Summary List Placement
Editor’s note: This story was updated on April 6 with Elon Musk’s comments about Austin’s housing shortage.
The country crooner George Strait once sang, “All my exes live in Texas.” Odds are yours probably do too.
From 2010 to 2019, the population of Texas grew by about 3.8 million residents, Insider previously reported. Now 29 million residents call the Lone Star State home — more than the entire population of Australia.
Within Texas, the capital of Austin has been the center of interest for relocating Americans for most of the past decade. In the past 10 years, the Austin area had a net migration of 355,902 residents — a whopping 20.7% of its 2010 population of about 1.7 million.
In 2020, Austin’s lure has proved stronger than ever, as the coronavirus pandemic’s normalization of remote work — coupled with the influx of businesses that have sought cheaper office space outside major coastal cities — boosted already high demand.
Austin’s real-estate scene has become so hot, in fact, that now Elon Musk is pleading for more housing to be built as his companies look to hire hundreds of people in Texas. The Tesla and SpaceX CEO tweeted on Sunday about the lack of available housing in Austin, an inventory shortage that is fueling a massive spike in home prices and an even more competitive property market.
Other tech giants like Oracle have recently announced plans for expansion or relocation into the Austin area, adding to the growing list of corporations setting up shop outside the San Francisco-Silicon Valley stretch. Companies like Facebook and Google, too, which already have thousands of Austin employees, are seeking additional office space in the city, Austin Business Journal reported.
Techies who once worked in major hubs on the East or West coasts have relocated to Austin to take advantage of lower costs of living, favorable tax laws, and an overall better quality of life, locals and experts in the real-estate industry told Insider.
“Austin offers people the cachet of a cool cultural center and a burgeoning tech hub paying high wages, while still remaining much more affordable than coastal markets like San Francisco, San Jose, and Seattle,” Jeff Tucker, a senior economist at Zillow, told Insider.
It helps that Austin’s trendy music and food scene and its popular annual cool-kid tech conference, South by Southwest, have elevated its national profile and added to its allure.
The influx of transplants is sending Austin’s property market into a frenzy, sparking bidding wars over the limited number of homes available and pushing real-estate prices to record highs. Most homes are selling for significantly over asking price. There are hourlong lines to get into some open houses, and multimillion-dollar mansions in posh neighborhoods are trading hands in off-market deals.
And while the journalist Alex Kantrowitz used LinkedIn data to show that tech workers were not landing in Austin in 2020 at a faster pace than in 2019, the city is still gaining 1.84 tech workers for every one that leaves. Plus, the LinkedIn figures measured inflow and outflow only from April to October. With more recent announcements of moves from Musk and Oracle, the city can only brace for more.
But the effects of Austin’s ascent ripple throughout the once modest city. Concerns about affordability and a lack of infrastructure take on new weight as more companies, executives, and employees pile in.
Here’s a look at how Austin rose to this vaunted position and a peek at life in the boom town right now.
The exodus from Silicon Valley to Austin’s ‘Silicon Hills’
Locals have nicknamed Austin’s western swath “Silicon Hills” because of the growing number of companies, from Amazon and Cisco to Intel and PayPal, that have offices there.
The topography of the area is more mountainous than other parts of Austin — and definitely higher in altitude than Silicon Valley, its more famous California counterpart.
The biggest influx of new residents has been from California, Ian Grossman, an Austin real-estate agent with Keller Williams, said, emphasizing that many denizens of San Francisco and Silicon Valley consider Texas a cheaper, lower-tax haven. That trend seems primed to continue given the Austin expansion plans Google and Apple revealed this year.
“Google has a big presence here,” Grossman said, pointing to a high-rise in downtown Austin the tech giant built about two years ago, where more than 1,100 of its employees work. Google is also expected to lease space in a development under construction next to its current tower.
For its part, Apple recently announced its plans for a $1 billion 3 million-square-foot Austin campus, which is expected to open in 2022. Per Apple’s press release, the campus will house 5,000 employees initially, with the capacity to grow to 15,000.
Amazon, too, has shared plans to grow its footprint in the Austin area, Grossman added, mentioning that the company’s fulfilment centers in the Austin suburbs, about 20 minutes outside the city, were set to increase capacity with the addition of an 820,000-square-foot Pflugerville fulfillment center set to open in 2021.
But the biggest announcement this year, Grossman said, is Tesla’s plan to build a factory in the area, which has already broken ground. That plus Musk’s personal move to the area — and public comments about Austin’s housing crunch and future as a boomtown — has drawn even more attention to the Lone Star State’s capital.
Austin may be relatively affordable — but it’s rapidly growing pricier
Employees of the major corporations in Silicon Hills who relocate to Austin find its lower property prices appealing.
Houses are a hot commodity for millennials aging into homeownership and parenthood, Zillow’s Tucker said, adding that Austin could offer California emigrants a big break on state income taxes.
As the city tries to meet the needs of the influx of transplants moving into town, the local real-estate market has experienced rapid growth. Though demand for Austin real estate has trended upward for most of the past decade, local brokers say migration to the area has hit a record high in 2020, which has sent home prices skyrocketing.
The median sale price in the Austin metro area at the end of October was $371,534, according to data Zillow shared with Insider, a figure 13.8% higher than the year before. By comparison, between 2018 and 2019, prices increased 8.4%.
Zillow data also shows that Austin leads the nation in year-over-year increases in median listing price, a metric that indicates what buyers hope their homes can fetch. That figure that jumped 23.1% from 2019 to $446,642.
Much of 2020’s growth is thanks to the remote-work trend brought on by the coronavirus pandemic. The adoption and liberalization of work-from-home policies have worked to Austin’s advantage, Tucker said, adding that as a result, major tech companies and workers have broadened their horizons for headquarter locations and put down residential roots. Some major firms are even letting their employees work remotely indefinitely.
‘There’s nothing like wearing shorts in December’
The migration data showed many new Austin residents arrived before the pandemic.
Take Ivan and Julia Serdyuk, who left New York for a stint in Germany before returning to the US and choosing to put down roots in Austin in 2019 with their young child.
The 35-year-old project manager and 36-year-old sales analyst considered a broad swath of geographic options when they repatriated.
“Everything on the map was open,” the couple told Insider.
But after reading that Austin ranked highly on several “best place to live” rankings, the pair said the city stood out. It had delicious food, outdoorsy activities, and a reliable public-school system for their 8-year-old. (It’s worth noting that many of these attractive qualities continue to lure newcomers in 2020.)
“All the metrics weighed in our favor,” said Ivan, who enlisted the Century 21 broker Julie Mattoon to help them buy a house after a year of renting.
They’re settled in a four-bedroom house after having lived in Austin for about a year and a half. Tacos, hiking, and warm weather year-round are among their favorite Austin attributes.
“There’s nothing like wearing shorts in December,” Ivan said.
Austin is running out of new homes
Demand from new arrivals is boosting prices, but so is a lack of supply.
Inventory in the Austin metro area is down a staggering 40.9% year over year, according to Zillow data. On average, Austin homes for sale went under contract after just seven days. Buyers are snatching up properties on the market an average of 19 days faster than last year — and the rate at which Austin properties are zooming into contract is among the fastest in the country.
Current owners are afraid to list out of fear they won’t be able to find, afford, or win a bidding war for a new place to live. Housebuilders are struggling to keep up, Grossman said, reporting they are unable to take on new construction contracts or requests because they are backed up with prior orders. Some, he added, even have wait lists.
Earlier and toward the middle of the year, builders were basking in the busyness, Grossman said, but now the market is so hot they can’t keep up.
It can take an hour just to get into an open house
“The market was almost moving too fast,” Grossman said, adding that one result was buyers getting shut out of deals even when they made over-asking offers.
Other hallmarks of a competitive market are becoming more commonplace.
With inventory so low, Grossman said, buyers are spurred to act fast because they fear missing out on today’s prices only to have to pay tomorrow’s higher ones.
Even for those with unlimited cash on hand, existing properties are as difficult to snag. “Even multimillion-dollar properties are getting multiple offers,” he said.
And properties not listed on the public, consolidated Multiple Listings Service — aka whisper listings — are being fought over via exclusive services that broker such off-market transactions.
One of Grossman’s clients recently entered into a bidding war on a $3 million new-construction house, he told Insider. They were prepared to make an offer $200,000 over the asking price — but had already been outbid, so they walked away.
Grossman said even more modest homes that needed work, listed for about $450,000, were going for as much as $60,000 over asking. And buyers are taking big risks — like waiving appraisal contingencies, which are typically standard for making sure a home doesn’t have any costly structural or other issues — if it means they can win a home.
Mattoon of Century 21 has witnessed interested buyers line up outside homes to see properties, she said. Mattoon herself even waited almost an hour for a showing in recent weeks.
In what Mattoon calls a “fabulous but challenging” climate, she tells buyers to come in with a strong offer, brace for a bidding war, and be prepared to walk away without the property. As multiple-bid situations have become commonplace, chances of getting an Austin home at first offer are slim.
The downsides of a boom town
As the influx of newcomers, middle-income and wealthy people alike, drives up prices, locals in lower income brackets, including teachers, artists, and nurses, can get pushed out of choice neighborhoods.
Even before the pandemic, The Austin Chronicle reported that high-earning tech and medical professionals made up the bulk of the population left in the pricier city center.
And with the unprecedented demand from deeper-pocketed folks flocking to Austin in 2020, locals are debating whether the city’s infrastructure can even hold up under the strain.
Plans to double the size of Austin’s local airport — which was the US’s second-fastest-growing midsize airport in 2019 — have been delayed as a result of the coronavirus pandemic.
Complaints of standstill traffic during peak hours on the city’s main drags have at least been partially addressed with a new initiative called Project Connect, a transit plan moving ahead that’s set to add a public-transit system to the historically car-centric city. Among its promises to combat snarled roads are a new transit tunnel to separate light-rail tracks from car traffic and an expanded bus system with an all-electric fleet.
There are bidding wars over Austin’s poshest homes too
Bidding wars have even broken out over homes worth tens of millions of dollars, according to Gary Dolch, a Compass real-estate agent who specializes in luxury homes and has worked in Austin for over a decade.
Take a $26 million mansion on Lake Austin that found a buyer and closed in less than two weeks after attracting multiple bids in a private sale, Dolch told Insider.
West Lake Hills, a suburb just west of downtown Austin, is one in-demand area, Dolch said. The lakefront properties there attract Austin’s wealthiest residents and can range from $1 million to $50 million. Like in the rest of the metropolitan area, prices have been increasing: Some lots that would’ve cost $3 million to $5 million a few years ago are now selling for $10 million.
Rural ranches have proved popular this year, attracting atypically high demand from some affluent buyers looking for primary or secondary residences, Dolch said. After all, this is Texas, and ranch properties are common on Austin’s outskirts.
Even multimillion-dollar ranches in the “mid-to-upper teens” have fielded multiple offers, Dolch added. Buyers are increasingly seeking out estates with a lot of acreage and spacious homes amid the COVID-19 crisis, when distance and isolation have become coveted amenities.
“Tech has been here, but it’s exploding now,” Dolch said. Because the tech-industry boom has resulted in more wealthy residents, he added, he’s taken to calling Austin “the new Emerald City.”
Originally published at https://www.businessinsider.com/moving-to-austin-texas-real-estate-prices-affordability-elon-musk-2020-12 on .