Austin/Central Texas Real Estate

Latest Post

Case-Shiller Index and Austin

It has been almost five years since I wrote about the Case-Shiller Home Price Indices. (Case-Shiller and Market Bubbles, November 2014.) At that time, I discussed the marked contrast between how the Austin/Central Texas market and Case-Shiller cities performed during the run-up to the mortgage crisis in 2007-2008, and I noted that our area did not experience the bubble in home prices as much of the U.S. did then, or the collapse of home values that followed.

I have commented many times since then that price appreciation supported by job creation and a housing supply-and-demand imbalance, is not what constitutes a market bubble. Of course, the housing shortage in our area itself makes it more difficult for that market growth to continue, as we have seen with unit sales struggling to grow even as demand pushes prices higher and higher, but the demand to live in the Austin area continues nonetheless.

Today let’s have a look at how Austin-area prices have behaved during the years since that last post. I believe the comparison I made is remains valid and relevant, but I want to mention first that the Case-Shiller indices are built on a methodology that relies on paired sales of the same properties over time to validate the price change calculations. I have not attempted to replicate that approach. Instead, I have worked only with average sales prices for the five-county Austin metropolitan area (Travis, Williamson, Hays, Bastrop, and Caldwell counties)

As a starting point, here are the metropolitan areas that comprise the 10-City and 20-City indices:

Using monthly average Austin home sale prices I indexed changes to a “base” of January 2010. (I.e., January 2010 = 100.) For this comparison I also indexed Case-Shiller data to January 2010. Then I graphed that data:

The dotted green line is the monthly Austin price index that I described above. The larger dashed green line is the 12-month rolling average of that monthly data. That simply filters out seasonal effects and allows easier long-term comparison. As the U.S. real estate market was struggling to recover from the mortgage crisis in 2010 and 2011, the Case-Shiller cities experienced market weakness more dramatically than Austin did, and the Austin market maintained faster growth since the 2012 recovery than the Case-Shiller cities.

By April 2019 these are the ending values of the three lines:

10-City Case-Shiller Index ………. 145

20-City Case-Shiller Index ………. 148

Austin-area Price Index ………….. 167

The 167 value for the Austin area indicates that the average home price increased 67% from January 2010 through April 2019.

Bubble? Not in my opinion, as long as real supply-and-demand economics is driving the Austin market. Frustrating? Yes for many buyers, and maybe even more so if they are also Austin-area sellers at the same time, coordinating a quick sale with a challenging buying environment.

If you’re a Central Texas homeowner you have probably experienced growth in your home’s value and in your home equity. That’s a good thing. Most of us don’t buy a large asset hoping that it loses value over time.

On the other hand, a property tax burden that increases by 67% over 9 years can impact affordability in a real way for some long-term residents and it may put home ownership out of reach for some new residents who must now move farther from Austin to buy. New limits on property tax growth from the 2019 Texas legislative session may help, but it’s growth in taxable value that is felt most directly.

This is an ongoing challenge, as is the creation of enough new housing of all types to support net in-migration of an estimated 150 people per day. I’ll keep reporting on this, keep doing my professional best to serve buyers and sellers throughout the area, and keep working to influence Austin’s new land development code to make it easier for new, more varied and affordable housing to be built in the city.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 588 other followers

Follow Us

Required TREC DISCLOSURE

Bill F. Morris, Broker Associate
ABR, CRS, CDPE, e-PRO, MBA
RE/MAX Capital City
13018 Research Blvd
Austin, TX 78750
Texas RE Broker License # 505218

Follow Us