Native Austinites have bemoaned for years the influx of outsiders, especially those relocating from the Golden State. How can Austin, Texas, “keep it weird” and maintain its rustic charm? Will tacos remain a breakfast staple or be replaced by kale smoothies?
The coastal in-migration trend has only gained momentum, thanks partly to corporate investments by Amazon, Facebook, and Google that are creating new jobs. Apple’s new Austin campus will open in 2023, and a new Tesla gigafactory will debut in 2021. The recent announcement that Oracle would relocate its headquarters from the Bay Area to Austin generated speculation about another influx of Californians to “Silicon Hills.” Most Austin builders have experienced record new-home sales in 2020, fueled partly by relocation.
Affordability is part of the appeal. Compared with the Bay Area, Austin is a bargain. Zonda indicates that the average new-home closing price in Austin CBSA in 2020 YTD is $353,289, compared with $1,073,475 in the San Francisco-Oakland-Berkeley CBSA. That’s a gap of more than $720,000. In theory, one could buy three homes in Austin versus one in San Francisco.
That said, demand has pushed the average new-home list price in Austin 11% higher than it was a year ago, rising to $358,497 in November, according to Zonda. And cost pressures are mounting. Builders are experiencing higher prices for supplies—especially lumber—as well as increased development and permitting fees and labor costs. The biggest worry? Land. A recent Zonda survey indicated that 47% of Austin builders are “extremely concerned” about land prices and availability, while 42% expect to pay “much more” for lots in 2021.
Wells Fargo senior economist Sarah House, who spoke to the Austin Chamber at a recent event, said Austin “was an outperformer and a highflier before the pandemic, and the pandemic hasn’t changed that,” relatively speaking. The city “hasn’t been able to escape the downturn that we have seen nationally, [but] it has been much more modest” in Austin than either statewide or nationally, House said. In November, the city’s unemployment rate shrank to 5.9%, one of the best in the nation. And more jobs are coming, which should fuel home building.
Will Austin home prices eventually rival San Francisco’s? There’s a long way to go before that happens, but Austinites should guard their tacos.
