Is Mueller in a Speculative Bubble?
I’ve had two calls from appraisers in the past week asking me for more information about Mueller home prices for property valuations that they were undertaking. I’m not suggesting that this means that appraisers are getting more nervous about values in the neighborhood, but it isn’t typical and it reminded me of an article I wrote about 2011 property tax valuations. In it I gave two examples of home values rising between 8.2% in 20 months and 13.9% in 6 months, could this be a sign of a bubble market?
This question was particularly pertinent when I met a buyer at one of my off-MLS listings a few weeks back – she was concerned that this was a bad time to buy at Mueller due to what she described as an unsustainable increase in prices that would surely adjust downward in the near future, particularly with the impending new homes of Section 6.
It’s obviously very hard to look into my crystal ball and figure out what home prices are going to do, but I can take a quick review of the real estate fundamentals and see how they are changing.
Macroeconomic US factors:
- GDP Growth (2% in Q3 2011 per TradingEconomics.com)
- Unemployment Rate (8.6% in November 2011 per TradingEcomonics.com)
- Foreclosure Rate (1 in 563 housing units received a foreclosure filing in October 2011 per RealtyTrac)
- Mortage Rates (The Fed is talking about a new plan, though in August they said they would effectively keep rates low through 2013)
So overall, the notion is that the US housing market is recovering slowly, or about to start recovering, and there are more threats to stimulate it even more to accelerate a more broad recovery. Now before I start ranting about there being no such thing as a national housing market (unless you’re a national bank), I’ll just say that these macroeconomic factors do play into the Mueller housing market – interest rates are l0w, and Austin unemployment is 7.4% in October 2011 per The Texas Workforce Commission.
Local Real Estate Factors:
- Jobs and amenities are increasing in the neighborhood – from the HEB Grocery, new jobs at the expanding Dell Children’s Medical Center, and new entertainment facilities
- New transportation is relatively stagnant – aside from increased capacity on 290E and the relatively low usage commuter rail stopping at nearby M-Station.
- Population – Austin’s population continues to double in size every 20 years and while new people are arriving, there is no new centrally located land, aside from the large condo towers expanding the downtown population.
- New residential construction is coming to the neighborhood in the form of the 221 new homes in Section 6, and the thousands more to come.
- Homes at Mueller aren’t permitted to be leased for the first year of ownership, and are sold to owner-occupiers. This prevents speculation by investors.
Real estate is a somewhat illiquid asset, and in the absence of speculation, any price changes will likely be slow in my mind. With the increased housing supply in the next year cancelling out the effects of the new amenities, I would anticipate Mueller house prices to stay somewhat level, or at least arrest the alarming increases of 2011.
Of course, I could be entirely wrong – that’s just what my crystal ball is telling me right now – we’re not in a speculative bubble. Let me know if you want to talk more about Mueller home values. 512 215 4785