined up for future episodes already. But if you know someone that would be, a really interesting person to talk to and bring their story and share it with the Austin community, please reach out those same ways as well. I love to get connected with great people here in Austin and share their stories. Hope you have a wonderful day.