News is that the housing market is booming in the Austin area. I assume that bubble will have to burst at some point. Any projections?

Still active.

Bought a 2014, 950 sq ft, 2BR in 2017 for $328.
1 Mile East of downtown in Rosewood area.

Sold it in 7 days, closed last week for asking price of $525.
Had two active buyers immediately.

I bought my 790 square foot home in 2014 for 375k. I thought it was the top of the market. I added a bed, a bath and a pool and if I listed it for less than 1M tomorrow there would be a line out the door.

Austin's population has doubled over the past 20 years,
Continues to grow, and the latest wave of folks are fleeing high priced areas with loads of cash. Until the city stops growing with well paid employees it won't stop, maybe it slows or plateaus but I don't see a bubble.

And it's not just CA it's New Yorkers, Bostonians and DC

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The same thing happened with Seattle from the decade between 2010 and 2020

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I lived in Seattle from 2010 to 2014. I had several friends who were upside down on their mortgage due to their house value dropped significantly after the purchased it. After 2014 it picked back up.

Does the property tax get assessed and increase every year in TX?

Yes, and I think the out of staters may be in for a shock. At least that's what I'm hanging my hat in for a blip in the market.

I held off upgrading on a home I was about to pull the trigger on just as covid hit. Now I hav a baby and a way too small home. I'm an idiot.

CA has 1% property tax and 10% income tax, so even with the increase in property tax the tax rate likely drops for most folks moving here
For a simplified example

Income: 200,000
State Tax: $20,000 (CA)/ $0 (TX)
Property value: $1,000,000 (CA)/$700,000(TX)
Property tax 10,000 (ca)/21,000(tx) (plus a smaller note at lower rates)

If you are planning to buy and hold for 10 or more years I'd say do it now, because let's say it runs up at even less than inflation 5% over next 2. If it drops 20% in year 3, who knows what interest rates will be but I imagine they won't be much lower

Shouldn't you be able to sell your current place for much more now?

I am able to sell it for about 4x what I paid for it 10 years ago. Having the money isn't the issue - I just have a mental block on spending a million dollars on most of these houses for what you get.

Time to move out of town and rationalize the "overspending" via land to get past my mental hurdle.

Cause you;re going to really get a deal on land and construction costs near Austin.

It's not about the "deal" it's about getting past the mental hurdle to spending that much for so little. For me, I'm willing to spend a ton more for a bit of privacy.

Correct, you will see softening in these exurbs first.

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For me, I'm willing to spend a ton more for a bit of privacy.

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I get that.

Keeper of The Spirits said:

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CA has 1% property tax and 10% income tax, so even with the increase in property tax the tax rate likely drops for most folks moving here
For a simplified example

Income: 200,000
State Tax: $20,000 (CA)/ $0 (TX)
Property value: $1,000,000 (CA)/$700,000(TX)
Property tax 10,000 (ca)/21,000(tx) (plus a smaller note at lower rates)

If you are planning to buy and hold for 10 or more years I'd say do it now, because let's say it runs up at even less than inflation 5% over next 2. If it drops 20% in year 3, who knows what interest rates will be but I imagine they won't be much lower

Shouldn't you be able to sell your current place for much more now?

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Effective state tax rate for $200,000 house hold income is less than 6%. So about $12,000.

And if property doesn't change hand, annual assessment is based on CPI or no more than 2% which ever is less.

So if you bought a house at $500,000 but now valued at Million. Property tax is still based on $500,000 + CPI.

So taxes in this scenario would be more or less equal using your calcs right? So still no big sticker shock for our new neighbors.

Unless they bought more house than they should have due the savings they thought they would have due to no state income tax - not thinking about property tax.

Let's let the hope exist.

Yes and No.

My parents' house they purchased in Orange County in 1988 for $200,000 and my house I purchase for $450,000 in 2012 are both valued over $1,000,000. But my property is assessed at $560,000 and my parents house is assessed at $350,000 so our property tax at 1% is quite reasonable and doesn't jump rapidly.

Now, if I was to purchase a $1,000,000 house in CA today....poor soul, yes, I'll be paying $10,000+ plus per year.

So in some scenario, total tax payment in CA can be lower than TX for similar valued houses.

I owned a house in Rockwall from 2004 to 20012 and it didn't appreciate much so my tax payments during that period is a bit hazy..

But the question is, will the appreciation of Austin Real Estate during the past 2 years impact some home owner's ability to pay property taxes coming up?

I'd take the bet that it won't be taxes that break people especially in the urban core. Supply in the ex and suburbs catching up may help the whole area stabilize some but until the population growth slows or Austin introduces rent control I think and hope values consider to skyrocket

I take the people moving into austin in three categories:
-Those with tech jobs from california that have money, are willing to spend it, and have companies will to pay the relocation savings game.
-Broke just graduated college kids taking all sorts of high,medium, low paying jobs to be in the cool city.
-People from around the country just trying to escape their covid insanity. (usually doesn't wind up in austin).

The techies, with the most money and strongest attachment to high paying tech companies are going to be just fine with property tax increases. As we've seen with California, the tech companies just wrap that into a cost of living calculation and pay that out to their employees. So the winners are those who buy land, get a job that can pay the mortgage and stay above tax rates, and then exit one day to a LCOL area. The company effectively pays for the property taxes as employees will change jobs to get paid more.

(Sidenote, I think a lot of techies are going to get burned by Texas enforcing noncompetes compared to california ruling them illegal).

Agree with most of your points. One that I have been trying to think through is whether or not companies will continue playing the COLA game when they expect to (at least communicate to staff) that they will remain fully remote for most of the positions. To me, you will only ever get one or the other.

In reality, some tech companies will bring people back quickly - or at least certain positions probably at the leadership level - and some companies will try out the fully remote life and start experimenting with "rural" hires that will do the job cheaper due to lower cost of living. A lot of assumptions there that would determine how successful that could be....but it's going to be done.

tlepoC said:

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Agree with most of your points. One that I have been trying to think through is whether or not companies will continue playing the COLA game when they expect to (at least communicate to staff) that they will remain fully remote for most of the positions. To me, you will only ever get one or the other.

In reality, some tech companies will bring people back quickly - or at least certain positions probably at the leadership level - and some companies will try out the fully remote life and start experimenting with "rural" hires that will do the job cheaper due to lower cost of living. A lot of assumptions there that would determine how successful that could be....but it's going to be done.

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Good points. From a corporate level, moving to Texas from California helps immensely on taxes. Austin is the only city they can convince these californians to consistently move to. Dallas/San Antonio/Houston is for conservative squares. So I expect to see more offices/headquarters moved to Texas to help the corporate side out on taxes.

On the individual contributor level, the remote work is a double edged sword. In theory, you can try to find someone cheaper out in the country and pay less, but in reality those skills just aren't there in masse. For a company that looks at a remote job and says, this is so simple we can just have anyone do it-lets go find someone cheaper. That job isn't going to someone in the sticks, its going to India, or South America. For tech work that is complicated but boring and hard to get people to do, thats what the H1B visa program was abused for. I think you're going to see a lot of insurance paperwork, virtual assistant, and admin jobs go fully remote and stay within the state. Those require a relatively low level of technical ability (compared to coders) but also demand someone who is working in your time zone and can speak english completely like a local and not create communication barriers.

I think the talent base out in the sticks increases with fully remote options. I may be projecting and overestimating the number but think of the talented tech people that want to live out in the middle of nowhere and avoid human interaction - as long as they have a strong internet connection. The internet connection is a hurdle that will soon be cleared.

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as long as they have a strong internet connection.

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And a backup generator.

IMO I don't think you'll see a bubble there, but more a slowdown in appreciation. But I'm also assuming there's a bucket load of inflation to really show itself in 2022 because I've lost track of the number of emails I've gotten from suppliers about prices going up by X% on whatever date.

My original question was not in regards to appreciation but as to the # of new people moving to the Austin area.

PlanoAg98 said:

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My original question was not in regards to appreciation but as to the # of new people moving to the Austin area.

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was it?

I'm not familiar with the Austin market, but with the general migration trends in the US, people are moving to Texas. They are moving here because real estate is still reasonably priced and because there are political, personal and corporate tax advantages. So if the real estate markets in Cali, NY, and Chicago take a hit, it's not a shock. It's because people are leaving and the demand is going down. But they are moving to Texas. So one would think that Texas could withstand the hit of a nationally shifted real estate market. So in short, no...the bubble isn't bursting. This is the new norm.

I'm an appraiser in the Austin metro. It's been difficult to really assess and the price appreciation that just happened in the last year was truly out of this world. The local economy is strong and will continue to be so for awhile.

The one thing that gives me pause is that probably half the appraisals I do are refinances on recently closed new construction homes to eliminate PMI. These are all generally $600k+ homes. It may just be people are keeping their cash due to low rates, but there's some pretty high debt levels out there.

Bob_Ag said:

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I'm an appraiser in the Austin metro. It's been difficult to really assess and the price appreciation that just happened in the last year was truly out of this world. The local economy is strong and will continue to be so for awhile.

The one thing that gives me pause is that probably half the appraisals I do are refinances on recently closed new construction homes to eliminate PMI. These are all generally $600k+ homes. It may just be people are keeping their cash due to low rates, but there's some pretty high debt levels out there.

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Debt levels have to be through the roof but money is getting cheaper for the last 30 years.

My father rubbed off on me and I was ultra conservative, buying a way smaller home than I could afford. Had I been more adventurous I think any big home purchase before 2020 would have paid off massively.