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Pop goes the market?

Climbs like a rocket, falls like a feather

The past three years have been on a tear for the Austin residential real estate market. Once of the questions I get the most is when do I think the market will crash or pop? I usually compare any down side in the real estate cycle to the mother of all downturns, 2008. It took until 2012 for that market to come to a new bottom. So if this were an equivalent event, we have four years of slowly falling prices ahead of us. But they don't go in a line. There will always be a spring upturn followed by a winter down turn. Rates of course also influence prices and I think the fed will keep them relatively high for some time to avoid a repeat of the 70s. If they don't succumb to political pressure, then rates will stay in the 6-7% range until we have sub 3% inflation for at least 12 months. If the Fed relents and drops rates as soon as we get below 3%, my best guess is that we will see inflation come back in the short term and the Fed will have to start over.

The above chart shows Austin single family home prices over the last 3 years. Note each year is higher. Last year's price curve is actually more normal than the previous two years and January is actually better than December, so we are so far seeing a spring of rising prices. My prediction is that we will see lower highs in the spring and lower lows in the winter this year and that will continue until we enter the next economic expansion which is too far out to predict. So like most years, if you can sell in the spring and buy in the fall you will optimize your transactions assuming you have a place to live in the time between.

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