High-end homes planted in ordinary neighborhoods, new subdivisions sold out before construction, and tower cranes erecting gorgeous luxury condominiums in downtown Austin is the new normal. For an Austinite, trying to comprehend the immense surge in demand of the Austin real estate market is both perplexing and exciting. Not too long ago, I remember that Slaughter Lane was deemed the far edge of town and cruising by pastures and barns on the main streets of Austin was not out of the ordinary. A fond memory I wish could have lasted a little longer.
Austin’s highly acclaimed reputation as the best-in-class city of literally everything under the sun has a changed in a way that may be too costly. Skyrocketing home sales and hot commodity real estate matched with affluent newcomers wanting to move to Austin has left many local buyers feeling discouraged. Austinites ready to cash in on their home’s surging appreciation often find themselves in gridlock if they are looking to stay in the area.
A Little Bit of History
Why Austin? Well, for starters, the city has long been hailed prime picking for its unique culture, hilly scenic topography, parks and green spaces, sunny days, collegiate talent, and one-of-a-kind indie influenced festivals like SXSW. But, most attractive of all, Austin achieved its goal as being a business-friendly city with a STRONG ‘keep-it-local’ vibe, which is why my husband and I operate our music school here. However, the biggest draw to the city is its tech hub status pioneered by the early endeavors of Vic Mathias, the architect and Godfather of Austin.
From 1956 to 1982, President Mathias of the Austin Chamber of Commerce managed multiple campaigns and outsourced efforts with local media and organizations to see his vision through. In addition, he solicited the help of faculty at the University of Texas (UT) to entice company leaders nation-wide, namely electronic and science-based businesses, to come to Austin. Their diligence soon paid off snagging Tracor in 1962, IBM in 1967, and Texas Instruments two years later. Once a city where most graduates from UT left in droves for better jobs elsewhere, Austin is now dubbed ‘Silicon Hills’ for its many tech companies and a favorable location for graduates and seasoned talent across the country.
Where are most home buyers coming from?
Now that the secret is out, and Austin is included in yet another top city publication without even trying, who the heck is buying in an already expensive housing market? Apparently, people living in cities where housing is even more expensive according to the real estate company, Redfin. As businesses adapted to employees working remotely during the pandemic, people capitalized on ways to live where they wanted. In Q1 of 2021, Austin was the leading destination for home buyers from the Bay Area at 23.5%.
Not surprising, right? Austin has attracted Californians and the like for years. However, with the addition of more big tech companies and Tesla moving to Austin the demand to relocate here has been exacerbated with deep pocket buyers.
According to an analysis of average maximum list-price filters for homes set by Redfin.com users, the average out-of-towner has a whopping budget of about $850,000. This is 32% more than the Austin local, which is under $600,000. The demand for houses has created a critical inventory shortage that real estate agent and broker, Alyse Black of the Heart of Austin Homes Team, knows all too well.
Alyse and I arranged to meet for a two-part meeting to discuss the real estate issue in Austin. Our initial meeting was at one of her listings, a luxury condominium high-rise at Seaholm Residences located downtown. To capture the moment I enlisted, Noelle, a highly talented family and branding lifestyle photographer, who helped select the location. As we made our way to the patio on the 10th floor, I imagined the type of person that this stunning facility would attract.
The condo’s secured lobby with concierge and seating felt like the entryway of a five-star boutique hotel and the location’s walkability to fine dining and shopping is an attractive convenience. Large windows framing lovely scenic views of the Austin skyline made the building feel airy and bright. Certainly, a person that enjoys the finer things in life would seek residence at Seaholm as the smallest unit, a 558 sqft studio, costs $395k.
But what about the rest of us? The people that have lived here for years and still have strong ties to this city. For generations, the top wealth generating asset for most Americans has been via real estate, but lately it’s becoming harder for middle class America to buy a home. Alyse explains that as hopeless as it seems there may still be hope.
Q. Is it still possible for a local home buyer to purchase a home in Austin?
A. “There is a glimmer of hope for buyers” due to recent buyer burn-out. People have decided to take a break and out-of-towners are opting to leave Austin empty-handed. Median home sales have recently slowed down to increases of about 1-2% a month instead of a staggering 5-10%.
Q. Will a credit score affect the home buying process?
A. Credit scores directly impact mortgage interest rates. A difference of just 100 points could cost, or save, you thousands. Most lenders want to see at least a credit score of at least 620. Don’t be mislead by Credit Karma stats, “which tend to be off by up to 40 points.” Home lenders tend to factor your finances more conservatively when dealing with transactions of several hundred thousand dollars. If you’re looking to buy a home within a year or so, be proactive in your day-to-day budgeting and try to keep your credit card balances under 30% of the maximum amount allowed. Example: If your credit card limit is $1000, spend $300 or less.
Q. Are there any affordable homes in Austin or the surrounding areas?
A. Just outside of Austin in Manor, Texas “you can still buy a home sub $300k”. There are also affordable hidden gem neighborhoods in zip codes 78744, 78741, and 78721.
Q. Any tips for buyers wanting to buy a home, but need to sell your home first?
A. There are home financing companies that provide services to buyers to help them pose as cash buyers and/or buy a desired home upfront BEFORE selling their home. According to Homeward, cash offers are four times more likely to beat financed bids. Alyse has used Homeward numerous times with her clients and recommends buyers to use them to stay competitive. Alternatively, if a buyer qualifies they can take out a Home Equity Line of Credit (HELOC) on an existing home and apply it to the purchase of a new home.
Q. Is a pre-approval letter still a contender in a competitive real estate market or is a cash offer still considered unrivaled?
A. In general, there are 3 things that make a cash offer less appealing if you have financing:
- Waiving financing contingency. In a bidding war a contingency may hurt your chances of locking in a sale. The appraisal may come back lower than expected and the bank won’t finance over that amount. Be prepared to compensate additional funds on top of the down payment.
- Waiving appraisal and/or your right to a home inspection. Alyse hates to advocate this, but has seen this work. If a seller knows that you aren’t going to drop out due to the results of an appraisal this could help keep you in the running.
- Fast close guarantee. Closing quickly on a home sale in 21 days or less can be very attractive selling point. Some buyers have opted to rent Airbnbs or short-term rentals to prepare for a fast turn-around sale. Normally appraisals and inspections can take days or perhaps a week to schedule. Make sure your realtor is connected with a solid team of professionals that won’t loose the sale.
Q. What do you foresee the housing market will be like this Fall or Spring 2022?
A. In 2020, people were not comfortable selling their homes leaving under 300 homes available for sale in Austin. With home scarcity, the flexibility of working-from-home and homeschool, and the high demand of people wanting to move to Austin, the price of homes skyrocketed.
Alyse believes that as people become more comfortable in public spaces and businesses and schools continue to reopen the housing market will return to a cycle that’s more attainable for buyers.
Need More Information?
Alyse Black has a wealth of knowledge regarding real estate and loves educating buyers and sellers. The topic of housing in Austin couldn’t be addressed in one sitting. For more information and a deeper understanding of the Austin market, I highly recommend you watch my one-on-one interview.