Buying House in Area where Both Supply and Demand Are Growing Rapidly?

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SteveJ2
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Buying House in Area where Both Supply and Demand Are Growing Rapidly?

Post by SteveJ2 » Sun Jan 21, 2018 9:07 pm

I live in a suburb of Austin, TX. Especially in my local area, many people are moving here, which in theory would be good for future property values. But, there are also tons of new housing developments. Housing prices relative to rent are favorable, and I can have a margin of safety, but I'm a little uncertain about how to gauge future property value given both demand and supply are going up.

I am thinking about buying here - given this scenario, are there special considerations I should think about? Is there a way for me to gauge if/how supply and demand will match each other?

In the past I have only bought houses in more stable population and growth markets. I am fortunate to have stable employment and plan to stay for at least 5 years, and probably more. However, I rented a home in a new planned community right after the 2008 calamity, and saw first hand how aggressive development in the mid-2000s was totally halted and many homes had underwater mortgages in an oversaturated market.


123
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Re: Buying House in Area where Both Supply and Demand Are Growing Rapidly?

Post by 123 » Sun Jan 21, 2018 9:15 pm

From my experience if you're in an area that is still growing with new housing it may be more difficult to sell an existing home that was built in an earlier phase. Buyers in such areas are attracted to the new tracts because of the advertising and usually have little or no interest in buying a "used" house. After the area maxes out and matures the used home become attractive since there is no longer any "new". Depending on your area that might be 10 years after you bought in. Of course you can sell earlier, but you may have to take a considerable discount in your price to attract any buyers.
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quantAndHold
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Re: Buying House in Area where Both Supply and Demand Are Growing Rapidly?

Post by quantAndHold » Mon Jan 22, 2018 1:28 am

In a place like Austin that has essentially unlimited buildable land, I would not expect long term price appreciation to be much more than the overall rate of inflation, plus or minus the effect that changing interest rates will have on the price. However in the short term, the market can do anything.

The crazy price appreciation that’s happening mostly on the coasts is happening because development in the coastal cities is constrained in some way, often by large bodies of water stopping new development, or sometimes because of urban planning issues. Neither of those things seems likely to affect housing prices in Austin.

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randomizer
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Re: Buying House in Area where Both Supply and Demand Are Growing Rapidly?

Post by randomizer » Mon Jan 22, 2018 1:29 am

Sounds like a roof over your head, not an investment.
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SteveJ2
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Re: Buying House in Area where Both Supply and Demand Are Growing Rapidly?

Post by SteveJ2 » Mon Jan 22, 2018 9:42 am

Based on that article, if the buyers' market is overpriced, the rental market here is even more outrageous! It is indeed a roof over my head and not a true "investment" (prices in my local area being favorable to renting is the main impetus). I just don't want it to become a huge loss (I would be happy with roughly inflation-level price increases) and I'm not sure how variable prices could be given the growth in the area. Thank you 123 and quantAndHold for the insight about how market development can proceed in these kinds of areas.

scifilover
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Re: Buying House in Area where Both Supply and Demand Are Growing Rapidly?

Post by scifilover » Mon Jan 22, 2018 10:05 am

My DS just purchased a home in Austin this past summer. He has been there for 7 years and prices have escalated significantly both in the rental market and the property market over that time. However, like everywhere else, proximity to core Austin lifestyle benefits has driven price increases. In part, this is because there is no transit, and the road system has not been developed to match the population growth.

So, the suburbs have seen some increases but not as much as Austin itself.

Another factor to consider in your purchase decision is the very high property tax rates. In Austin, the rate can be over $2/per $100 of assessed value. This is twice the rate of Seattle for example.

My DS has just a 6 mile commute but he often speaks about 35 minutes in the car.......

SteveJ2
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Re: Buying House in Area where Both Supply and Demand Are Growing Rapidly?

Post by SteveJ2 » Tue Jan 23, 2018 8:08 pm

Great point - I hadn't considered that property taxes could be so high here. I will have a look.

runner540
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Re: Buying House in Area where Both Supply and Demand Are Growing Rapidly?

Post by runner540 » Tue Jan 23, 2018 8:15 pm

SteveJ2 wrote:
Tue Jan 23, 2018 8:08 pm
Great point - I hadn't considered that property taxes could be so high here. I will have a look.
Your OP seems to say that you looked at house price vs rent. That is pretty meaningless. You need to run the numbers including all cost of renting and buying: try this calculator, and make sure you are using numbers for two **comparable** properties.

https://www.nytimes.com/interactive/201 ... lator.html

Insurance and taxes in particular tend to be high in Texas. Don't just rely on current taxes: if someone has lives there a long time, they msy have much lower appraisal and taxes than a new owner would have. Apply the tax rate to the market value of the home.

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