An increasing number of people are relocating to Austin, Texas, driving housing costs way up.
When Hassane El-Khoury moved to Austin, Texas, from San Jose in 2018, he knew he’d be able to get more house for his money. But even more importantly, he got more land.
The CEO of publicly-traded Cypress Semiconductor, which has an office in the Texas capital, purchased a home on five and a half acres in Austin at a cost of about “four to five times” less than what he would have paid in the Bay Area. Additionally, he found that the quality of life in Austin has exceeded his expectations.
“I am extremely happy I made the move,” says El-Khoury, who had lived in the Bay Area for a decade prior to his relocation. “From a personal and professional aspect, Austin offers what I am looking for.”
As the city’s tech ecosystem has continued to expand, buying a house in Austin is either a steal or a struggle depending on whether you are a local or transplant to the area.
To Austinites, the rapid pace of home appreciation over the past 10 years has been startling while dramatic hikes in property taxes presenting even more threats to home ownership.
But for outsiders moving in, especially from the Bay Area, home prices in Austin are a bargain. Therein lies the friction – if transplants continue to relocate, it’s inevitable that housing prices will continue to escalate. But to what degree remains uncertain.
Looking At The Numbers
For an idea of how hot the city’s housing market is, let’s look at the most recent statistics from the Austin Board of REALTORS® April 2019 Central Texas Housing Market report.
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The number of home sales in the Austin-Round Rock Metropolitan Statistical Area (MSA) spiked by 15 percent in April 2019 compared to the same month last year, according to the report. However, there are signs that the heated pace –while still accelerating– might at least be rising at a slower pace.
In the first quarter of the year, the median price of a single-family home in the Austin-Round Rock MSA increased by just 0.2 percent, which is a much smaller margin compared to previous years, according to Kevin Scanlan, 2019 president of the Austin Board of REALTORS®.
In April, the median home price in the five-county metropolitan area increased 1.6 percent to $320,000. This is 69 percent higher than the area’s median home price of $189,000 in April 2009. In the city of Austin, the median home price in April is nearly 20 percent higher, increasing year over year by 1.1 percent to $394,450 in April. (For context, this compares to a median price of $1.32 million in Santa Clara County metropolitan area.) Meanwhile, home sales in the five-county metropolitan area climbed year-over-year by 14.9 percent while sales dollar volume increased 14.1 percent to $1.2 billion.
This 2,838-square-foot Crafstman home in Central Austin was listed for more than $1 million and was under contract at the time of publication.
While the median home price has continued to rise steadily in recent years, it’s going up at a slower pace as of late, local industry experts say.
“Between 2012 and 2015, we saw price increases as high as 9 percent. These narrower margins are a strong indication that market prices are starting to stabilize,” says Scanlan. “We’re still seeing lots of multiple offers and homes selling significantly over list price if they are in a good area and in good condition. But it’s not as dramatic as it once was with homes hitting the market and getting 10 to 20 offers at $20,000 to $50,000 over list in the first 48 hours.”
Still, inventory remains low and the market remains a seller’s one “to an extreme degree,” according to Scanlan. In some areas of the city, inventory has dropped so low that there’s only less than a month of inventory. On average in the five-county MSA, housing inventory in April remained unchanged at 2.4 months worth.
“Six months’ worth is considered a balanced market,” Scanlan says. “The lack of supply has become a major factor. Demand is so high that supply can’t keep up.”
What’s the backstory?
Part of the driver behind the increase in home prices is the number of people and companies moving to Austin. In this piece for Crunchbase News, I looked deeper into the increasing amount of tech companies in particular that had relocated to the city over the past few years. Also, over the past few months, I have covered how Apple’s plans to spend $1 billion on building a massive new campus in the city as well as Google’s plans to hire more people have impacted the real estate market here.
“My agents have talked for years about the fact that when people come to Austin from the East and West Coast, but especially from high tech areas in California, they have what we call ‘reverse sticker shock,’“ Scanlan says. “They come here and can often get double the size for one half or one-third of the price. Plus, the quality of life versus the cost of living makes it a very attractive destination.”
El-Khoury is a prime example.
Chrissy Hand, who works with Coldwell Banker, represented El-Khoury in his home purchase. The Realtor worked in Human Resources for tech companies for two decades before she changed careers. As such, she estimates that about 60 percent of her clients come from the tech industry. About 50 percent of those clients are migrating from the Bay Area, she says. North Austin, in particular, due to the presence of a number of tech companies but most notably, Apple, is increasingly “desirable.”
“It’s always been a competitive landscape for the best homes in the North Austin area — the schools are some of the best in the state,” Hand says. “But I do think it’s gotten even a little bit tougher since Apple’s announcement of adding the new headcount. I have extended three offers for homes within about three miles of the Apple campus in the last couple of months and all of them were competitive offers.”
A former Bay Area resident herself, Hand recalls the reaction of a friend who worked for a Bay Area tech company when she first began posting homes for sale in Austin.
“She was in awe of what you could get under half a million,” says Hand. “I thought she was joking when she said she was going to move here but as soon as her daughter got out of high school, she came and picked a new construction home near the Apple campus. While she earned a good income there, buying a home in California has just really been out of reach for a while, even for those pulling in a good living.”
To Hand’s point, many homebuyers are opting to move further north or south of the city’s core to save money on houses and property taxes. Companies are also choosing to build or locate in the suburbs or outskirts more often to be closer to potential employees, Scanlan says.
Romeo Manzanilla, broker-in-charge at Realty Austin, said he doesn’t have exact figures but estimates that for every 10 transactions, two to three involve out-of-state buyers despite higher property tax rates. Apple’s announcement in December created an “immediate huge demand” for homes in the neighborhoods near its planned new campus.
“I have past clients that are investors calling for me to find new properties in and around that area for them to purchase,” he said. “But there’s not a lot of inventory. With traffic and mobility being such an issue in Austin, people are wanting to live closer to where they’re going to work.”
Not Just From The Bay Area
Jason and Brooke Mozersky are also new to Austin. But they came to the city in January 2018 from the Los Angeles area, another region that has served up transplants to Austin.
Brooke is a personal stylist and Jason is a guitarist for musician Ben Harper. They lived in a two bedroom, two-bath 1,650-square–foot house in Sherman Oaks but as their family continued to grow, the couple realized they wanted and needed more space.
“We started shopping for houses and quickly became very discouraged,” says Brooke. “We realized we could only really afford to buy our own house back. Everything with a yard or extra bedroom was too expensive so we kept looking further and further out. But then my commute, which was already bad enough, would be about 90 minutes one way, so our quality of life would go downhill.”
Jason grew up in San Antonio and had a brother who lived in Austin. On a whim, he and Brooke flew to Austin for a weekend to scope out houses.
“The house we’re living in now was the first one we saw. We fell in love with it,” she says. “So at the end of the weekend, we made a list of pros and cons and ended up making an offer on the home and putting our house in L.A. on the market. We are thrilled with our decision.”
The Mozerksys sold their house in L.A. for $1.2 million and purchased a 4,300 square foot home, more than double the size of their previous home, for $900,000 in Northwest Austin.
“The schools in L.A. were awful so we would have had to spend money on private schools,” Brooke says. “Here we have some of the best public schools in the city.”
Now the Mozerksys find themselves making the same comments as those who have lived in Austin for much longer.
“We want the Californians to stop coming,” Brooke jokes. “We want us to be the last ones to move and keep the city just how it is.”