Eric Bramlett has been a real estate agent in Central Texas for 18 years and said that since the end of the 2008 economic recession, the local housing market has consistently been strong following regular seasonal patterns and has remained relatively stable in total sales. and prices.
But something happened around the middle of 2020 that caused the market to take off, according to realtors and economists.
Due to the increase in teleworking brought on by the COVID-19 pandemic, they said, many employees now working remotely have moved to other more expensive cities, more tied to their commute to work. Locally, employees who use their home as a workspace have a different idea of their needs. As the unemployment rate hit double digits nationally, those who kept their jobs accumulated disposable income.
“We were the hottest market and basically dumped gas there,” Bramlett said.
Prior to July 2020, the median monthly home selling price in the Austin-Round Rock metropolitan area had never reached $ 350,000. It topped $ 400,000 in March 2021, then hit $ 465,000 in May, the most recent month data available from the Austin Board of Realtors. This is an increase of 27.4% from January.
“You don’t need to have a doctorate in economics to understand that if prices are rising faster than income and housing affordability is based on the relationship between income and price, then [homeownership is] less and less affordable, ”said James Gaines, research economist at the Texas Real Estate Center at Texas A&M University.
This frantic pace of price increases cannot last forever, said ABoR President Susan Horton. Eventually, she said she expects the price to return to a certain level of normalcy, although it may take years as supply catches up with demand.
“Builders cannot build [homes] fast enough to get us to where we need to be to deal with growth in the metro area, ”said Horton.
“Perfect storm” of construction challenges
Even though demand could stabilize after the pandemic as individuals begin to redefine their spending habits, increasing supply remains difficult for many builders.
Aaron Boenig is the co-chair of Brohn Homes, a developer that focuses on homes that fall in the price range for first-time homebuyers. The company builds in less expensive areas than Austin such as Georgetown and San Marcos, but Boenig said it is increasingly difficult to build at an average price, even in outlying areas.
Land prices are a factor that makes it harder for developers to build affordable homes, but Boenig said buying the land is only a challenge. Long waits for building permits, rising prices for materials, especially lumber, and labor shortages are also affecting developers. Boenig called it a “perfect storm” which restricts supply.
In the Austin subway in May, there was 0.5 months of inventory available, according to ABoR, a measure of the time it would take to sell all existing properties on the market. A balanced market, according to Gaines, has about five to seven months of inventory available.
“I think it’s unprecedented, the way builders sell homes, I’ve never seen anything like it in this industry,” Boenig said.
While Brohn Homes focuses on the outlying areas of Austin, Cody Carr’s family business, Carr Residential, has been building new homes in Austin since 2015. Carr said he has encountered many of the same challenges, including a the price of lumber has tripled since before the pandemic.
The company is targeting the $ 400,000 to $ 1 million range for the homes it builds, but Carr, who is also chairman of the Austin Infill Coalition, said it was becoming increasingly difficult to stay in that. fork. A home that Carr Residential could have built to sell in the high range of $ 300,000 about five years ago, he said, would cost $ 500,000 today.
“I am an Austinite. As an Austinite, it’s hard for me to see the price of housing go up so dramatically. My own friends and family are struggling to find a place to live, ”he said.
Alternatives to single-family families
Adrianne Craft, a licensed real estate broker with Keller Williams Realty, agreed that buyers really have a hard time finding housing.
“A year ago, I would say buyers could be a little more picky about the condition of a home,” said Craft. “A buyer may choose one house over another because it has no carpet or has white cabinets. … Whereas now buyers have to concede everything.
Craft added that every deal it negotiated this year has seen multiple offers where homes typically sell for between 10% and 20% of asking price. In addition to highlighting the current seller’s market, this is a situation that often does not favor first-time buyers, especially those looking for single-family homes, which make up the vast majority of homes on the home market. given moment, she said.
One solution that city officials in the Greater Austin area have been considering in recent years is to diversify the types of homes.
Dan Parolek, CEO of Opticos Design, a California-based company that helps collaborate on housing and community issues, has given numerous presentations to city officials in central Texas, from New Braunfels to Austin.
Parolek’s presentations focus on a concept called missing intermediate housing. This involves homes such as duplexes and townhouses to eight unit buildings. They are usually within walking distance, which means they are located near business centers or city centers with popular amenities.
These options, Parolek said, are more affordable for people, including first-time buyers, who can’t make cash offers to become homeowners.
“Every market, regardless of the size of the city, has been affected quite dramatically by the increase in costs,” Parolek said. “It has become more difficult for… some kind of entry-level household to buy houses. “
While Parolek agrees that single-family homes are the most abundant option for homebuyers, he said his research has shown that they aren’t necessarily the most popular option. He added that 60% of all housing across the country will have to run out of mid-range housing by 2040 in order to meet demand.
“I think there will always be a demand for single family homes [homes], but I think there is more and more a growing demand that is not being met for these types of missing intermediate housing, ”he said. “I’m not saying there isn’t a demand for single family homes, but historically that’s all we’ve provided, and the industry is struggling to adapt and evolve fast enough to respond to the request.”
Small towns are experiencing strong growth
When Robin Sheppard sold her 35-year-old Austin home in December, she said she didn’t expect her to be still looking for a home more than six months later.
Rising tax rates, heavy traffic, and rapid growth within Austin played a key role in Sheppard’s decision to leave the capital and settle in San Marcos. She would still be close enough to visit friends but in a less populated city, she said.
“I had lived in Houston for many years and moved from there to come to Austin because Austin was so much smaller and had a wonderful feel,” Sheppard said. “This is not the Austin I came from.”
Within 2.5 days of listing her home, Sheppard received seven offers and accepted an offer of $ 50,000 that exceeded demand and included a contingency that allowed her to live in her home rent-free for 30 days. after closing.
“I was like, ‘Wow, this is great; now I can go buy myself a house and I have some travel stuff left, “but it wasn’t like that,” Sheppard said.
By June, Sheppard had placed bids on more than six properties that met her requirements for secondary accommodation that she plans to rent cheaply to a friend. Although she offered $ 42,000 more than a request on a property, she was outbid each time.
Many homebuyers who plan to move to one of the smaller towns along the I-35 corridor expect to find more availability at a lower price than larger metropolitan areas, said Patricia Fernandez, president of the I-35. Four Rivers Association of Realtors 2021 Board of Directors. However, soaring demand and declining supply have made once affordable markets highly competitive.
“You can pick any city in that hallway, and it’s the same story,” Fernandez said, adding that buyers who qualified at one point for a home worth $ 350,000, for example, might have to bid for homes listed in the high end of $ 200,000 with the expectation of paying significantly more. “All this middle market [is] being eliminated from the playing field. “
As population growth in I-35 cities continues to outstrip supply and companies such as Amazon and Tesla invest in central Texas, Fernandez expects interest to increase in cities. east of the highway.
“[East] is the only direction you can go right now, because even with Waco it’s exactly the same market we have, ”Fernandez said.
Like many house hunters, Sheppard said that if needed, she would resort to renting in San Marcos if she couldn’t find permanent accommodation quickly.
“I feel like I’m homeless, you know; it’s just not pleasant, ”Sheppard said. “At the end of this month if I haven’t [a house], then I’ll rent something. … I’m not looking forward to it, but it will definitely be the next step. I cannot stay with other people indefinitely.