Austin has been a prime place to buy real estate for the past few years and not just for people who love music and barbecue. It was ranked the hottest real estate market by Zillow in 2021.
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Austin, Texas has been a prime place to buy real estate for the past few years and not just for people who love music and barbecue. It was ranked the hottest real estate market by Zillow in 20211 as buyers flocked to the area from higher-priced housing markets in California and the Northeast in search of affordability.
Remote work accelerated the appeal of Austin with its relatively affordable housing. The thriving economy makes it a great relocation spot for jobseekers, too, which brings in plenty of renters.
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Similar to other housing markets, Austin’s home prices shot up in recent years due to a combination of increased demand and limited inventory. Austin is considered a very competitive housing market, with many homes receiving multiple offers. The median sales price of a home in Austin rose 14.4% in February 2022 compared to February 2021 to $575,500, according to Redfin.3
The rental market is strong in Austin, too, with rents up 40% year-over-year in February, according to Redfin⁴, which made it the top market for rent growth in the country. In fact, some renters in Austin have gotten into bidding wars for apartments, according to a recent NPR story.5
Change in Austin median home sales price
Median days on market
Percent of homes sold over list price
Average home price per square foot
The Austin housing market has been thriving in recent years, even prior to the pandemic, with buyers flocking to the area in search of the lifestyle they prefer and relatively more affordable single-family homes, at least in comparison to coastal markets.
The ability to work remotely that so many companies discovered during the pandemic only increased the city’s popularity. As a result, home values have risen nearly 90% over the past five years. Home values in Austin rose 39.4% over the past year, according to Zillow’s Home Value Index.6
While nearly every housing market has experienced sales increases, lack of supply and price appreciation in recent years, Austin has been a leader among markets. Nationally, the median sales growth was 13.5% year-over-year from February 2021 to February 2022. Austin’s median sales growth during that same period was 29.5%.6
Another way to measure home values is by looking at the median price per square foot. Here, too, Austin stands out with a 24.4% growth rate year-over-year to $260 per square foot, according to Redfin. Nationally, the median price per square foot rose from $184 in February 2021 to $218 in February 2022, an increase of 18.5%. In El Paso, the median price per square foot jumped much less, up by 16.4% year-over-year.7
Like many housing markets, the biggest thing slowing down sales in Austin is a lack of inventory. In March 2022, there were just 1,639 new listings in the market. While that’s up a little from the 1,593 homes on the market in March 2021, it’s far below the 7,075 homes that were on the market in March 2019 or the 6,400 available in March 2017.8
Austin is considered a very competitive market, with a Redfin “compete score” of 70. There were 933 homes sold in Austin in February 2022, down slightly from the 944 sold in February 2021.3
Homes sell in Austin in an average of 32 days, according to Redfin, down from 34 days on the market in February 2021. Nationally, Redfin reports that homes sold in 25 days in February, compared to 33 days in February 2021.7
As an investor, you want to find the right balance between a house you can afford to buy and one that’s desirable to renters. Here we break down the most and least expensive neighborhoods in Austin, according to the Zillow Home Value Index (ZHVI).6
These are the top 10 most expensive neighborhoods in Austin:
These are the 10 least expensive neighborhoods in Austin:
Yes. While Austin has seen intense growth in recent years, the underlying fundamentals are in place for continued growth: a strong job market, limited inventory and continued demand.
Possibly. Most economists anticipate that the rate of growth may slow in housing markets throughout the country as mortgage interest rates rise, but that home prices will continue to increase. However, in some markets like Austin that experienced the sharpest pandemic-related price increases, prices could decline slightly and become more affordable over the next year or so.
Austin has been one of the hottest housing markets in the country in recent years because of its attractive lifestyle and relatively affordable cost of living. However, according to some analysts, Austin is among the most overpriced housing markets in the country. One analysis estimated the buyers in the region overpay by more than 60%.
Rental market trends are closely tied to the local economy and housing markets. In locations with strong population and high job growth, demand for rental housing typically thrives. When homes for purchase are scarce and prices are rising, that can also drive more people to rent. Austin ranks among the top 30 rental markets in the country, according to WalletHub, based on affordability and lifestyle.9
Rents in the Austin area have consistently increased along with population and job growth. The metro area is among the top cities for remote workers. Overall rent increased by 23.5% in Austin when comparing January-March 2022 with January-March 2021.10
Rental yield in Austin is similar to the national average, which is $22,596, according to analysis by HoneyBricks. In Austin, rental yield is $21,576, compared to $20,388 in Dallas and $20,628 in Charlotte. In Seattle, where home prices are significantly higher, the rental yield is $25,920.
The business-friendly environment, absence of a state income tax and lower overall cost of living has made Austin into a magnet for a variety of people and turned it into the fastest-growing city in the U.S. over the past decade.
Austin’s population grew by 34% over the past decade, according to the Census Bureau, with a net gain of 579,000 new residents. Within the city limits, Austin has about 962,000 residents and about 2.2 million people live in the Austin metro area.11
Austin is particularly popular for people in the tech industry, with major tech companies and remote workers moving from higher-cost areas in California and Washington. The city’s thriving music and arts scene, along with the University of Texas at Austin and the abundance of outdoor activities draw people to Austin. The annual South by Southwest conference and festival, which serves as a showcase for Austin, brings thousands of people into the city from the tech, film and music industries.
Texas is known as a landlord-friendly state and Austin doesn’t have a separate landlord-tenant law. Still, landlords must follow federal and state regulations in Austin. Before investing in rental property in Austin, investors should be aware of a few basic provisions, such as:
While Texas doesn’t have a state income tax and has a relatively low sales tax, it makes up for that lost revenue with some of the highest property taxes in the country. The average rate in Texas is 1.81% of the assessed property value, according to Tax-Rates.org. In Travis County, where much of Austin is located, the average tax rate is 1.88% of the assessed property value. Property owners pay an average of $3,972 in annual property taxes in Travis County.13
You should always consult a tax advisor for individualized information, but property investors generally can take advantage of several tax benefits. The IRS taxes investors only on the profit from their rental property, so you can typically deduct your maintenance costs, management fees and mortgage expenses.
The city of Austin has approximately 280 square miles and the metro area has about 4,300 square miles. Naturally, that means there are plenty of neighborhoods to explore for investors. Renters often choose locations based on their accessibility for walking, biking and public transportation. Renter families and homebuyers also compare school districts.
Generally, Austin is ranked 30th most walkable large city in the U.S. by Walk Score, which rates locations from 1 to 100 based on their proximity to retail and other amenities. Austin overall has a Walk Score of 42, a Transit Score of 35 and a Bike Score of 54. This means that Austin is a car dependent city, with most errands requiring a car. However, there are plenty of neighborhoods in the city that offer the ability to live without a car.14
The three neighborhoods in the city with the highest scores for walkability, biking and public transportation include Downtown Austin, West University and the University of Texas-Austin. Downtown Austin has a Walk Score of 92, a Transit Score of 68 and a Bike Score of 90. West University has a Walk Score of 92, a Transit Score of 67 and a Bike Score of 94. The University of Texas-Austin has a Walk Score of 89, a Transit Score of 72 and a Bike Score of 93.
Renters with kids typically look for a location with the highest-rated schools. Homes in locations with highly rated schools generally hold their value or increase in value more than those in neighborhoods with less sought-after schools.
Overall, the Austin Independent School District is considered among the best in Texas and was rated a “B” overall, for school progress, closing the gap and student achievement by the state for the 2018-2019 school year, the most recent time the district was assessed.15
According to Great Schools, which analyses multiple factors to rate schools, the following neighborhoods have highly rated schools: Barton Creek, Bee Cave, Brushy Creek, Circle C Ranch, Great Hills, Lost Creek, Rollingwood, University Hills and Windermere.16
The health of the local job market is closely tied to the housing market. One reason Austin’s rental market continues to grow is the thriving job market for the city.
According to WalletHub, Austin ranks as the fifth best city out of 182 cities analyzed for jobseekers.17
According to the Austin Chamber of Commerce, the city’s year-over-year increase of 7.8% in employment between November 2021 and November 2022 made it the second highest-performing job market in the country, only behind Las Vegas.18
The tech industry is particularly strong in Austin, with companies such as Apple, Dell, IBM, Oracle, Samsung and Tesla among the major employers in the area. Consulting and financial firms such as Accenture and Charles Schwab are also major employers. Many national companies have their headquarters in Austin, including the Indeed job search site and Keller Williams Realty.19
The abundance of people moving to Austin signals its appeal as an affordable place to live with an attractive lifestyle.
The National Association of Home Builders’ Housing Opportunity Index compares the median home price in a metro area to the median household income to determine the percentage of homes that the average household could buy there. Nationally, the HOI was 54.2% during the fourth quarter of 2021, which means that just over half of the homes in the country were affordable to the average household.
In Austin, the HOI was slightly lower at 50.3%. Nearby Dallas was similar at 50.4%. But in Charlotte, the HOI was 63.4%, making it a more affordable option. In Los Angeles, the HOI was 7.5%, which makes it easy to see why Austin is so popular with people from California.20
Austin is rated as the number one Best Place to Live in Texas and the number five Best Place to Live in the U.S. by US News. The ratings are based on five factors, including migration patterns, whether the location offers a good value, a strong job market, is a desirable place to live and offers a high quality of life.21
For renters, Forbes ranked Austin 17th out of 100 cities based on a variety of factors such as the affordability of the rent and other apartment data, weather patterns, parks and more.22
The slogan “Keep Austin Weird” is a testament to the city’s laidback vibe. Austin is known as the music capital of the world, with more than 200 venues for live music and multiple acclaimed music festivals every year. Outdoor life is prized by Austin residents, who enjoy miles of hiking and biking trails, canoeing and kayaking on the rivers and lakes during the city’s abundance of warm sunny days. The food scene is also special in Austin, with a focus on barbecue and Tex-Mex food. The lack of income tax is also an appeal for people from out of state.
One drawback to the fact that Austin is such a hot housing and job market is that traffic has become the number one complaint among residents. The city suffers from a lack of reliable public transportation. Another issue for long-term residents is that people moving from higher cost housing markets have driven up home prices, making it less affordable for locals.
Investing in rental properties in a hot market like Austin can be challenging given the competitive market conditions. A partner like HoneyBricks can help investors overcome that challenge. Sign up for the HoneyBricks Early Access Program to be the first to know when investment properties in Austin and other top markets are available.
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