top of page
  • Writer's pictureor yochanan

Is Austin Real Estate Market a Bubble? A Data-Driven Analysis

Updated: Jun 10

We often hear that Austin is a real estate bubble, teetering on the brink of a major fall. But are these claims rooted in reality, or are they just clickbait headlines? At The Investory Group, we value data over speculation. In this blog post, we'll delve into Austin's real estate story, examining raw data and key events over the past decade. By analyzing trends from the most recent year to the past decade, we aim to provide a comprehensive understanding of Austin's real estate market dynamics.


Austin Real Estate Market: A Year in Review


Austin May 2023 till May 2024 single residence median price comparing to Interest rates graph

Let's start with the present. In my assessment of Austin's real estate landscape for 2024, I've observed a notable trend towards stabilization in home prices, including an increase in areas with growth engines. While initial predictions hinted at a significant drop, the reality paints a different picture. Though some fluctuations are evident, the rapid surges & drops witnessed in previous years appear to have plateaued. As we approach mid-hot season, I'm eager to see what new dynamics and opportunities it will bring to the market.


We took all our data directly from the MLS, for Median sale price of Single Family Residence (SFR) homes in Austin, from January 2014 till April 2024 and we will evaluate it with 3 graphs. Past 1 year, Past 5 years and past decade.


The market follows a predictable pattern. It peaks during the hot season (April-July) and cools down during the colder months (October-February). This cyclical nature shows a healthy real estate market, characterized by seasonal variations that are typical in any robust market.


We combined this graph with the interest rates from the past year. In April 2023 , the median sales price for a single-family home in Austin was $621,100. Fast forward to April 2024, and that price has edged up to $635,000, a 2.2% increase despite the average interest rate climbing from 6.34% to 7%. This isn’t just a fluke; it’s a testament to Austin’s resilient market, even as interest rates rise.


Five-Year Austin Housing Market Trends


Past 5 years Austin single residence median price comparing to Interest rates graph
Data driven from MLS

Let’s rewind further. Over the past five years, from March 2019 to April 2024, Austin’s housing market has seen some wild swings. The pandemic brought historically low interest rates, dropping below 3% in 2020 and 2021 - combining this with people wanting a larger residence for their families, along with the major tech companies doubling down on Austin, spurred a frenzy of buying activity. Prices soared, even during the traditionally slow cold seasons. By February 2021, the median price had jumped to $562,500, a 20% increase from six months prior.


However, with the end of 2021 came rising interest rates, doubling from 3.22% in January 2022 to 6.42% by year’s end. While Austin's median prices peaked at $730,000 in May 2022 - they fell to $563,401 by December—a stark 30% drop. This dramatic decline was influenced by high interest rates, seasonal trends, and the market’s shock given the Fed’s shift - but when comparing peak-to-peak from May 2022 to May 2023, the drop was a more moderate 16.8%.


When accounting to the difference in the typical homebuyer’s purchase power, the correlation is relatively straightforward: Consider Homer, a homebuyer looking to purchase their first primary residence in Austin TX. Homer has $100,000 of downpayment and $2,500/mo for housing expenses. When the interest was 3%, it meant Homer can afford a $500,000 home (including monthly prorated Taxes & Insurance), when the interest got to 7% his new budget changed to… $355,000. This means that his purchasing power decreased by 29%, which seems rather close to that 30% figure from the previous paragraph.


Google mortgage calculator

This period also saw a significant migration to Greater Austin driven by the city’s appeal during the pandemic. Many people from the East and West Coasts sought more space, lower taxes, and a warmer climate, further fueling demand and price increases. The market dynamics during these years highlight how external factors, like a pandemic and federal monetary policy, can dramatically influence local real estate trends. Whether the tech giants’ ever-expanding footprint in Austin was the result, or the cause, doesn’t change the fact that the jobs and facilities in Austin increased, exponentially, and these changes aren’t temporary in nature.


Net domestic migration in the USA 2020-2021

A Decade of Growth


When I moved to Austin in 2018, I began investing in real estate. Despite hearing from others that I might have missed the train, with the market having grown by 28% over the past four years, I remained optimistic. Observing the evolution of Austin's tech sector, I knew there was still tremendous potential for growth. The market looks only towards the future, the past is irrelevant. The market does not delve in the past, it is always focused on the future. 


Austin 10 year population growth

To truly grasp Austin’s real estate story, we need to look back a decade. In April 2014, the median sale price was $320,000. Fast forward to April 2024, and it’s $635,000—a 100% increase. During this period, Travis County’s population grew by 15%, reflecting Austin's rise to top 11th largest cities in the U.S.


Greater Austin, including Williamson County, saw even more impressive growth. Williamson County’s population surged by 47% over the past decade, landing it among the top regions for positive net domestic migration in 2023 (#6 in the US per Census.gov). This explosive growth is a key factor driving the real estate market, as more people and businesses flock to the area.


Williamson and Travis county 10 year population growth

Why Austin? The Appeal Beyond Numbers


So, what’s driving people to Austin? It’s not just the numbers; it’s the lifestyle. Imagine a city where the tech scene thrives, from startups to giants like Google, Tesla, Samsung and Apple. Picture miles of hiking and biking trails along the Colorado River, 300 days of sunshine, and a music scene that earned Austin the title “Live Music Capital of the World.”


Austin isn’t just attracting individuals but entire companies. This influx of high-paying tech jobs has transformed the local economy and housing market. During the pandemic, Austin saw significant migration from the East and West Coasts, with many seeking more space, lower taxes, and a warmer climate.


Beyond the tech boom, Austin offers a unique blend of cultural vibrancy and economic opportunity. Its culinary scene ranges from high-end dining to mouth-watering barbeque, and the city's numerous festivals, like SXSW, add to its charm. The scenic outdoors, with miles of trails and the Colorado River, provides endless recreational opportunities.


Future Outlook for Austin Real Estate


Despite recent fluctuations, the outlook for Austin’s real estate market remains optimistic. Zillow predicts a 3.3% increase in home prices from January 2024 to January 2025, fueled by ongoing population growth and high demand. But Zillow is a marketing platform, not a viable source of information for data analytics, so just consider the following: Many of my recent closings were priced at $200-250/sqft, while the cost to build is pretty much the same ($175-225/), for properties that are associated with top schools and within 30 minutes from Downtown. Would you say that the intrinsic value of the land is being captured given these data points..?I would say: Heck no. When you couple this with Austin’s robust economic fundamentals, it suggests a bright future for real estate investments here.


However, challenges remain. The rapid growth has made it harder to find affordable housing, and the rising cost of living could deter some potential newcomers. Yet, these challenges also present opportunities for savvy investors to find untapped markets and for the city to innovate in housing solutions.


Austin’s story is one of resilience and growth. The real estate market here is dynamic, shaped by economic, demographic, and cultural factors that make it a unique place to live and invest. So, whether you're looking to buy, sell, or invest in Austin, understanding these nuances can help you make informed decisions and appreciate the vibrant community that defines this city.


Conclusion? You tell me :)





Harness the power of data-driven insights with our real estate expertise. Let The Investory team guide you to smart decisions, ensuring you find the perfect home or investment. Your dreams, backed by our analysis, become a seamless reality. Our approach is client-obsessed, technology-driven, and grounded in data. We aim to make your real estate journey as smooth and stress-free as possible.

Comments


bottom of page