Home design drives new home sales in Austin, and homebuilders are juggling in-bound hipsters with existing Texans. The state capital was among the top in the nation for net migration from 2016 to 2017, and shoppers are generally coming from expensive West Coast markets. Redfin’s data that tracks online home searches shows that nearly 30% of shoppers are looking from outside the market with the most activity from the Bay Area, Los Angeles, and Seattle. Ali Wolf, our Director of Economic Research, along with our Senior Vice President of Advisory, Scott Davis, spent time in Austin last week touring 15 communities and recap the highlights below.
Austin CBSA stats at a glance, powered by Zonda:
- The Meyers Index, a gauge of market fundamentals, grew 2% YOY
- D.R. Horton, Lennar, and Pulte make up nearly 30% of the new home sales market share
- 40’ product (lot frontage) on average is selling around 4.0 sales per month compared to 2.0 for the market overall
- 50’ product has the highest overall contract volume (LTM)
Jobs and lifestyle are some of Austin’s biggest selling points. The area’s average household income of $75,000 is 23% above national figures. Some of the big employers in the market are Apple, Whole Foods, Samsung, and Dell. The metro also hosts university and hospital jobs.
Unlike some markets where one cardinal direction of downtown is good while another is bad, there are pockets of strength throughout the metro with accompanying development. During our tour, the sentiment in the market was that sales have slowed in recent months, matching the normal seasonal pattern.
With prices rising (up 15% in two years), rates hovering around 5%, and affordability tightening (50% of households can afford the median priced new home compared to the historical average of 55%), the question top of mind was – what will motivate somebody to buy today? In Austin, there were two clear answers:
- A value product. Builders like LGI Homes and D.R. Horton are successful in the market by providing new product at a low price. Their communities require buyers to compromise on location or square footage, but are selling nearly 3.5 times faster than the market average.
- Design. The product offerings in Austin are vast, and data from our consumer survey, headed by our Principal of Advisory, Mollie Carmichael, tells us that better home design was important to 84% of consumers shopping for a new home today. In fact, “home design” ranks as the second most important motivation for buying a new home today amongst nine other factors (i.e. price, schools, accessibility, and more), just behind location.
Regardless of the strategy, design execution is king. There were homes so wonderfully designed that our team had to stop and take a picture. Equally, there were homes that our team also photographed, but as an example of what to avoid (this wasn’t just subjective; the proof was in the sales rates). In some cases, even the coolest amenities struggled to save a community with poorly executed product or a lack of flow.
Knowing reason two is harder to execute on, here are the notable mentions from the trip that satisfy both regional newbies and Texans alike:
Prado: Continuity at its Finest.
- William Lyon Homes community southeast of downtown
- Lively exterior colors and elevations that work well together
- Value-focused without compromising design
- Sold out at an average of over 8.0 sales per month and scrambling to bring more lots online
Goodnight Ranch: The Stapleton of Austin.
- Master plan community due south of downtown with a community pool, trails, and parks
- Front porch community with vibrant craftsman homes
- The lifestyle attracts all walks of life, from Millennials to Boomers and even single women
- Also sold out and the heavy rains are causing delays in bringing more product to the market
Presidio Station: Authenticity to the Suburbs.
- David Weekley community walkable to the train station (pictured below)
- The modern farmhouse community offers 27 different elevations that contribute to the unique look and feel
- Selling points for the dense community include the pool, pavilion, lifestyle, and trees