What's Driving Demand in Austin's Real Estate Market in 2021?

Austin’s housing demand was unbelievable last year, and is looking attractive once again in 2021. As the Austin Business Journal reports, growing high-tech employment from companies like Apple and Oracle are causing home sales and prices in the Austin real estate market to jump while inventory of available homes for sale is less than one month.

Austin is located in the Hill Country region of Central Texas, surrounded by lakes and rivers, including the Colorado River. The city is the state capital and the 11th most populated city in the country.

The economy in Austin is as diverse as the city’s residents, earning several well deserved nicknames including Keep Austin Weird, Live Music Capital of the World, and Silicon Hills. Austin is home to numerous high tech companies including Apple, Amazon, and PayPal. Major industries keeping the Austin economy booming include the technology, biotechnology, and pharmaceutical sectors.

Keep reading to learn why Austin just might be the real estate market to fall in love with in 2021. 

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Population Growth

Austin is ranked among the fastest-growing cities by WalletHub. The report compared 515 cities with different population sizes using the same key measures real estate investors use such as economic growth, population change, unemployment rate decrease, and regional GDP per capita.

Austin has also been #1 in population growth for eight years in a row, according to CBS Austin. In fact, about 100 people move to Austin each and every day. In less than 10 years, the population of the Metro Austin area has grown by about 20%.

Key Population Stats:

  • City of Austin is home to nearly 965,000 residents with almost 2.2 million people residing in the Austin-Round Rock metropolitan area.
  • Population of Austin has increased by 2.5% year-over-year.
  • Between 2009 and 2018 the population of Austin increased by 32.7%.
  • Austin is located in Travis County and is the 2nd most populated capital city in the U.S., right behind Phoenix.
  • Austin remains one of the top destinations for migrating talent, with about 6.7% of Austin residents in 2018 having lived elsewhere just one year earlier.
  • By 2050 the population of the Austin MSA is projected to more than double in size to more than 4.5 million residents.
  • Median age in Austin is 31.8 years vs. 33.9 years for the State of Texas.
  • 46% of the population in Austin is between the ages of 20 and 49 years.

 

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Job Market

Employment growth in Austin is 2.86% year-over-year, with median household incomes increasing by 4.23% of the same time period. It may come as no surprise that Austin also had the hottest job market in the U.S. last year, according to Inc.com

The publication notes that Apple’s new $1 billion corporate campus designed to hold 15,000 employees is helping to create an influx of technology jobs. Wage growth in Austin was 5% last year, making the market extra appealing for job hunting and relocation.

Key Employment Stats:

  • GDP of Austin-Round Rock is nearly $159.4 billion, according to the Federal Reserve Bank of St. Louis, and has grown by over 88% in the last ten years.
  • Job growth in Austin last year was 2.86%.
  • Unemployment rate in the Austin metro area is 5.1% as of October 2020, according to the BLS.
  • Target industry sectors in Austin include advanced manufacturing, creative and digital media, clean technology, life sciences, space technology, and data management.
  • Companies with corporate or regional headquarters in Austin include AMD, Apple, Dell, Cirrus Logic, Home Depot, Legal Zoom, Oracle, and Vrbo.
  • Apple, Amazon, Cisco Systems, eBay, PayPal, Facebook, Google, HomeAway, and Xerox are just a few of the many high-tech companies with operations in Austin, helping the metro  area earn the nickname Silicon Hills.
  • Major employers in the Austin metropolitan area include Apple, Ascension Seton healthcare headquarters, Austin Independent School District, City of Austin, the Federal Government, State of Texas, and Samsung Austin Semiconductor.
  • University of Texas at Austin, Austin Community College, and Concordia University are three of the major universities and colleges in Austin.
  • 90% of the Austin residents have a high school degree or higher, while 46% hold a bachelor’s degree or advanced degree.
  • Interstate highways I-10, I-35, and SR-130 put Houston, San Antonio, and Dallas less than a three hour drive from Austin.
  • Burlington Northern Santa Fe Railway and Union Pacific Railroad are two of the freight rail lines serving Metro Austin.
  • Austin is within 250 miles or less of the top U.S. ports in Houston, Beaumont, Corpus Christi, and Texas City.
  • Austin-Bergstrom International Airport (ABIA) serves nearly 16 million passengers with nonstop service to more than 70 national and international destinations, and last year handled 182.5 million pounds of air cargo shipments.

 

Real Estate Market

Housing inventory in the Austin real estate market has dropped to an all-time low, with only 0.5 months of supply on the market (as of May 2021). According to the Austin Local, inventory of homes in Austin has dropped to levels never seen before due to an increase in new residents moving to the area. 

With more business relocations in the pipeline, the real estate market in Austin is predicted to keep outperforming in 2021. In fact, Austin is ranked as the 7th best real estate market in the U.S. by WalletHub, based on key investment criteria such as activity in the housing market and strength of the economy.

Key Market Stats:

  • Zillow Home Value Index (ZHVI) for Austin is $540,086 through May 2021.
  • Home values in Austin have increased by 29.8% over the last year.
  • Over the past five years home values in Austin have increased by over 58%.
  • Median sales price for a home in Austin is $465,000 based on the most recent report from the Austin Board of Realtors (ABOR).
  • Sales prices for homes in Austin have increased by 42% year-over-year.
  • Active listings of homes in Austin have decreased by 71% compared to the same time last year.
  • Average days on market for a home in Austin is 16.
  • Months of inventory in the Austin real estate market is just 0.5 months, which means there is around a 15-day supply of homes for sale in the Austin metropolitan area.
  • Of the 75 neighborhoods in Austin, Realtor.com reports that Tarrytown is the most expensive with a median listing prices of $1.5 million.
  • Most affordable neighborhood to buy a home in Austin is Montopolis where the median listing price is $349,000.



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Attractive Renters’ Market

In a red-hot real estate market like Austin, it’s no surprise that more people rent than own. According to WalletHub, Austin ranks among the top 45 best cities for renters. Austin is among the best places for renters based on 24 key measures of rental attractiveness and quality of life, including price changes, cost of living, and job availability.

Key Market Stats:

  • Median rent in Austin is $2,000 per month for a 3-bedroom home, according to the most recent research from Zumper (July 2021).
  • Rents in Austin have increased by 3% year-over-year.
  • Renter-occupied households in Austin make up 61% of the total occupied housing units in the metropolitan area.
  • Most affordable neighborhoods in Austin for renters include Heritage Hills, Windsor Hills, and Franklin Park where rents are less than $1,465 per month.
  • Most expensive neighborhoods in Austin for renters include Downtown Austin, Old West Austin, and Zilker where average rents go for $2,302 per month.



Historic Price Changes & Housing Affordability

Analyzing historic price changes and housing affordability can help real estate investors narrow down which markets to purchase rental property in. Reviewing past price changes may indicate future property appreciation, while how affordable homes are to purchase in an area can be an indicator of how many people will buy rather than rent, or vice versa.

Each month Freddie Mac releases up-to-date data on the change in home prices for all markets across the U.S. The most recent Home Price Index report from Freddie Mac (FMHPI) for the Austin-Round Rock, TX MSA shows:

  • May 2016 HPI: 196.4
  • May 2021 HPI: 325.4
  • 5-year change in home prices: 65.7%
  • One-year change in home prices: 29.8%
  • Monthly change in home prices: 2.9%

The HAI (housing affordability index) of a market compares median family income to the median price of an existing single-family home. The higher a market’s affordability index is above 100, the more affordable single-family homes are to purchase. However, the HAI doesn’t consider factors such as lifestyle preference or the actual supply of a median priced home. 

The National Association of Realtors (NAR) publishes a HAI report for all markets in the U.S. Investors should note that when ranking the affordability of each housing market, the NAR assumes the home purchase will be made using a conventional mortgage with a 20% down payment.

Based on the NAR’s latest report, the HAI for the Austin-Round Rock MSA was 152.6 in 2018, the most recent year available. This means that families have a little more than 1.5X the median income needed to purchase a median priced, single-family resale home in the Austin metro area.Investors can opt to look for a hard money lender in Austin too.

 

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Quality of Life

Austin’s booming job market, plentiful nightlife options, diverse dining scene and outdoor experiences are some of the reasons why young professionals are flocking to the capital city of Texas.

Key Quality of Life Stats:

  • Austin is ranked as the #1 place in the nation to live by U.S. News & World Report.
  • Forbes lists Austin as the 8th best place for business and careers, 9th best place for job growth, and 16th best place for education.
  • Austin receives an “A+” grade from Niche.com with top-of-the-class grades for public schools, family living, nightlife, and diversity.
  • The music scene in Austin is second to none, earning the city the nickname the “Live Music Capital of the World.”
  • WalletHub lists Austin as the 4th best place in the U.S. to find a job.
  • Climate in Austin is humid subtropical with very long and hot summers and short mild winters.
  • There’s always something to do in Austin, such as music festivals, Hill Country wine tastings, motorsports, outdoors and nightlife, and sports.
  • Pro sports teams in Austin include the Round Rock Express for baseball, Austin Spurs for basketball, and the AHL’s Texas Stars.
  • St. David’s Medical Center and Ascension Seton Medical Center Austin are two of the best hospitals in Austin, Texas.

 

Get Out the Map

Where to begin your search? Roofstock created a heat map of Austin based on our Neighborhood Rating, a dynamic algorithm that enables you to make informed investment decisions by measuring school district quality, home values, employment rates, income levels and other vital investment criteria.

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DARK GREEN: 4-5 star neighborhood
LIGHT GREEN: 3.5-4 star neighborhood
YELLOW: 2.5-3 star neighborhood
ORANGE: 2 star neighborhood
RED: 1 star neighborhood

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This article, and the Roofstock Blog in general, is intended for informational and educational purposes only, and is not investment, tax, financial planning, legal, or real estate advice. Roofstock is not your advisor or agent. Please consult your own experts for advice in these areas. Although Roofstock provides information it believes to be accurate, Roofstock makes no representations or warranties about the accuracy or completeness of the information contained on this blog.
Jeff Rohde

Author

Jeff Rohde

Jeff has over 25 years of experience in all segments of the real estate industry including investing, brokerage, residential, commercial, and property management. While his real estate business runs on autopilot, he writes articles to help other investors grow and manage their real estate portfolios.

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