Construction work is underway on this home in the Quail Hollow area of North Austin. The latest real estate data show that new homes in Northwest Austin are selling for an average price of over $ 600,000 this year. (Ian Oldman / Public Influence Newspaper)
Eric Bramlett has been a Central Texas real estate agent for 18 years and said that since the end of the 2008 economic downturn, the local housing market has been robust, following regular seasonal patterns, and has remained relatively stable in terms of overall sales and prices.
But something happened around mid-2020 that pushed the market to take off, according to realtors and economists.
Due to the increase in telecommuting caused by the COVID-19 pandemic, many employees who now work remotely have moved from other, more expensive cities, no longer tied to work, they said. At the local level, employees using their homes as office space thought differently about their needs. While the unemployment rate reached double digits across the country, those who retained jobs increased disposable income.
“We were the hottest market and we actually dumped gasoline on it,” Bramlett said.
Until July 2020, the average monthly home sales price in the Austin Round Rock metropolitan area had never reached $ 350,000. It topped $ 400,000 in March 2021, then peaked at $ 465,000 in May, data for the last month available from the Austin Board of Realtors. This is 27.4% more than in January.
“You don’t have to have a PhD in economics to understand that if prices rise faster than income, and housing affordability depends on the relationship between income and price, then [homeownership is] is becoming less affordable, ”said James Gaines, research economist at the Texas Real Estate Center at Texas A&M University.
According to ABoR President Susan Horton, the breakneck pace of price increases cannot last forever.
Ultimately, she says, she expects the price to return to a certain level of normalcy, although this may take years as supply catches up with demand.
“Builders cannot build [homes] fast enough to get us where we need to be to adapt to growth in the metropolis, ”Horton said.
The “perfect storm” of construction problems
Even though demand could stabilize after the pandemic, when people begin to re-prioritize their spending habits, it is still difficult for many builders to increase supply.
Aaron Benig is co-president of Brohn Homes, a developer specializing in homes that are in the price range for first-time buyers. The company is building in areas less expensive than Austin, such as Georgetown and San Marcos, but Benig said mid-price construction is becoming more difficult, even in remote areas.
Land prices are one of the factors that make it difficult for developers to build affordable homes, but Benig said buying land is only one problem. Long wait times for building permits, spikes in material prices, especially lumber, and labor shortages are also affecting developers. Benig called it the “perfect storm” limiting supplies.
According to ABoR, the Austin subway had a 0.5 month inventory as of May, a measure of how long it would take to sell all of the existing property on the market. A balanced market has five to seven months of inventory, Gaines said.
“I think this is an unprecedented way that builders are selling homes, I’ve never seen anything like it in this industry,” Benig said.
While Brohn Homes focuses on the outskirts of Austin, Cody Carr’s family business, Carr Residential, has been building new homes in Austin since 2015. Carr said he faced many of the same challenges, including tripling the value of the home. lumber even before the pandemic.
The company aims to build homes in the $ 400,000 to $ 1 million range, but Carr, who is also president of the Austin Infill Coalition, said it is getting harder and harder to stay in that range. The home that Carr Residential could have built about five years ago for a $ 300,000 sale will cost $ 500,000 today, he said.
“I am an Austinian. As an Austinitis, I find it difficult to watch such a sharp rise in house prices. My friends and family cannot find a place to live, ”he said.
Single family alternatives
Adrianne Kraft, a real estate broker licensed by Keller Williams Realty, agrees that it is really difficult for buyers to find homes.
“A year ago, I would have said that buyers could have been a little more picky about the condition of the home,” Kraft said. “A buyer may choose a home over another because there is no carpet or white cabinets. … And now customers simply have to give in in everything. “
Kraft added that every deal it has done this year has been accompanied by a plethora of bids, with homes typically selling 10-20% above the asking price. The situation not only highlights the current sellers market, but is often discouraged by new buyers, especially those looking for single-family homes, which make up the vast majority of homes on the market at any given time, she said. •• One solution that city officials in the Greater Austin area have been considering over the past several years involves diversifying home types.
Dan Parolek, CEO of Opticos Design, a California-based firm that helps collaborate on housing and community affairs, has given numerous presentations to city officials throughout Central Texas from New Braunfels to Austin.
Parolek’s presentations focus on a concept called no intermediate housing. This includes homes such as duplexes and townhouses to buildings with eight apartments. They are usually within walking distance, meaning they are located close to business centers or urban centers with popular amenities.
These options, Parolek said, are more affordable for people, including first-time property buyers who cannot make cash offers to become homeowners.
“Increasing costs have greatly impacted every market, regardless of the size of the city,” Parolek said. “It is becoming increasingly difficult for entry-level households to buy houses.”
While Parolek agrees that single-family homes are the most common option for home buyers, he said his research showed they were not necessarily the most popular option. He added that by 2040, 60% of all housing nationwide will not have mid-range housing to keep up with demand.
“I think the demand for detached single-family homes will continue. [homes]but I think there is more and more demand for these missing types of medium-sized housing, ”he said. “I’m not saying there is no demand for single-family products, but historically that is all we provide and the industry has struggled to adapt and switch quickly enough to meet demand.”
Small towns have seen a lot of growth
When Robin Sheppard sold her 35-year-old Austin home in December, she said she didn’t expect to still be looking for a home in more than six months.
Higher tax rates, heavy traffic and rapid growth in Austin played a key role in Sheppard’s decision to leave the capital and move to San Marcos. She says she will still be close enough to visit friends, but in a less crowded city.
“I lived in Houston for many years and left to move to Austin because Austin was much smaller and felt great,” Sheppard said. “This is not the Austin I came to.”
Within 2 and a half days of listing her home, Sheppard received seven offers and accepted an offer that was $ 50,000 more than the requested one and included contingencies that allowed her to live in her home without rent for 30 days. after closing.
“I just thought, ‘Wow, this is great; now I can go and buy myself a house and I have extra to travel “… but that was not the case,” Sheppard said. • By June, Sheppard had placed bids for more than six properties that fulfilled her need for an additional apartment she plans to rent to a friend for a small fee. Despite offering $ 42,000 in excess of asking for one property, she was interrupted every time. •• Many home buyers who plan to relocate to one of the smaller towns along the I-35 corridor expect to find greater affordability at a lower cost than major urban areas, said Patricia Fernandez, president of the board of directors of the Four Rivers Association of Realtors in 2021 year. However, skyrocketing demand and dwindling supply have made the once-available markets highly competitive.
“You can choose any city in this corridor, and it’s the same story,” Fernandez said, adding that buyers who at some point were entitled to a home worth $ 350,000, for example, could apply for homes. listed in the range of 200,000 US dollars with the expectation of payment is much higher. “This whole middle market [is] only now I’m being thrown off the playing field. “
As urban population growth on I-35 continues to outpace supply, and corporations such as Amazon and Tesla invest in central Texas, Fernandez expects interest in cities east of the interstate to grow.
“[East] “This is the only direction in which you can move right now, because even before Waco, this is the same market as ours,” Fernandez said.
Like many others looking for a home, Sheppard said that if it comes down to it, she will resort to renting in San Marcos if she can’t find a permanent home soon.
“You know, I feel like homeless; it’s just not good, ”Sheppard said. “At the end of this month, if I don’t have [a house], then I’ll take something off. … I’m not looking forward to it, but it will definitely be the next step. I cannot stay in other people’s homes indefinitely. ”