October 2020 Austin Market Report

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If you locked yourself in a room for 2020 and only paid attention to the Austin area real estate market, you might have little clue of currently lingering global pandemic and significant economic challenges it currently presents. The Austin market has shown astounding resilience by continuing to break records in the face of COIVD-19. Case in point, here are highlights from the October 2020 Central Texas Housing Market Report just released by the Austin Board of REALTORS®:

  • Closed sales in the Austin-Round Rock MSA were up 29% year over year and up 22% in the City of Austin proper.
  • The median sales price in Austin was up 13% year over year to $441,250 and also up 13% in the greater metro area to $365,000.
  • Inventory remained critically low, dropping 1.2 months to 1.1 months of inventory in the MSA. Austin dropped 0.4 months year over year to 1.3 months. (A balanced market is roughly 6.5 months of inventory).
  • There were a whopping 50% fewer listings on the market compared to this time last year in the metro area. Listing inventory in Austin itself was down 23%.

Inventory remains a significant bottleneck on the Austin area market with no signs of increasing over the next year. Demand also shows no signs of flagging as Austin promises to create thousands of jobs annually in the coming years and continues to attract significant investment from high-quality employers. Overall, then, the Austin-Round Rock MSA is poised for 2021 to continue it’s near decade-long pattern of high demand, low inventory, and rising home prices.

Laura Huffman, with the Austin Chamber of Commerce, shares the same outlook for 2021 while also flagging some threats to the area’s housing market:

“Austin’s rank as one of the best places to live, work, and thrive in the country is evident by not only the growth of our housing market, but also by the growth of our local economy. Our region has a lower year-over-year job loss than any other major metro, and despite the pandemic, a record number of businesses have chosen to relocate to or expand in the region this year. We expect this growth—attributed to Texas’ business-friendly environment paired with Austin’s deep talent pool—will continue through 2021. Despite this, in 2021 the region needs to address housing affordability to help people from being priced out of the market, even as salary and job growth continues.”

Here are stats on residential sales for October 2020 for the City of Austin and the greater Austin area:

Here are a few items of note:

  • Earlier this month, Austinites approved Project Connect, a significant mass transit and infrastructure plan funded in part by a roughly 4% increase in property tax for the average Austin property owner. You can see an overview map of the plan.
  • The Federal Reserve recently reiterated its commitment to keep borrowing costs low and continue its other activities to support the US economy during its likely years-long recovery from the effects of the pandemic. Rates for 30 year fixed mortgages are at historic lows. This only adds fuel to Austin's already insanely hot market by bringing even more buyers to compete for the area's extremely low housing inventory. We will continue to see an extremely low interest environment for 2021.
  • Take a look at these charts related to activity at Austin-Bergstrom International Airport. This is a nice proxy or indicator, at least to some extent, for economic activity in the Austin area.

The City of Austin really needs to modify their land development code and increase density along with to change the requirements on compatibility and the setbacks.  Until the neighborhood plans that have a stranglehold on the city are defeated this trend will continue.  The buyers who are working at Google don't really worry too much about another 10% bump in prices.

After sitting 3 years out I am about to start putting some Austin MSA-based inventory in the pipeline next week.  We organized our capital to start bidding on new projects and will start placing units in 2021.  

@Bryan Hancock Yes, there needs to be a complete rewrite of the land code. Its been the same land code for 40 years and the city has completely changed many times over since then.  If the city really wants to tackle affordable housing then they need to think about the land code. 

The appreciation in the metro area is nuts. Its good to be a landlord.

@Bryan Hancock I agree completely the development code is greatly hampering any attempts to control the cost of housing. I've spoken with several developers in recent months to ask why small multi-family is basically non-existent in new construction. They stated simply the math doesn't work and it's easier to sell single-family homes and "condo" homes in the denser core of the metro. I honestly can't see what will increase any inventory in the core of the Austin area. Only the outskirts will see new developments, but they will increasingly get farther and farther from employment hubs.

Pretty much all of the developers in my circle would gladly build denser product to give the city what they want if the development code was changed.  Simply changing the rules on the compatibility setbacks would help a ton with many, many sites.  

I wouldn't count on anything changing with the political climate that they currently have though.  Unfortunately the craziness is infecting Williamson County now.