Austin Foreclosures and Loan Delinquencies

These days, the national mortgage crisis is big news. As home prices drop, delinquencies rise, and foreclosures continue to grow, the national picture remains bleak.

In Austin, however, the mortgage crisis is causing much less pain. According to the Wall Street Journal, Austin loan delinquencies are virtually unchanged from the national market peak in the fourth quarter of 2005. During this period, loan delinquencies in Austin have increased by a trivial 0.03 percentage points to 2.97% of loans. This net increase is just 1/60th of the national average increase of 1.84 percentage points. In the worst markets in Florida, California, and Michigan, delinquency rates have risen 5 percentage points or more. In Merced, California, for example, 9.78% of home loans are currently delinquent and home prices have plunged by more than 25%. This is an increase of 7.76 percentage points over the delinquency rate in Q4 of 2005.

During this same period, Austin real estate prices have increased by more than 10%. This compares quite favorably to the average U.S. home which has decreased in value by more than 8%. As a result of the changes, Austin has passed Dallas to become the most expensive housing market in the state of Texas. While Austin home prices are only 90% of the national average, they are moving up the charts quickly as other markets continue to weaken.

There are a few reasons why Austin has fared well:
– Austin skipped the real estate boom which inflated values in the rest of the country
– The Austin economy remains one of the strongest in the country
– Austin continues to attract many migrants from other states, pushing up local real estate prices
– Austin housing remains affordable compared to most major U.S. cities

While Austin has fared well, all is not perfect. The national credit crunch has caused local mortgage rates for jumbo loans to soar and has left many first-time buyers unable to get financing for a new home. The deterioration of the mortgage market has stunted housing demand causing prices to remain flat. While the economy has remain strong, the expected weakening of the technology sector over the next year will have a disproportionate effect on the Austin economy. While Austin fundamentals remain strong — especially over the long term — price may dip over the next year.

The good news, however, is that Austin real estate will almost certainly outperform the vast majority of country over the next two years. While growth may be flat, Austin housing remains in high demand.