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Austin’s housing market expected to outperform national average, says study

Home prices predicted rise among fastest in country

Aerial photo of similar-looking, similar sized suburban houses in rows with trees in between.
Development near Wells Branch in Austin

Austin’s already scorching housing market should continue to experience some of the top growth in the nation in 2020, according to a recent report. In a Zillow-backed survey released earlier this month, almost 83 percent of the experts queried predicted the Austin’s market to outperform the national average, making it the most likely city in the country to do so, according to the survey.

Conducted by research firm Pulsenomics for Zillow, the study surveyed more than 100 economists, investment strategists, and real estate experts, asking them for predictions about the US housing market and to rate 25 large markets according to their 2020 expectations for home value growth compared to the nation.

Texas and Southern markets top the list; some California prices expected to dip

Austin was the city most expected to outperform the, country according to the survey. Southern markets in general topped the results, with Charlotte, North Carolina; Atlanta, Georgia; and Nashville, Tennessee among the markets at the top of the charts for predicted home value growth.

Meanwhile, the panelists predicted that some of the nation’s most expensive housing markets—such as San Francisco, San Jose, and Los Angeles—would underperform in 2020. U.S. home values overall are expected to grow by 2.8% next year, according to the survey.

That several Texas cities topped the list of expected overperformers isn’t too surprising. A recent Curbed article by Patrick Sisson attributes that statewide growth at least partly to a booming construction industry that, for a variety of reasons, is positioned to keep up with demand in the state.

Austin affordability is still on the decline

As much glee as an increase in home values might provoke for some—particularly investors and others with a stake in the industry—when looking at regional home costs, it’s important to keep in mind relative incomes from city to city and state to state.

As the Pulsenomics survey suggests, building all those new homes—mostly single-family—doesn’t necessarily make buying one more affordable on an individual basis. Austin has been parked in the bottom third of the nation’s large cities for affordability for a while.

According to a recent report by RealtyHop, which crunched U.S. Census numbers and more than 300,000 listings in its database to rank the 100 largest U.S. cities for affordability, this month’s index bumped Austin up to 27th on the list. (The rankings are ordered most- to least-affordable, with Los Angeles in the top slot.)

Milago on Rainey Street
Austin apartment in Rainey Street neighborhood
Via Kuper Sotheby’s International Realty

Is renting a better option?

Maybe? According to Sisson’s article, “The [Texas] apartment market isn’t expected to do quite as well” as that for single-family homes, meaning it won’t be “outperforming” the national market quite as dramatically.

That prediction could also be a matter of low inventory. Even though a September 29 report predicted that more than 10,000 new apartment units would be in the city by the end of last year and a November study put Austin at fifth-highest place in the country for new multifamily permits, it’s clearly not enough to keep up with the ever-increasing population.

A November study found 23.2 percent of Austin renters “severely cost-burdened”—meaning meaning they spend more than 30 percent of household monthly income on rent. And while January rents slowed a little, a predictable pause in increases during this time of year, overall Austin’s rents are rising at one of the fastest rates in the country.

Austin’s banking a lot on a new land development code, which would permit multifamily housing in more places in the city, to address some of these affordability issues. Here’s hoping.