How to Save for a Home Purchase In Austin TX

Austin median home values 2008-July 2018

Historically in Texas, homes have appreciated at 4.5% annually (according to Texas A&M Real Estate Center). This is the expected appreciation we use when making real estate investment assumptions as well. For example, a $200,000 home would increase in value to $209,000 if appreciation was 4.5% for that year.

If you wanted to save for 1 year a 5% downpayment for a $200,000 home in Austin, you would save 5% of the future value of the home, not the current value. You would save for a $209K purchase, $10,450, not $10,000, if saving just for 1 year.

Starting in about 2012, homes in Austin have appreciated at a much greater rate, closer to 8% annually. This makes it harder to save for a down payment, like chasing a vanishing horizon. Also, there are no more $200,000 homes. The median value of a home in Austin is now about $400,000 if you want to actually be in Austin itself, versus the greater Austin outskirts areas.

So, today, if you want to save for a $400K median value Austin home, and you want to buy it in 3 years with a 5% downpayment, for example, and 8% annual appreciation rates continue, you will need to assume the median value Austin home will cost $503,885 in 3 year. That really sucks doesn’t it? If you are trying to live cheap and save for a downpayment? Waiting 3 years will cost you another $100K in purchase price.

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Austin Real Estate Market 2014 to Remain on Fire

Sylvia and I usually attend an annual Austin Real Estate Economic Update to find out what the coming year holds. This year, I exclaimed to her, “Why bother?  It’s going to be full tilt boogie, just like 2013“. I mean, Austin is rumbling along with all cylinders firing. There is nothing I need to hear about 2014 that I don’t already know. We’re gonna be working our butts off and house prices are going to keep rising.

For many, this is good news. If you’re going to sell a home in Austin this Spring or Summer, you’ll be happy. If you’re buying a home in Austin, you better have an “A Game”, and you better be ready to bring it. And I mean bring it. You don’t buy a house in Austin anymore, you compete for one. Oddly, you’ll be happy too, when you finally win a multiple bid competition and pay too much for a house.

Many of our Realtor friends had record production years in 2013, as did Sylvia and I. Most are looking forward to another busy year in 2014. But I don’t like it. I don’t want to be this busy. And I think, to some degree, these manic real estate swings and rising values are ruining Austin, and the real estate profession. Everything has become hyper-instant. Everything is Urgent. Sylvia called on a new listing the morning of Jan 2nd which had already gone under contract with 7 offers New Years Day. This wasn’t even in a “hot” area. Why aren’t people sleeping in on New Year’s Day instead of out fighting over a house?

I know. It’s a weird thing to complain about, being busy, doing well, enjoying professional success. Shame on me.

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