In Austin, Texas, where the average summer day peaks over 90 degrees, air conditioning seems … important. This is widely recognized for making Texas habitable, and is one of the reasons why the state’s population has grown in every census since it was unionized. And yet when Un air-conditioned home in booming East Austin when it entered the market earlier this year, it sold within four days – almost unheard of, at $ 850,000 above the listing price.
“Sure, it was a super cool house, but still,” says Matt Richard, an agent for the Giles Group at Moreland Properties in Austin. It’s true – the home has solar power, a charming historic design, and an even older form of cooling: a salt water pool. But without air conditioning, these amenities don’t cost much, let alone nearly a million dollars.
Most experts agree that Austin’s real estate market is now the craziest in the country. According to the Austin Board of Realtors (ABoR), median home prices hit a record $ 465,000 this month, the fourth consecutive month a record and fifth in a past six. Prices are rising by more than 42 percent year after year and are well above pre-pandemic prices. And while the organization says housing stocks are “critically low,” more than $ 2.3 billion was spent on housing in the Austin area in May alone. And supply does not keep up with demand – as of May, the monthly stock of housing was less than a month, that is, there were only enough houses to saturate the market for two weeks. There were 4,413 listings this month; but there were still 4,355 unfinished houses. And as of June 29, there were only 1,116 houses on the ABoR list.
In the current state of affairs, the average time a home spends on the market is only 15 days. A year ago it was two months. And this average – the desired home is likely to be sold out much faster. “There are times when the deadline for an offer is set to Sunday or Monday after it has been listed for a week, so you think you have all the weekend to see it,” says Richard. “But sellers can get a killer offer and decide to accept it before the deadline – and now your customers, who planned to see it on Sunday, have missed it.” Richard estimates that the average home still gets five to twenty offers during this truncated window, and tells the story of a home in Brushy Creek – a pretty area in nearby Cedar Park, but hardly Williamsburg-era in terms of fashion or desirability. … receiving 96 offers in one weekend. “Absolutely insane,” he says.
And this only applies to real estate on the open market. Private sales, which are usually associated with higher tier homes, do not count at all in these numbers. This includes homes sold directly by builders that are not required to report their numbers to the board of realtors, according to ABoR President Susan Horton. She cites a sensational Lake Austin home, popular with the super-wealthy, that was recently sold to an unknown owner for an estimated $ 39 million, likely a record for the city. This means that these numbers are likely to underestimate how frantic the market really is.
All of these facts and figures may merge together, but the jokes that circulate at children’s birthdays and backyard barbecues help to clarify the picture. (And soon the conversation turns to real estate.) Take, for example, one about a couple in Müller, a planned development with houses, condos and tenements on the site of the former city airport. The couple bought a two-story, three-bedroom, three-bath house for $ 776,000. Then they got divorced. Less than eight months later, barely touching the spot, they sold it for nearly $ 1 million – $ 200,000 more than they originally paid.
“I write 20 to 30 sentences a week,” says Horton, “and I can get one. This is amazing. it astonishing… “She mentions a house on a neighboring estate that has been on the market for 48 days – essentially unheard of now, and a sign that the house has” some problems, “as Horton put it, referring to the 19-year-old roof as just one example. It was listed at $ 345,000; Horton’s client made an offer “in the 300s.” Someone interrupted them. “They probably got $ 375 or about $ 400,000 for this house. Someone is going to go and do all this work – install a roof for 10 or 15 thousand dollars, install a new air conditioning system, cover the floor and paint – and they are going to invest another 20 or 30 thousand dollars in it, on top of what they already paid. “.
So what exactly is Austin fueling such an extreme situation? Sure, home prices are on the rise across the country, but nowhere is Austin seeing such monthly increases, not to mention the massive delirium of buyers abandoning checks and other traditional guarantees. It’s not about geography – unlike other hot markets that are limited to being on an island or in a bay, Austin can expand indefinitely in any direction, with enough housing for everyone. This is also not culture – yes, Austin is the self-proclaimed world capital of live music, and his progressive politics earned him the unforgettable nickname “blueberries in a bowl of tomato soup” from the famous word master Rick Perry. (Plus, being in Texas gives you the best of both worlds — a hospitable culture with zero income tax.) But then again, Nashville can make the same demands, and there’s nothing on the market like the one here.
The stream of technicians steadily descending into the city is certainly part of it. Dell was already a major player (as were the so-called dellioners who inhabited the richer quarters of the city). For more than two decades, South by Southwest Interactive has attracted many startups and aspiring entrepreneurs who never left – for good reason Austin was nicknamed Silicon Hills. However, over the past year or so, they have skyrocketed: Oracle is moving its headquarters here, Tesla is building a gigafactory, and Apple is also building a huge campus. Even the military is involved, as the US Army’s Futures Command headquarters is in downtown Austin, just a few blocks from Google’s offices.
Like everything else, COVID has made the situation even worse. “Before the pandemic,” says Horton, “our market was very stable and we were in good shape,” she says. “There were enough of them for all realtors, and realtors sold well, and life was happy for everyone.” However, when the coronavirus restrictions came into effect, realtors were limited to on-site orders for housing, limiting their ability to list homes and sell homes. The market has stopped.
Horton identifies three types of people who suddenly felt the urge to buy a home: families who felt locked up in their current families; millennials who have saved up money while living with their parents or in an apartment; expats from California and other countries looking for a coveted but (relatively) affordable place to live in the state, again without income tax. “And the money went with that,” she says. Buyers, especially those from other states, “saw the value of a home depending on where they came from, and they were more than willing to pay the difference. And so the trading frenzy began. “
Collectively, demand soon far outstripped supply, resulting in charts similar to the Zillow chart. Market Review for Austin and the surrounding suburb of Round Rock: steady growth over eight years, followed by explosive hockey stick-style growth this year and next. Zillow predicts that by May 2022, the average home price will double compared to March 2019; if anything, it seems conservative.
Anyone who’s been to Manhattan or the Bay Area knows this part of the story: The poor were effectively expelled from Austin – the Department of Housing and Urban Development estimates the median national income for a family at $ 79,000. Based on traditional principles, such as setting aside 28 percent of their income for mortgage payments or buying a home that costs between two and two and a half of your annual salary, this means that the average family can afford a house for about $ 150,000 to $ 275,000. – hardly. half the average selling price of a home in Austin right now. Calculate the numbers however you want, and the result is the same: the average American family cannot buy a home in Austin. This includes the area public school teacherswhich start at $ 51,000 and peak in the 60s. “The days of the $ 250,000 single-family home in Austin are over,” said Vaike O’Grady, regional director of housing research firm Zonda. Or how Monthly in Texas Editor Forrest Wilder tweeted: “The people featured in the chronicle understandably continue to say this trend is unsustainable. I understand, but check the average price of a house in San Francisco: it’s $ 1.8 million. Austin has ways to get there, but why couldn’t it happen?
At the moment, apart from unforeseen circumstances, it is difficult to imagine anything that could cool the market. These employees from Oracle, Apple and Tesla have yet to arrive. (The city already has low unemployment, so it is unlikely to be able to provide all the necessary workers.) In 2020, the city built about 20,000 new homes, which is enough to rank fifth in the country, but not enough to keep up. with growth rates. influx of new arrivals.
However, according to Zonda, 6,664 new homes were built in the first quarter of this year, which is 27,000 homes a year. And O’Grady notes several other encouraging factors: lumber prices are stabilizing, more than 18,000 future lots are in development (7,000 more than last spring), and it is common knowledge that the city’s permitting process will be supported by some 40 new hires. … City Council. However, she also notes that overworked builders are still limiting their capacity – which she compares to pushing a “watermelon through a pipe” – and even a small increase in supply will not be enough to meet demand. After all, the city grew by 21,223 people in 2020, according to the Austin Department of Housing and Planning, and is projected to grow by almost the same amount in 2020. 2021 g.… (These numbers do not include the adjacent metro area.) This is less growth than the mid-10s peak, but represents growth over the previous two years.
All of this suggests that soon $ 2.6 million for a home in Texas without air conditioning may seem like a bargain.