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Construction has ramped up in neighborhoods across central Texas, including East Pflugerville. (Brian Rash / Community Impact Newspaper)
Eric Bramlett has been a real estate agent in central Texas for 18 years and said the local housing market has been consistently strong, following consistent seasonal patterns, and has remained relatively constant in total sales and price since the end of the 2008 economic recession.
But something happened in mid-2020 that brokers and economists believe gave the market a boost.
With the rise in teleworking caused by the COVID-19 pandemic, many new teleworkers have moved in from other, more expensive cities that are no longer tied to their commutes. On site, the employees who used their home as an office thought differently about their needs. While unemployment rates were in double digits across the country, those who kept their jobs built disposable incomes.
“We were the hottest market and we essentially threw gasoline on it,” said Bramlett.
Prior to July 2020, the monthly median home sales price in the Austin-Round Rock metropolitan area had never reached $ 350,000. According to the Austin Board of Realtors, it exceeded $ 400,000 in March 2021 and reached $ 465,000 in May. That is 27.4% more than in January.
These incredibly rapid price increases pose an affordability challenge, said James Gaines, a research economist at Texas Real Estate Center at Texas A&M University.
“It doesn’t take a PhD in economics to understand that if prices are rising faster than incomes and home affordability is based on the relationship between income and price, then [home ownership] becoming less and less affordable, “said Gaines.
This breakneck pace of price increases can’t last forever, said Susan Horton, president of ABoR. Finally, she said she expected price to return to some degree of normalcy, although it could take years as supply catches up with demand.
“The builders cannot build [homes] fast enough to get us where we need to be to accommodate the growth in the metropolitan area, “said Horton.
A sellers’ market
As Travis County’s home prices rise, buyers are turning to homes outside of Austin, driving up Williamson County prices.
In January 2020, the average retail price in Williamson County was just under $ 280,000, according to ABoR’s market report. In May 2021, the average retail price reached $ 435,000.
The report also shows that homes are spending less time in the market, from an average of 63 days in January 2020 to 10 days from May 2021.
Renee Fox, agent and owner of Fox Realty, said in the roughly nine years she has lived in central Texas, residential real estate has been a market that benefits sellers versus buyers.
However, she said she hadn’t seen a seller market that got close to the current trend.
At the start of the COVID-19 pandemic, Fox said typical real estate trends like moving and downsizing have been paused.
Typically, new home rentals are a popular option for homebuyers trying to avoid competition. Now there are waiting lists for new buildings and delivery bottlenecks that lead to extended construction times.
Fox said she and her team spent an hour and a half searching for houses each direction from central Austin. Where previously homebuyers on a budget of around $ 250,000 could afford to live in their ideal Williamson County home, Fox now said it needed to show those same buyers homes outside of the area, including Burnet County or much further south, near San Antonio.
Alternatives to the single family
Adrianne Craft, a real estate agent licensed with Keller Williams Realty, agreed that buyers have a really hard time finding a home.
“A year ago, I’d say buyers could be a little more picky about the condition of a home,” said Craft. “A buyer can choose one house over another because it has no carpet or white cabinets. … Whereas buyers now simply have to admit everything. ”
Craft added that every deal it brokered this year has seen multiple offers for which homes typically sell for 10 to 20% above the asking price. This is a situation that often puts first-time buyers at a disadvantage, especially those looking for single-family homes, which at some point make up the vast majority of homes on the market, she said.
One solution that officials in greater Austin cities have been investigating over the past few years is to diversify house types.
Dan Parolek, CEO of Opticos Design, a California-based company that helps collaborate on housing and community issues, has given many presentations to city officials across central Texas, from New Braunfels to Austin.
Parolek’s presentations focus on a concept known as a lack of middle living. This includes houses such as semi-detached and terraced houses through to buildings with eight units. They are usually walkable, meaning they are close to business or city centers with popular amenities.
These options, Parolek said, provide more affordability for people, including first-time buyers, who cannot get cash offers to become homeowners.
“Any market, no matter the size of the city, has been affected quite dramatically by the cost increases,” said Parolek. “It has become more difficult for … entry-level households to buy houses.”
While Parolek agrees that single-family homes are the most common option for home buyers, he said his research showed that they are not necessarily the most popular option. He added that 60% of all homes will have to forego medium-sized homes by 2040 in order to keep up with demand.
“I think there will continue to be demand for single family homes [homes], but I think more and more that the demand for these missing mid-range apartment types is not being met, ”he said. “I’m not saying there is no demand for single family homes, but historically that’s all we have supplied and the industry is having a hard time adapting and relocating quickly enough to meet the demand.”
Smaller cities see big growth
Little did she know when Robin Sheppard sold her 35-year-old house in Austin in December that more than six months later she would still be looking for a house.
Rising tax rates, heavy traffic, and rapid growth within Austin played a key role in Sheppard’s decision to leave the capital and move to San Marcos. She would still be close enough to visit friends, but in a less crowded city, she said.
“I had lived in Houston for many years and moved to Austin from there because Austin was much smaller and felt wonderful,” said Sheppard. “This is not the Austin I came to.”
Within two and a half days of her home listing, Sheppard received seven bids and accepted an offer that was $ 50,000 above demand and included a contingency that allowed her to live rent-free in her home for thirty days after it was closed.
“I was just like, ‘Wow, this is great, now I can buy a house and have some left over to travel’ … but it wasn’t like that,” Sheppard said.
By June, Sheppard had bid on more than six properties that met her needs for an additional unit that she plans to rent to an older friend at a low cost. Despite offering $ 42,000 more than one property, it has been outbid every time.
Many planning to move further from downtown to one of the smaller towns along the I-35 corridor expect more availability at a lower price than in larger metro areas, said Patricia Fernandez, chairman of the Four Rivers Association of 2021 board Realtors, which covers the suburban corridor between San Antonio and Austin.
“You can pick any city in that corridor and it’s the same story,” Fernandez said. “This whole middle market [is] wiped off the field right now. ”
She added that buyers who qualified for a home worth $ 350,000, for example, may have to bid on homes in the high $ 200,000 range, expecting to pay significantly more.
The same goes for buyers looking for a home north of Austin.
She said homes sold for $ 300,000 to $ 400,000, and with her budget of $ 260,000, she knew she couldn’t afford the area she was looking in. Even finding a home in Burnet County was difficult as the properties sold well above asking price, she said.
Aside from the location, Rodriguez said she had to compromise on commuting – she lives in Burnet County and will be 30 minutes away from her job and family. However, she said the distance is better than waiting a year, saving money and hoping the market will change.
For first-time home buyers last year, $ 250,000 to $ 300,000 was a normal budget in Williamson County, Fox said. Now the same homes in this area are selling for $ 375,000 to $ 400,000.
Compared to the California housing market, Fox said she predicts that central Texas real estate will eventually flatten, but added that she doubts prices will come down.
“I expect this to be the case for the rest of the year, and I think it will depend on the builders being able to open lots and sell houses again on a regular basis instead of having huge waiting lists,” she said. “As soon as they are able to sell a lot of houses, that opens up more inventory.”
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