I agree the line graph from a macro view of Austin (and the U.S.RE market in general), trends up except for the occasional downturns, however it is the unexpected downturns that eliminate many investors from the business. Staying Power is underestimated. The first signs of the Austin downturn were late "85, Denial set in till "88 -"89. Surrender '90-'92....."91-'95 was the very best time to buy Austin RE. Wealth changed hands in Austin. Though we have had a few bumps since then, they have not been significant.
My point in the previous response is that I am burdened that so many investors are involved in a game and unaware of the dangers should a correction or decline occur. In my opinion, returns are not enough at these price levels to sustain/attract further prudent investment .
For instance, let me compare/contrast
I still hold a few properties I bought in the early "90's that have averaged a cash on cash return of 35% per year for the last 15 years. Appreciation has been 5 fold as well. If I were to sell a duplex I own now it would go for $140,000.00 net. It rents for $1100 per month:
$1,100 x 12 months = $13,200
Pro. Tax ($3,000)
Vacancy/Make Ready ave over 15 yrs ($2,000)
Net Flow $5,500 for a cash layout of $140,000.00....no thanks.
Any debt/financing to purchase wipes out any cashflow and requires the investor to realize return on appreciation alone. A 10% correction/decline in price levels in Austin leaves leveraged Investors with negative cash flow (assuming debt) and no way to sell the property short of bringing cash to the closing table, which most will not do.
Finally, life is too short for me to study/discover/invest in other cities. I have teenagers. For me, I must decide if the timing is right to invest in Austin. If it is, I invest with the intent to hold long term, if it isn't, I buy, remodel and sell. I do not believe Austin will contine to appreciate at the levels of late, indefinitely. The market in Austin is highly leveraged and if a correction occurs we will have an over supply to digest. Time will then determine if it is a breather/correction/decline. The fundamentals of growth and employment are excellent in Austin so it is unlikely we will have decline. I look for a correction.
BTW, when you say "I sell investment RE but invest in other markets" do you mean that you do not invest in Austin, or you do invest in Austin, but diversify with investments in other markets? Pleae write back. I think healthy dicussion helps all.