Austin can DEFINITELY grow for the next 5-7 years

16 Replies

Austin metro will continue to appreciate. @Eric James That is an interesting topic. Texas has land. Austin metro has a few obstacles to build that other cities in Texas do not have. We have the heavy handed city restrictions on building. I just got back from South Florida. There it's possible to build 8 units on the same sized lot that is restrictive to 2 units in Austin. And to get those 2 units built in Austin can be an endeavor as the city permitting process is historically and aggravatingly slow.  That prevents supply from really meeting the demand for space thereby increasing prices. Will that improve? It hasn't happened in 20+ years. Example of heavy handed city restrictions is the building of circle c ranch housing development southwest that was a legal nightmare that I believe, if I remember correctly, bankrupted the developer. There are also environmental and ecological impediments as well. In the north, northeast and northwest side of the city there are fewer obstacles. That is why Williamson county has seen explosive growth going back 20 years to Dell and the Dellionaires. Has the availability of land caused equilibrium in pricing whereby supply meets the demand? Not even close. 

@Aaron Gordy Not to make lite of a tragedy, but we don't see condo buildings collapsing or drywall with built-in fungus in Austin.  If builders and owners were equally concerned with health and safety as they are with profit, there would be fewer "heavy handed...restrictions" and the construction industry would be allowed to self-regulate.  The restrictions you complain about not only keep consumers safe but also shield (in part) builders from liability.

I agree with the overall assessment: the economic fundamentals in Austin drive supply/demand and elevate the equilibrium price of housing.  The drag is always going to be wages.  It doesn't matter, for the most part, what the demand or supply might be if people cannot afford to buy.  But putting more inventory on the market, even new/high-end product, will take pressure off prices across the board.

A colleague and I are looking at buying at 80 acre lot to develop near the new Tesla location. So that's one data point that there is outward expansion. It's going to be a great project. 

@Jerel Ehlert I am not arguing safety. I am arguing for less restrictions on what one can build to alleviate housing pressure. The city has had the same zoning since the 1980's. Do you think that restrictions on meeting demand in neighborhoods (allowing for more housing units) will impact housing prices? Sure it will. San Antonio is much more relaxed. Houston is definitely more relaxed. I am not really sure about Dallas but I have done deals in San Antonio and Houston so I know those markets. Heck in San Antonio they allow for old Victorian houses to be converted to apartment buildings with as many as 8-10 apartments. In Austin, that is one house for one family only. Don't get me wrong..I love Austin but its ironic when the city politicians say we want more affordable housing and then have strong restrictions on limiting building in neighborhoods. 

People drift from reality by thinking it in theoretical terms. Here is a simple example of what limits appreciation in TX. Four years ago I moved to TX for a job in Dallas. I could have purchased a home in the Dallas area for $250,000. Instead, I purchased 75 minutes outside the city for $60,000. This doesn't mean that real estate in TX cities can't appreciate, but there are very real limits to that appreciation.

I'm big time BULLISH on Central Texas Real Estate for the next 5-10 years. Group the amount of people moving here every year on top of our organic population growth, the low housing inventory within the metros, and the room to expand outward from them and you've got solid room for valuations nearer the metros to rise as inventory needs time to stack up outside. See what's happening in areas like Dripping Springs recently and the expansion up/down the 35 Corridor between Austin and San Antonio. LOTS OF OPPORTUNITY!!!

Originally posted by @Jerel Ehlert :

@Aaron Gordy Not to make lite of a tragedy, but we don't see condo buildings collapsing or drywall with built-in fungus in Austin.  If builders and owners were equally concerned with health and safety as they are with profit, there would be fewer "heavy handed...restrictions" and the construction industry would be allowed to self-regulate.  The restrictions you complain about not only keep consumers safe but also shield (in part) builders from liability.

I agree with the overall assessment: the economic fundamentals in Austin drive supply/demand and elevate the equilibrium price of housing.  The drag is always going to be wages.  It doesn't matter, for the most part, what the demand or supply might be if people cannot afford to buy.  But putting more inventory on the market, even new/high-end product, will take pressure off prices across the board.

 I have seen you on here plenty and mucho respect....but.....

I built in Austin area 7 years ago. I had to jump through hoops. I was told "We dont like out of town folks." I was busted for stuff so stupid, it wasn't even funny. 

"What? Your socks dont match???? I will have to red tag you today." 

After hurricane Ike, Galveston county adopted better than Miami-Dade code. I have built in Miami-Dade. I have built in Galveston County-------- post hurricane Ike. 

Austin is worse per code. They are unrelenting. Still doable if you have the right attitude. I just cant imagine what 7+ years will congeal after what I went through. Maybe less regs? 

Nah, not Austin. Maybe more regs instead. 

"Can you stand on one leg when you install rafters please? That is what we require now as of 5/20/21." 

To sum up, the only red tag I ever got was not Miami-Dade. Not Galveston County. It was Austin and New Braunfels. 30 years of building. Just Austin. 

Originally posted by @Shafi Noss :

A colleague and I are looking at buying at 80 acre lot to develop near the new Tesla location. So that's one data point that there is outward expansion. It's going to be a great project. 

How much per acre? I have been looking in that area for raw land. Need to move quick if it's not too late.  

The initial drive of inflated prices in Austin was the environmental restrictions and water quality restrictions put in place in the early 90's that restricted what, where and how much you could build in certain areas. Vast amounts of land along Southwest Parkway, Barton Creek, and Northwest Travis County were taken out of play for the Golden-Cheeked Warbler and some other bird (I don't recall), and saving the Salamanders in Baron Springs. 

The city of Austin also had a city government model in which every Councilperson was elected at-large. Meaning the person did not represent a specific portion of the city - but quote "the entire city" unquote. This led to almost all of the council people being elected lived in the close-in downtown / west Austin neighborhoods. It was easy for them to vote for restrictions on the outlying parts of town as it didn't effect them or their neighbors personally. 

These led to less supply of available places to build. Couple this with the increased cost of development and building to meet the stringent environmental restrictions (particularly to the West & SW of Austin within the Austin ETJ) and it became uneconomical to build entry or mid-level housing. Which drove more affordable development and construction to the North, East & Southeast of Austin. 

@Jim Cummings Spot on!  In some parts of the city, during the at large city council model, the services were horrible. Dove springs had roads that had pot holes. East side city services were notoriously bad, then. 

@Mike Reynolds I've had similar experiences with courts and clerks when they see my office address doesn't match their county.  Getting "home towned" is ********, that's for certain.

Arbitrary inspection process *is* a violation.  To stop inspectors from applying arbitrary standards, that is a complaint then a lawsuit but no builder, developer, or owner wants to pay the legal fees to make them stop.  Until that happens....

As for Austin zoning, they've been working on making it better for years.  But with any endeavor involving more than a few people, they can't get enough people to agree on what the new code should be at the same time to pass.  For everyone complaining about it, get involved in the process but be willing to reach a compromise.  But if all people want to do is stand outside and complain, I don't have much sympathy.  2020 prevented just about all work on the new zoning, but should be picking back up by now.

Originally posted by @Jerel Ehlert :

@Mike Reynolds I've had similar experiences with courts and clerks when they see my office address doesn't match their county.  Getting "home towned" is ********, that's for certain.

Arbitrary inspection process *is* a violation.  To stop inspectors from applying arbitrary standards, that is a complaint then a lawsuit but no builder, developer, or owner wants to pay the legal fees to make them stop.  Until that happens....

As for Austin zoning, they've been working on making it better for years.  But with any endeavor involving more than a few people, they can't get enough people to agree on what the new code should be at the same time to pass.  For everyone complaining about it, get involved in the process but be willing to reach a compromise.  But if all people want to do is stand outside and complain, I don't have much sympathy.  2020 prevented just about all work on the new zoning, but should be picking back up by now.

 Agreed and aside from the legal fees you will really be run up a tree on future inspections. 

"I would like to pour concrete on Thursday. Can I get an inspection please?"

"sorry can't make it till next week."

We have to walk a thin line with guys like this. Somewhere between looking out for the client and biting our tongue. 

It was actually all good on the next jobs. He even started to like me.