Since the great recession resulting from the mortgage crisis of 2008, not all cities have bounced back as well as Austin. The Texas State Capitol, also known as the Live Music Capital of the World, has recovered remarkably well and is experiencing enviable economic growth. In fact, investors still look to Austin as one of the top real estate investment markets for the foreseeable future. To get a better understanding of why investors are buying into Austin, we’re sharing insight from real estate experts around the country.
Austin is the Top City for Investing
Recently, Austin was ranked as the top city for real estate investment in 2020 by the Urban Land Institute and PricewaterhouseCoopers. The September report detailed the economic factors that resulted in Austin topping their list of best cities to invest in real estate. The consensus was that Austin will continue its impressive growth as jobs continue to be created.
Austin has the added benefit of being one of the coolest cities in the U.S. to live, which is demonstrated by its nickname as the Live Music Capital. Add to that the absence of a state income tax and real estate values that are a huge value over other high-profile cities and you’ve got a recipe for massive in-migration every year.
“Population growth begets job growth. Job growth begets opportunities in real estate investment and development,” said Jeff Coddington, senior vice president at Jones Lang LaSalle Inc., who moderated an Oct. 8 ULI panel on the findings of the 2020 Emerging Trends in Real Estate report.
In fact, it was Austin’s population growth that helped the city cinch the top spot in the ULI ranking and makes real estate experts regard the city as “recession-proof.”
Population Growth and a Recession
“The population of Austin is growing at three times the population growth rate of the U.S.,” Mitch Roschelle, partner at PwC and co-publisher of the report, said in an interview with Austin Business Journal. The area is growing by about 45,000 people a year, he added, citing Census Bureau data. According to an ABJ report published earlier this month, the latest federal numbers, released in April, found that the Austin area population grew by 53,086 from 2017 to 2018, or about 145 people a day.
Vaike O’Grady, Austin regional director for Metrostudy-Zonda, which tracks new home construction, supported Coddington’s position. According to O’Grady, the Austin metro is on track to have a record 17,500 new home sales in 2019.
“The only thing that is holding the market back is the lack of supply,” O’Grady said. “We just don’t have enough lots on the ground right now at the right price to move this market to 20,000” sales a year.”
More Housing on the Way
But solutions to the barrier of scarce land are on the horizon. The city is currently underway on its second attempt to update land use codes to accommodate for more dense housing. That could mean older developments giving way to new developments offering denser housing.
Additionally, the Austin suburbs are experiencing their own real estate expansion. Developers and home buyers alike are looking more toward suburban communities for building and putting down roots. That’s because there’s more land available, which means more new homes that can be built. Since the suburbs can offer a wider selection of available homes and at a lower average sales price, buyers are moving further into the suburbs where they can afford a house that suits their needs.
Hidden Opportunities: Austin’s Suburbs
The corridor communities between Austin and San Antonio are a great example of suburban growth. In the 8 communities that lie along the stretch of Interstate Highway 35 there are downtowns that are all going through their own resurgence. Each one has its own unique identity and offer vibrant lifestyles and affordable homes.
Another booming suburban area is in Williamson County, where Round Rock is making a name for itself as a fast-growing city with its own tech presence. Dell is currently headquartered in Round Rock and is one of the Austin area’s largest employers. More tech companies are moving to the Round Rock area, which is bolstering population growth and driving home sales in the area.
An article by the Forbes Real Estate Council pointed out the income potential in Austin’s suburbs. As a result of Austin’s continued growth, “neighboring communities, including Round Rock, Buda and Kyle are experiencing a similar trend and also presenting excellent investment opportunities. New residents find greater affordability of housing with median home prices of $315,000, creating unique appeal for young professionals and families transitioning to Austin.”
The Value of An Expert Local Agent
In a hot real estate market like Austin’s, buyers are cautioned not to take on a real estate transaction without experienced representation. “Potential deals exist across the range of values and property classes, and you can find value-add opportunities with numbers that cash flow — not an easy thing to do in a hot market,” wrote Ari Rastegar, a Forbes Real Estate Council member. “Seek a knowledgeable broker and conduct your due diligence to ensure a viable acquisition when you evaluate investment properties in Austin.”
Austin is expected to continue to create new jobs at a sustainable rate. Affordability and favorable lifestyle options make a no-brainer for job hunters around the country. For the foreseeable future, Austin real estate sales don’t show signs of stopping. Even a minor economic downtown wouldn’t likely be devastating to the local economy due to the diversity of industries and a continual stream of newcomers.
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