Our results found that new home closings in more than half of the top markets remain below the historical average, even after adjusting for the peak years. The top 5 metros that have new home closings higher than their adjusted historical average are Austin, Raleigh, Charlotte, San Jose, and Houston. Here, we will focus on the trends in Austin.
When looking at current closings compared to the historical average, Austin leads the pack on both an adjusted and unadjusted basis. Austin hosts a diverse economy that is attracting individuals from across the country to the metro, particularly relocations from California. The market’s unemployment rate is well below the national average and the metro added 31,100 jobs over the past year, a 3.1% annual clip. The solid job market combined with highly rated cultural, entertainment, and dining options makes the metro attractive to both Millennials and Boomers alike.
Population growth is on the rise in Austin, and a lot of that can be attributed to the booming tech industry. While the city started to garner attention from the industry back in the 1990s, the sector is now thriving. Tech has been the industry with the highest growth over the past 5 years in Austin; tech accounts for 14% of all jobs in the region. In fact, Austin has been a tech powerhouse for so long that the local nickname is ‘Silicon Hills’, a nod to San Jose’s Silicon Valley. Here are some factors that support Austin’s success in tech:
- Capital Investment. “The presence and interest of venture capitalists in the Austin market has enabled the tech industry to expand,” explained Lloyd Vaughn, our Regional Director in Austin and San Antonio. In fact, a PricewaterhouseCoopers and National Venture Capital Association survey showed that Austin-area deals received $740 million last year. This is a 20% jump from 2014 and the highest level since 2001.
- Relative Affordability. When you do a cost-of-living adjustment of tech salaries, incomes for Austin employees go a lot further than in places like Silicon Valley, Seattle, or New York City. The average detached new single-family home price in Austin was $285,000 as of August, well below the $777,000 in San Jose, $491,000 in Seattle, and $477,000 for New York City.
- Educated Workfoce. For companies looking to relocate to the region, the abundance of qualified workers, either transplants or graduates of places like the University of Texas at Austin, makes the move less risky. For individuals, the job opportunities and lack of state income tax make Austin desirable.
- No Taxes. The state corporate tax rate of zero also has attracted some companies to either build or expand their campuses in the area. Some notable large companies include Apple, Google, Oracle, and Dropbox.
CITY AND SUBURBS GROWING
The increased population in Austin has been great for the local housing market. Home closings in Austin are nearly 70% above the adjusted historical average. Unlike the national level where supply is still far below the historical average, permits in the Austin MSA on an adjusted level are 33% higher (20% on an unadjusted basis). Lloyd Vaughn says it’s hard to look past the cranes when driving throughout the city.
Source: Meyers Research
A lot of the tech employees are younger and prefer city living. This has contributed to rapidly rising prices in the city center, which has helped some of the housing markets in the suburbs. For example, Buda, Cedar Park, Georgetown, Hutto, Lakeway, Leander, and Manor all had high increases in year-to-date sales compared to 2015.
In addition, retirees are another boon to the market. The Baby Boomers are bringing a lot of money to Austin, which perpetuates the economy and development. Kissing Tree by Brookfield Residential in San Marcos (30 minutes south of Austin) is an example of an active adult community under development. Brookfield plans to provide the first homes in spring 2017 and will include 3,200 homes at build-out. The community is the first age-restricted development in San Marcos. So far, interest is primarily from Austin, Dallas, and Houston, but they are also garnering attention from across the nation. Prices are expected to range between $250,000 and $500,000. The community will come equipped with hiking trails, a biergarten, tennis courts, an 18-hole golf course, and more.
Source: Kissing Tree by Brookfield Residential
The temperate climate, relative affordability, accessible business capital, and plenty of job opportunities will continue to benefit the local economy and housing market. Austin is in a great position to keep growing to meet housing demand given the abundant supply of developable land outside of the city center.
Contact us to discuss how we can help you better understand metro-level trends.
Ali Wolf, Manager of Housing Economics
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