Market Stats:
Population Growth Rate: 2.5%
Annual Job Growth: 3.6%
No. 1 on Forbes’ Best Buy Cities to Invest in Housing in 2015
No. 2 on Milken Institute’s 2014 Best-Performing Cities Index
No. 2 on Forbes’ Fastest-Growing Cities 2015
AUSTIN, TEXAS
Its vibrant live music scene, strong network of local businesses, and recent emergence as a top “foodie” destination have helped make Austin one of the nation’s fastest-growing cities, especially among young people drawn to the city’s proudly eccentric culture. With that booming population, low unemployment, and a diverse economy, Austin will be an ideal new-home market in coming years.
The positive job growth Austin has for the past five years is likely to continue in 2015: A Marcus & Millichap report predicts that Austin will lead the nation by adding 36,000 jobs this year, including robust growth in the leisure and hospitality sectors. And the city’s tech hub—home to major players like Dell, IBM, and National Instruments as well as numerous start-ups and a growing gaming industry—is a steady draw.
The region’s appeal to millennials and significant rent increases are surging demand from first-time buyers, says Eldon Rude, principal of Austin-based 360 Real Estate Analytics. He names entry-level housing the primary area of need, as most of the new stock has been in the move-up price range. That’s also the market where builders will find the greatest land availability, he adds. While some of the most desirable downtown locations face constricted lot supply, areas to Austin’s eastern edge are less crowded.
Barb Cooper, president of the Austin Board of Realtors, echoes the call for increased entry-level home production, noting that many of the market’s potential first-time buyers have been challenged by rising prices.
Those rising prices—the median cost of a new home climbed from $221,900 in 2012 to $258,500 in 2014—have led some to warn of a potential housing bubble, as Trulia named Austin the most overvalued market in its January Bubble Watch column.
Cooper disagrees with this assessment, noting that the speculative mindset typical of a housing bubble doesn’t apply here. “Austin’s market has been driven by population growth and job growth, which are the foundations of a healthy, sustainable market,” she says.
Rude concurs, adding that although Austin’s price increases
must be acknowledged, their pace should slow as new inventory helps supply
catch up to previously unmet demand. “It makes sense to anticipate that the
increase of pricing that we see in 2015 will be less significant than the price
increases we’ve seen in the last three years.” — Laura McNulty
