When thinking about the strength of the Austin real estate market during normal times, there are three important variables that drive home values: population growth, job growth, and interest rates (you need to look separately at conforming and jumbo rates).
While job growth does not seem to be occurring — layoffs are being announced every week in Austin much like the rest of the country — the other two variables are surprisingly strong.
According to the Census Bureau, Austin/Round Rock was the 2nd-fastest-growing metropolitan area between 2007 and 2008. According to the Austin Business Journal, “the population in the Austin-Round Rock area grew 3.8 percent to 1.65 million between July 2007 and July 2008. Among major U.S. metros, that growth rate was second only to Raleigh-Cary, N.C., which experienced a 4.3 percent population uptick during the 12-month period.”
This week, mortgage rates have dropped within striking distance of the all-time lowest rates, a record set earlier this year. 30-year fixed mortgage rates now average 4.98% for loans under $417,000. Jumbo rates, unfortunately, are still close to 7%. For all buyers, credit requirements remain tight.
While there is lots of bad financial news right now, the Austin market continues to hold its ground. While sales volumes have dropped significantly, prices have not. Hopefully, strong population growth and low interest rates will hold off the crisis that has effected much of the country.