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Californians are hesitant about buying houses in Austin, Texas, because they’re now too unaffordable.
In particular, Austin’s real estate market is so volatile that some houses in commuter towns like Buda are selling for close to a half-million dollars which would have only sold for the “low three hundreds” a year ago, according to the Texas Monthly.
“The Austin market is so hot, [real estate agent] Giles said, that some of his upscale clients in Los Angeles and San Francisco have decided to stay put, souring on the Texas city because they no longer consider it affordable,” the outlet said.
The bidding war has led to some would-be buyers taking desperate measures to ensure their offer is accepted, such as penning a letter praising the house from their dog’s perspective.
“To stand out among an outpouring of attractive offers, one of Giles’s clients penned a handwritten letter from the perspective of his dog,” Texas Monthly continued. “It explained what the home, and especially its lush green lawn, would mean to the animal.”
“For a final flourish, the client purchased an ink pad and used it to stamp the missive with an actual paw print.”
There’s several factors contributing to the real estate price spikes in Austin.
First, out-of-state residents are cashing out their home equity in expensive states such as California and New York to buy relatively less expensive houses in Austin, but now with this influx of cash, they’ve priced themselves out of the Texas capital.
Second, the actual city of Austin is not friendly to single family homes, meaning that, like in California, there’s a housing shortage. The majority of residential construction in Austin now is for multi-family units, such as fourplexes built on lots that once housed a single-family home.
Third, mortgage rates are unusually low, causing some people to compete to buy a much bigger house than they need.
Fourth, investors are paying well above market price for entire neighborhoods to create permanent rental houses out of homes that would have otherwise been bought by middle-class families.
According to Zero Hedge:
“You now have permanent capital competing with a young couple trying to buy a house,” according to real estate consultant John Burns, whose firm estimates that in many of the country’s hottest markets, roughly one 20% of homes sold are bought by someone who never moves in.
“That’s going to make U.S. housing permanently more expensive.”
Some analysts predict housing prices will flatline – or even crater – in the not-too-distant future due to collapsing homebuyer confidence in response to soaring prices.