Over time, the value of a home will rise and fall. In most cases, however, home values appreciate in the long term. It is important to remember that with real estate, there is always a certain amount of risk. Let’s take a closer look at real estate appreciation in Austin, TX.
2000 was a great year for Austin, as the annual appreciation rate was about 12.50%. Shortly thereafter, the Dot.com bust occurred, and disaster struck. In 2001 the rate dropped to 9.44%, and dropped even further to 1.54% in 2002. A low point came in 2003 when rates dropped to a shocking -0.29%. The rate then slowly rose to 1.02% in 2004.
Good news came in 2005 when the appreciation rate climbed back up to 4.90%. In 2006 it rose to 8.19%, and in 2007 rates reached 9.34%. Unfortunately in mid-2007 a serious financial crisis occurred, and the appreciation rate began to fall. In 2008, rates went back down to 4.81%, and in 2009 they plummeted to 0.01%. While the years between 2009 – 2014 saw a downturn (the Great Recession), the rates eventually returned to normal. The average growth during this period was 3.4%.
If Austin had not experienced the Dot.com and Great Recession downturns, and maintained a 6% appreciation since 2000, the median price today would be about $326,388. It is actually at a more affordable price of $230,000. With inventory at an all-time low, homebuyers are finding themselves competing for homes, and offering more than the list price. Once inventory becomes low and demand rises, appreciation rates will rise. Mark Sprague, State Director of Information Capital of Austin, was quoted as saying “Appreciation in Austin ranges between 5%-9% during growth periods. We think that 9% appreciation is predictable for 2014 and 2015. At least 6% appreciation for the following three years is likely.”
While appreciation rates in Austin have fluctuated over the past 14 years, they are expected to rise in the next three to five. Prices will move up once demand exceeds supply.
Heji, Roselind. “Austin Appreciation – A Long View.” http://austintexasrealestateblog.blogspot.com/. 29 May 2014.