Let’s take a look at how Travis, Williamson, Bastrop, Hays, & Caldwell counties were affected during the Great Recession from 2007-2011. Believe it or not, they weren’t all negatively impacted which may ease concerns for those who feel the white hot Austin real estate market bubble is bound to pop.
As everyone has noticed, the real estate market around Austin right now is white hot. Whenever we’re buying land we want to make sure that the prices are not over inflated they’re justifiable. Some people think we might be in a bubble in the greater Austin market.
I wanted to see what land prices did during the great recession when the real estate market was in shambles. I specifically looked from 2007 to 2011 and I tracked land prices for one acre lots up to fifteen acre lots. Some counties surrounding Austin got hit fairly hard. Travis county saw seven percent decrease, Williamson a sixteen percent decrease. Interestingly enough, some counties including Hays, Bastrop and Caldwell county actually saw an increase or held stable. Bastrop county actually saw a 17 percent increase from 2007 to 2011. Now keep in mind, these are nominal rates, this is not adjusted for inflation. Inflation on average was about 2.2 percent year-over-year. So, those numbers would need to be adjusted to real numbers. But, it’s still interesting when you compare it to today’s environment where we just simply cannot meet the demand. So, I am very bullish long term in the greater Austin area.
One caveat, whenever you’re purchasing land, if you are using any type of conventional debt via a bank, always make sure that you get long-term debt and preferably a non-recourse loan. Some people don’t realize that usually banks have language in their loan agreements that allows them to call the note due whenever they so please. That’s not very common in our environment today, but during the ’80s and the savings and loans crisis, it happened quite a bit.
Feel free to reach out to us with questions or other topics you’d like to see covered.
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