Not that long ago, owning property in Austin was—for those who could afford it—a no-brainer. Most Austinites took as common wisdom the idea that one’s home could and should be their primary asset, not unlike a big savings or retirement account. And home prices through the late 1980s were affordable on even the most middling state-worker salary in this still-quiet college town.
Over the past few decades, Austin has faced nonstop growth—the metro population has increased from 1.4 million to over 2 million people since 1980.
Somewhere between 2006 and 2016, Austin became a majority-renter market. At the same time, other questions have stoked anxieties over whether one should buy a home, in Austin, in 2020. Should you buy because you can, even if your purchase might contribute to a pattern of displacement and sprawl? And in an era of increasing climate risk, does it make sense to have property as your primary financial asset?
When it comes to Austin, the one constant is the worry that you’ve already waited too long, that the market has peaked—or, conversely, that all the good ones are taken. In the 21st-century Austin home market, in other words, the time you should buy always seems to be right now.
Or is it? We asked six experts their thoughts on whether you should buy a home in Austin this year. Here’s what they said.
We collected the responses below before the outbreak of novel coronavirus in the U.S. How might its spread impact the housing market this year? Read this.
Wade Giles
Realtor, Moreland Properties
With 1.7 months of inventory and an average of 152 people moving to Austin on a daily basis over the past decade, it’s no secret that Austin’s real estate market is on fire. We are currently seeing hot properties receiving a dozen-plus offers and selling for 10 to 15 percent over asking, which is very reminiscent of the market back in 2013/2014, when we saw our first real surge since 2009. Top it off with interest rates being at an all-time low, and you have the perfect recipe for a thriving market. Now, will it last? My predictions are that interest rates will remain low all year, but buyers and sellers will begin to lose confidence in Q3 and Q4 and the market may show some fizzling or flattening as the election comes more into focus. That being said, year-over-year appreciation rates are still strong with the strongest percentages in 78703, just west of Downtown, with 15.5 percent; 78704, just south of the Lady Bird Lake, with 15.4 percent; and 78746, Westlake, earning the top spots over the past year within Central Austin.
“Even for a household with the median income for Austin, buying a home within the city limits is virtually off limits.”
—Mark Rogers
Mark Rogers
Executive director, Guadalupe Neighborhood Development Corporation
As someone who works for a nonprofit organization entirely in the affordable housing world, my answer to the question “Should you buy a home in Austin in 2020?” is probably very different from how a realtor or developer might answer. Our clientele have incomes that are below the median income for the Austin metropolitan area. Note that this means half of the households in Austin. But even for a household with the median income for Austin, buying a home within the city limits is virtually off limits.
For example, the 2019-2020 median income for a family of three is $86,300. That family can afford a total mortgage payment with taxes and insurance of about $2,150 per month. That’s spending 30 percent of their income on their house payment. With really great mortgage interest rates down at 4 percent, they can afford a home at about $315,000. The bad news is that is about $90,000 less than the median home price of $405,000 in the city limits of Austin right now. To be able to have an affordable mortgage for that $405,000 home in the city of Austin, the buyer needs an annual income of at least $110,000. For a family of three, that’s an income at about 130 percent of the median.
Austin real estate agents might not see that as a problem, because $110,000 is just about the average salary of a tech worker coming into Austin looking to buy a home. And Austin created 37,800 new jobs last year, many of which were high-paying. But, if you think that half the population of Austin can only afford a home at $315,000 or less, you can understand why the single-family housing boom is occurring in what’s referred to as the “emerging submarkets” of places like Manor, Hutto, Jarrell, Kyle, and Buda, where new homes are selling for between $200,000 and $300,000.
Lilly Rockwell
Real estate agent, Coldwell-Banker Realty
Some buyers worry about purchasing at the top of the market, because we’ve had a nearly 10-year run of values increasing. But Austin’s fundamental economy remains strong, and our demand is still fueled by job creation and people moving here, not speculation. Interest rates are also incredibly low right now—even lower than they were this same time last year—which can greatly increase a buyer’s purchasing power. There’s a lot of uncertainty about how long these low rates will last, especially with the upcoming election. If you wait to buy until next year, there’s always a risk that interest rates will be higher and homes more expensive. Just last year, the median home price in Austin increased by 5.3 percent.
Amber Galligan
Broker-principal, Towers Realty
What are you looking to achieve with your purchase? Are you looking to control your monthly payment for housing?
Then you probably should consider buying. There are plenty of reports online telling us how rental rates in Austin have exploded over the last several years. I specialize in downtown Austin condominiums, and the MLS data for that neighborhood and property type—while incomplete, due to many transactions happening off-market—indicates that the median lease rate has increased by $1,150 per month in the last 10 years. Depending on what neighborhood and property type you’re interested in, the differential could be even higher.
Are you looking for a “good investment”?
Once again, the answer depends on your primary objective. If appreciation is your main goal (for instance, if you are an owner-occupier that wants a longer-term, less volatile space to invest your dollars), you may consider buying. MLS data on downtown Austin condominium sales indicates that the median sales price of downtown condominiums has increased by $245,250 over the last 10 years.
The data does get a little tricky for this particular market segment, since downtown Austin has seen plenty of new condo developments that have potentially weighted these numbers a bit—and again, there are a lot of off-market transactions not recorded in the MLS, particularly in downtown Austin. If I were representing a buyer, I’d probably drill down quite a bit more beyond this data to help them make the most informed choice.
Still, if you want to make money every month from leasing out your condo purchase, you may consider waiting. Downtown condos in particular can be harder to cash-flow if you’re financing under typical terms, and there are a host of other dynamics at play that could make it harder for a pure-play cash-flow investor in this market.
“From 2010 to 2019, Austin home sales increased by 84 percent, and the median home price rose from $193,520 to $318,000.”
—Romeo Manzanilla
Romeo Manzanilla
2020 president of the Austin Board of Realtors
If you’re a prospective homebuyer in the Austin area, the time to buy is now. Austin’s booming job and population growth, coupled with historically low mortgage rates, has fueled the demand for housing, signaling a slowdown is not expected anytime soon.
From 2010 to 2019, Austin home sales increased by 84 percent, and the median home price rose from $193,520 to $318,000. Austin’s housing market has become extremely competitive, and prospective homebuyers need an advocate who understands the market and buyers’ needs.
Jen Weaver
AIA, Weaver Buildings; member, Urban Land Institute Housing Council
The choice to buy or rent is less of a macroeconomic decision and requires more reflection regarding lifestyle, expenses, and income. Someone could live in the suburbs and spend $1,000 per month on their vehicle (gas, insurance, car payment, parking, depreciation, lost time driving) to live in a larger house that costs less per square foot. Many first-time buyers neglect annual repairs and maintenance costs, useful life expectancies and replacements for building components, and time for basic upkeep in their evaluations of homeownership. On the other hand, the same person could pay more per square foot to live a car-free lifestyle downtown as a renter without the costs and time associated with homeownership. With many food delivery services, 14,000 scooters downtown, protected bike lane options, and car-ride apps, an urban solution without a car is totally possible. Personal values should drive the conversation, but being realistic about trade-offs is key.
Interview responses have been lightly edited for length and clarity.