Real Estate Rumblings

Austin declared one of the best cities to buy a home this year, but there's a catch

Austin named one of the best cities to buy a home, but there's a catch

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Austin is the No. 7 housing market to invest in for 2016. Courtesy of Kuper Sotheby's International Realty

Looking to make a big investment in 2016? According to Forbes, you’re in the right place. In an annual report, the magazine names Austin the No. 7 "best buy city" for 2016.

Forbes teamed up with Local Market Monitor, a data company that tracks home prices and economic factors in over 300 housing markets, to determine the top 20 American cities that promise a healthy real estate market to invest in this year.

While these places are great for people looking to put their money into rental properties, it doesn’t bode well for first-time homebuyers in the low- and middle-income bracket due to high housing costs. Even so, these cities are where aspiring homeowners have the best opportunity to make an economically sound purchase, according to Forbes.

Down from its No. 1 spot in 2015, Austin still places in the top 10 due to three main factors: healthy job growth (3.3 percent annually), strong population growth (6.2 percent from 2011 to 2014), and anticipated home price appreciation (12 percent annually).

As you may have already guessed, Austin’s housing market is pricey, with an average home cost of $281,000. And Local Market Monitor estimates the Austin housing market is overvalued by 13 percent, a number determined by looking at the imbalance between local income and housing prices in Austin.

Ingo Winzer, founder and president of Local Market Monitor, estimates that if a city reaches a 20 percent overvalued point, it will no longer be a hotbed for investment. Austin’s not far behind, but if the city finds a stable relationship between local home prices and local salaries, there’s likely to be a better return on investment.

Texas has the second-greatest number of cities on Forbes’ list, behind Florida. In addition to Austin, two other Lone Star State cities make the cut. San Antonio places at No. 3, while Dallas comes in at No. 6. Forbes points to Austin's growth in the high tech sector; San Antonio’s high number of financial firms and data centers; and Dallas' welcoming of the relocation of major corporations Toyota, State Farm Insurance, and Liberty Mutual Insurance as boosting each metro area's individual ranking.

Luckily for Texas, Winzer predicts that it will be a while before Texas prices reach the point where these cities will no longer be a good investment.