Looking Under the Hood of the Austin, Georgetown Real Estate Market

A few years ago, my husband’s friend eased his Boxster onto Portland International Raceway’s (PIR) racetrack apron – open racing night.  Soon surrounded by rice burners, the cocky drivers scrutinized the stock-looking Porsche.  “Hey, old man – here to race or check out the real racers?”  By evening’s end, Darrell beat them badly and gladly fleeced their pockets. 

For twelve months a Porsche custom car shop modified the Boxster.  Their instructions? “Do whatever you want, just do it so no one can tell.”  And on that summer night, no one bothered to look under the hood. 

As we approach the last lap of 2024, buyers and sellers alike ask, “What is happening?”  The answer may be as simple as, “Let’s lift the hood.”

2010 to 2022

In the decade between 2010 and 2020, no major metro grew faster than Austin. After one decade, one in three Austinites was new to the region. “Where are you from,” took on an international flavor.

Then the turbochargers kicked in.  During the work-from-home Pandemic, well-paid techies migrated to the live-music capital of the world.  Austin looked like a hotter-dryer California with lower taxes, cheaper homes, and a voracious jobs wanted welcome mat.  From 2020 to 2022, the fast-growing city morphed into the fastest with 120,000 new residents.

With the land rush, home prices rocketed.  A median-priced home accelerated 56% in value peaking at $539,900 in May of 2022.  According to Moody’s Analytics, Austin’s real estate was overvalued by 63.7 percent.  No one bothered to look under the hood as impervious FOMO gripped the final wave of desperate buyers. 

2022 to 2024

Then Austin’s housing market blew an engine, or so it seemed. A boom-bust cycle, a riches-to-rags story line surmised some. They cited examples like the following.  In early 2022, an investor started construction on a three-bedroom, single-family house with 1,494 square feet of livable space in East Austin. In June 2023, he listed the property for $899,000.  In August, he sold it for $499,000.  The staggering price reduction may be an outlier train wreck, but we know TV crews never show up for minor fender-benders. 

A less sensational stat comes from the Zillow Home Value Index.  As interest rates increased, home prices declined nationally by one percent.  In contrast, Austin dipped 10.2%. 

A Different Dashboard

But what if we examine Austin’s real estate market with different gauges?  What if 2024 is revealing an unfolding Austin real estate success story?  In reply, you might ask, “Ivy, are you feeling well?”  Yes, I am.  Let me explain. 

Gauge 1: If you purchased a home before 2020, you are principally wealthier today than you were before.

Gauge 2: Austin stands apart from other 2020 pandemic boomtowns.  Other Austin-like areas have not experienced a 10% correction.  Corrections are healthy for overall economic soundness.  Corrections allow municipalities to catch up on previous growth and prepare for what lies next.  For those who question this gauge, drive north on Ronald Reagan Blvd. Developers show no signs of slowing.

Gauge 3: As previously mentioned, no major city grew faster than Austin between 2010 and 2020 and construction could not keep pace.  Affordable Austin became pricey.  To address the need, builders invested significant sums in land acquisition.  The result?  Since 2020, the Austin/Georgetown new home inventory has increased by 76,000 units, an 8.34% increase.  Jason Lewris, a cofounder of Parcl Labs, a provider of real estate data and analytics, recently stated, “Considering the size of the Austin market, moving the stock of homes by nearly 10% is a colossal feat.  These are huge housing markets.  Austin wasn’t small in 2019.”

Gauge 4: Builders built and built and continue to build.  And now?  Hopeful buyers, who waited for prices to come down, are seeing a dip.  Again – this is healthy.  Companies do not want to relocate to places where workers cannot afford to live.  The Austin/Georgetown housing marking is cooling not cratering. The result?  More houses are for sale.  More sellers are cutting prices.

Source: Lance Lambert, ResiClub Analytics

Gauge 5: “I think Austin is going to be fine in the medium to long run,” says Jenny Schuetz, a housing policy analyst at the Brookings Institution.  “The fundamentals of Austin’s economy are great, and it’s going to continue to grow with jobs and population over time.  Austin should be a model for the rest of the country in terms of allowing builders to meet demand.”