I have elaborated before about the S&P/Case-Shiller Home Price Index and how representative it is (or not) of conditions in the Austin/Central Texas real estate market. (Most recent comments: Case-Shiller caution -- national index, local business, 12/03/10; Quick comparison -- Austin vs. Case-Shiller Index, 01/26/11; and Housing Bubble? Austin compared to Case-Shiller cities, 01/30/11) I will not repeat all of that discussion except to point out that the list of Case-Shiller Index cities is dominated by those that experienced the boom-and-bust of this market cycle most dramatically -- the highest highs and the steepest falls. With that as context, I offer this comparison of Austin home prices with the Case-Shiller Index as reported today:
As before, I have not tried to duplicate S&P's methodology.
Instead, I have simply "zero'd" a graph of Austin Average Sale Prices
at January 2000, and added a 12-month moving average for comparison to
the indices shown.
Most discussion of the housing downturn focuses on how much value has
been lost in real estate in recent years. That, combined with some very
"creative" mortgage financing that facilitated -- maybe even caused --
the housing bubble, is important, especially for those in California,
Arizona, Nevada, and Florida who purchased homes near the market peak.
That perspective, however, ignores how much value was created during
the boom: On average, if you bought real estate in 2004 and experienced
the same appreciation as the 10-City Composite Index, you gained about
37.5% in value by January 2006. If you made a 20% down payment to make
that purchase then your leveraged return was actually 187.5%. How many
investments can offer the potential to almost triple your money in two
Yes, for all the financial devastation during the recession, there were
huge fortunes made during those years in the cities that are now
suffering the most, but on average homeowners who purchased in those
cities before 2004 and are still holding their properties are still
fine. If they bought in 2000, they have still gained substantially more
in market appreciation than Dallas or Austin.
The Dallas market has been pretty tame throughout the cycle. Dallas
property owners did not see the incredible run-up, so the downturn
wasn't nearly so painful. That is even more true in Austin, where our
12-month average sale price reached an all-time high in December 2010.
Is there uncertainty still ahead? Absolutely (see my Austin
Market Dashboard), but virtually all indicators call for continued
improvement in the Austin market. It won't be a straight line, but I
agree with the forecasts, and I believe we will see real, predictable
growth by 2012.
Content © 2020 'Frequent Contributors'. Design © 2020 ActiveRain, Inc. All rights reserved, Inc.
Logos and service marks owned by copyright holder.