In Austin, Texas – where the average summer day is over 90 degrees – air conditioning seems… important. He is widely credited with making Texas habitable, and one of the reasons the state’s population has increased in every census since he was admitted to the union. And yet, when a House without air conditioning in East Austin which is quickly getting middle-of-the-road hit the market earlier this year, it sold out in four days – for an almost unheard-of amount of $ 850,000 above the listing price.
“Okay, that was a super cool house, but still,” says Matt Richard, a Giles group agent at Moreland Properties in Austin. That’s right – the house has solar power, a charming historic design, and an even older form of cooling: a saltwater pool. But those amenities aren’t worth much, let alone nearly a million dollars, without central air conditioning.
Most experts agree that Austin’s real estate market is the craziest in the country right now. According to the Austin Board of Realtors (ABoR), median home prices hit a record high of $ 465,000 this month – the fourth consecutive month it has set a record and the fifth in the last six. Year over year, prices have increased by more than 42% and well above pre-pandemic prices. And although the organization says the housing stock is “critically low,” more than $ 2.3 billion was spent on housing in the Austin area in May alone. And supply is struggling to keep up with demand – in May, the monthly housing stock had less than a month of inventory, meaning only enough homes to saturate the market for two weeks. There were 4,413 registrations that month; but there were also 4,355 houses awaiting sale. And as of June 29, ABoR had only 1,116 listed homes.
As it stands, the average time a home spends on the market is only 15 days. A year ago, it was two months. And this is the average – a desirable house will probably be torn down much more quickly. “There are times when an offer deadline is Sunday or Monday after it’s listed during the week, so you think you’ve got the whole weekend to see it,” says Richard. “But sellers can get a great deal and decide to take it before the deadline – and now your customers who expected to see it on Sunday have missed it.” Richard estimates that an average home still receives five to 20 bids over that truncated window, and tells the story of a home in Brushy Creek – a pleasant enough neighborhood near Cedar Park, but hardly Williamsburg in the era of girls in terms of trend or desirability – receive 96 offers in one weekend. “Completely crazy,” he said.
And that only counts properties on the open market. Private sales, which typically involve high-end homes, don’t fit into these numbers at all. This includes homes sold directly by builders, who are not required to report their numbers to the board of realtors, according to ABoR president Susan Horton. She cites a much-talked-about house on Lake Austin popular with the ultra-rich that recently sold for around $ 39 million to an unknown owner, possibly a record for the city. Which means these numbers probably underestimate just how frenetic the market really is.
All of these facts and figures may fade away, but the anecdotes conveyed on children’s birthdays and backyard barbecues help to clarify the picture. (And it doesn’t take long before a conversation turns to real estate these days.) Take a couple’s in Mueller, a planned development with homes, condos, and multi-family units, all of it. on the grounds of the old city airport. This couple bought a two-story, three-bedroom, three-bathroom home for $ 776,000. Then they divorced. Less than eight months later, after barely touching the spot, they sold it for almost $ 1 million, $ 200,000 more than they had originally paid for.
“I write 20 to 30 offers a week,” says Horton, “and I could get one accepted. It’s incredible. This is amazing. She mentions a house in the neighboring mansion that has been on the market for 48 days – basically unheard of yet, and a sign that the house has ‘some problems,’ as Horton puts it, citing a roof of 19 years old as just an example. It was listed at $ 345,000; Horton’s client made an offer “in the 300s.” Someone outbid them. “They probably got 375 or close to $ 400,000 for Someone’s going to come in and do all of that work – put a $ 10,000 or $ 15,000 roof on it, put in a new air conditioning system, floor covering and paint – and they’re going to have another 20,000. $ or $ 30,000 invested in there, on top of what they have already paid.
So what is Austin in particular fueling such an extreme situation? Sure, home prices are on the rise across the country, but nowhere do you see the kind of month-over-month increase that Austin does, let alone the mass delirium of buyers forgoing inspections and other traditional guarantees. It’s not a matter of geography – unlike other hot markets, which are limited by being an island or sitting on a bay, Austin could stretch endlessly in any direction. , with plenty of accommodation for everyone. It’s not culture either – yes, Austin is the self-proclaimed live music capital of the world, and its progressive politics have earned it the memorable nickname “Blueberry in a Bowl of Tomato Soup” from famed writer Rick. Perry. (Plus, being in Texas, you get the best of both worlds – a welcoming culture with zero income tax.) But then again, Nashville might make the same claims, and the market has nothing to do with it. the one here.
The flood of technicians that regularly descends on the city is certainly one of them. Dell was already a major player (as were the so-called Dellionaires who populated the city’s wealthier neighborhoods). For more than two decades, South by Southwest Interactive has attracted many budding startups and entrepreneurs who have never left – it’s not for nothing that Austin earned the nickname Silicon Hills. Still, everything has accelerated over the past year: Oracle is moving its headquarters here, Tesla is building a gigafactory, and Apple is also building a huge campus. Even the military is getting there, with the US Army Futures Command headquarters in downtown Austin, a few blocks from the Google offices.
As with everything else, COVID has blurred things even further. “Before the pandemic,” says Horton, “our market was very stable and we were in good shape,” she says. “There was enough for all realtors, and realtors were making good sales, and life was happy for everyone.” When coronavirus restrictions hit, however, realtors were forced by shelter-in-place orders, limiting their ability to show homes and sell homes. The market has stopped.
Horton identifies three types of people who suddenly wanted to buy a house: families who felt parked in their current home; millennials who saved money by living with their parents or in an apartment; expats from California and beyond looking for a desirable but (relatively) affordable place to live, in a state where, again, no income tax “And with that, the money has come with” , she says. Buyers, especially out-of-state buyers, “saw the value of a home based on where it came from, and they were more than willing to pay the difference. And so, the auction frenzy began.
Overall, demand quickly outstripped supply, leading to charts like Zillow’s Market Snapshot for Austin and the adjacent Round Rock suburb: a steady progression for eight years, followed by a rapid stick-style hockey rise for this year and next. Zillow projects the median home price to double what it was in March 2019 by May 2022; if anything, that sounds conservative.
Anyone who has spent time in Manhattan or the Bay Area knows the rest of the story: The non-rich were effectively excluded from Austin – the Department of Housing and Urban Development puts the national median household income at $ 79,000. Based on traditional guidelines such as budgeting 28% of your income for mortgage payments or buying a home worth two to two and a half times your annual salary, this means the average family can afford a home between around $ 150,000 and $ 275,000 – barely half the median selling price of a home in Austin right now. Calculate the numbers however you want, and the result is the same: The average American family cannot buy a house in Austin. This includes the area public school teachers, which starts at $ 51,000 and peaks in the 1960s. “The days of the $ 250,000 single-family homes in Austin are over,” says Vaike O’Grady, regional director of the market research firm of Zonda accommodation. Or, like Texas monthly Editor-in-chief Forrest Wilder pointed out on Twitter: “People in the timeline continue to say, understandably, that this trend is not sustainable. I get it, but check the median home value in San Francisco: it’s $ 1.8 million. Austin has a ways to go to get there, but is there no reason why it shouldn’t happen? “
Right now, barring the unforeseen, it’s hard to imagine anything that would chill the market. These Oracle, Apple and Tesla employees have yet to arrive. (The city already has a low unemployment rate, so it seems unlikely that it will provide all the necessary workers.) In 2020, the city saw around 20,000 new homes built, enough to rank fifth in the country, but not enough to keep pace with the influx of newcomers.
Yet according to Zonda, in the first quarter of this year, 6,664 new homes were built, an annual rate of 27,000 homes. And O’Grady notes a few other encouraging factors: timber prices are stabilizing, more than 18,000 future lots are under development (7,000 more than last spring) and the city’s notoriously low licensing process. will benefit from the 40 or so new hires approved. by the city council. That said, she also notes that overwhelmed builders are still limiting their capacity – which she likens to pushing “watermelon through a pipe” – and even a modest increase in supply will not be enough to meet demand. After all, the city grew by 21,223 in 2020, according to the Austin Department of Housing and Planning, and is expected to grow by almost the same amount in 2021. (These numbers don’t include the surrounding metropolitan area.) That’s less growth than the mid-10s peak, but represents a slight increase from the previous two years.
All of this to say that soon, $ 2.6 million for a house in Texas without air conditioning might seem like a good deal.