In spite of rising prices and growing (vehicular) traffic, Austin proves to be an excellent value that will continue to attract households from around the country. Recently we met with a diverse collection of real estate professionals in Austin to share ideas about the future of the local economy and the local housing market. As one might imagine, there was concern that home prices had moved out of reach, traffic was unbearable and job growth was slowing. While these are legitimate concerns, we would like to provide some perspective on why these concerns are mitigated by some strong metrics in Austin:
Affordability is (still) solid: In mid-2012, a household earning the median income had 192% of the necessary income to qualify for a mortgage loan on a median-priced resale home. In the three years since, resale home prices in Austin have risen 21% percent (24% for new homes) which has “lowered” this affordability ratio to 155. While that shift is something to monitor, it is important to note that this affordability ratio is outstanding compared to other competitive cities such as Denver (126), San Diego (75), and Orange County, CA (68). Home price appreciation in Austin should moderate over the next year. The good news is that we expect consistent growth in incomes to somewhat offset this concern. Further, there has been an increase in new housing product, and this additional competition should help to moderate price appreciation. To provide some compelling perspective, consider what $500,000 can purchase in Austin versus two west coast markets:
Source: Meyers Research
Traffic is not great but it is a by-product of a healthy economy: Consider the following weekly average commute times compared among other major metro areas. As illustrated below, Austin residents benefit from less time in the car than those in other markets.
Source: US Census/American Community Survey
Job growth is expected to continue: Austin has a very solid outlook over the next two years, with strong growth in the Education & Health Services, Leisure & Health Service and higher-paying Professional and Business Services sectors. In fact, it is also expected to continue to lead the nation in tech job growth. From 2004 to 2014 Austin experienced the strongest expansion in tech sector employment (74% job growth), as well as 36% growth in STEM (Science, Technology, Engineering, and Math) jobs, the fourth-highest growth rate in the country. Job growth should be strong and the value that Austin’s housing market offers versus other regions in the western United States is compelling.
Austin has a terrific long term outlook because of the confluence of higher education, the tech sector, relative affordability compared to other major housing markets, great barbeque and a terrific music scene. It has the perfect mix of weird and wonderful. These factors set the stage for regional economic success.
Contact us to find out how we can help you identify and maximize your new real estate opportunities.
Tim Sullivan, Practice Leader of Advisory
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