Austin, TX Real Estate Market Trends & Analysis [Updated 2021]

Jump To Another Year In The Austin Real Estate Market:

The Austin real estate market has become one of the most active real estate markets in all of Texas, if not the entire country. With a burgeoning technology industry, relatively low housing prices, and plenty of demand, real estate in Austin has become a bit of a commodity. The culmination of several indicators, in fact, has made local real estate more desirable than ever before.

It should be noted, however, that the presence of COVID-19 has impacted several major market indicators. In particular, home prices have increased more in Austin than just about anywhere else in the country. The latest round of appreciation is largely due to a unique convergence between demand, low borrowing costs, increased savings, and an inherent lack of supply. These factors have made real estate in Austin very attractive, and investors who know what to do with it will find the rest of 2021 to be a great year to invest.

The Texas city still has plenty of potential, which begs the question: Is Austin a good place to invest in real estate? The simple answer is yes. Now may be a great time to invest locally, as the Coronavirus appears to have created a window of opportunity in a hot housing market.

Austin Real Estate Market 2021 Overview

  • Median Home Value: $567,723

  • Median List Price: $484,917

  • 1-Year Appreciation Rate: 35.7%

  • Median Home Value (1-Year Forecast): 37.1%

  • Weeks Of Supply: 6.8 (-2.1 year over year)

  • New Listings: 1,163 (+22.2% year over year)

  • Active Listings: 5,508 (-23.12% year over year)

  • Homes Sold: 816 (+0.1% year over year)

  • Median Days On Market: 23.7 (+3.20 year over year)

  • Median Rent: $1,554 (+9.3% year over year)

  • Rental Vacancy Rate: 11.0% (+2.3% year over year)

  • Price-To-Rent Ratio: 30.44

  • Delinquency Rate: 6.0% (-1.8% year over year)

  • Unemployment Rate: 4.2% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 978,908 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $71,576 (latest estimate by the U.S. Census Bureau)

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Austin housing market

2021 Austin Real Estate Investing

With median home values up approximately 35.7% in the last year, and expected to continue rising, real estate in Austin is still attractive. Despite the latest bout of appreciation, which has seen home prices increase as much as 62.0% from their pre-recession peaks, investors are still coming out in droves to participate in the market.

The Austin real estate investing community is the beneficiary of increasing demand from first-time buyers. Due to the city’s growing technology industry and increasing job opportunities, millennials have made the city a priority for their home buying efforts. Consequently, it is doing its best to attract new homeowners. According to a study released by Trulia, more than half of the neighborhoods have shifted in favor of buyers in the last year. There’s no doubt about it: more people are hoping to call Austin home than ever before. What does that mean for investors? What can real estate investors do with the current market?

More buyers have increased competition and prices to a point where gross flipping profit margins are starting to grow slim. In fact, supply and demand have shifted the most viable exit strategy for investors to use. While rehabbing and flipping have served investors well over the course of the recovery, it appears today’s market leans more heavily in favor of long-term investors. That’s not to say there aren’t profits to be made flipping houses in Austin (there absolutely are), but rather that today’s economic indicators are more suited for rental property owners.

Real estate still has room for flippers to prosper. However, nearly a decade’s worth of appreciation has made long-term strategies more attractive. Building a rental property portfolio is more attractive now than ever before, and the presence of the Coronavirus could actually work to investors’ benefit.

Here are just a few reasons investors should look into building their own rental portfolio due to the Coronavirus:

  • Interest rates on traditional loans are historically low

  • Years of cash flow can easily justify today’s higher acquisition costs

  • The price-to-rent ratio suggests it’s better to rent than buy

The Coronavirus has made sure interest rates will remain low for the foreseeable future. In an attempt to buoy the economy, the Federal Reserve has announced interest rates will remain low for at least the next couple of years. As of June, the average rate on a 30-year fixed-rate loan was 2.98%, according to Freddie Mac. The lower borrowing costs are helping to offset today’s higher prices. As a result, local investors are finding it easier to justify today’s higher acquisition costs. Additionally, lower borrowing costs simultaneously reduce monthly mortgage obligations and increase cash flow from properties placed in operation.

With a price-to-rent ratio above 30, fundamentals lean heavily in favor of renting. More specifically, it is currently more affordable to rent than to buy. Years of appreciation have driven up prices so much that renting is actually considered the cheaper alternative. As a result, rental property owners should see increased demand for their units. The demand should allow the same landlords to increase prices. More importantly, it doesn’t look like rental demand will drop anytime soon. With only 6.8 weeks of supply on the books, even people who want to buy will be forced to continue renting because they can’t find a home. The lack of available housing will ultimately drive more people to rent.

Is Austin a good place to buy a rental property? Again, the local market is currently a hotbed for investor activity. Any of today’s most popular exit strategies are in play. However, rapidly increasing home prices, low interest rates, high rental demand, and years of potential appreciation should place buying rental property at the top of every investor’s list.

2021 Foreclosure Statistics In Austin

According to Attom Data Solutions’ Q1 2021 U.S. Foreclosure Market Report, a total of 33,699 U.S. properties received a foreclosure filing (default notices, scheduled auctions, or bank repossessions) in the first quarter of this year. According to the latest research, nationwide foreclosures are up 9.0% from the last quarter of 2020 but down 78.0% from this time last year.

“The foreclosure moratorium on government-backed loans has virtually stopped foreclosure activity over the past year,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company. “But mortgage servicers have been able to begin foreclosure actions on vacant and abandoned properties, which benefits neighborhoods and communities. So it’s likely that these foreclosures are causing the slight uptick we’ve seen over the past few months.”

Only three states saw more repossessions than Texas: Florida, Illinois, and California. “Those states that had the greatest number of REOs in Q1 2021 were Florida (945 REOs); Illinois (610 REOs); California (414 REOs); Texas (370 REOs); and Arizona (330 REOs),” according to the Foreclosure Market Report.

As one of the most populous cities in Texas, Austin is most likely a large reason for the state’s influx of foreclosures. In fact, with forbearance programs lifted, there’s a good chance Austin will continue to see foreclosures rise over the course of 2021. Therefore, the whole Austin real estate investing community needs to position itself to help distressed homeowners avoid foreclosures and bankruptcy.

2021 Median Home Prices In Austin

Not unlike most markets across the country, Austin real estate bottomed out around the first quarter of 2012. At the time (January 2012), the median home value reached as low as $225,000. It was also at that time that local real estate would start to appreciate at a historic pace. Due largely to a strengthening economy, increasing optimism, and a lack of available inventory, home prices have increased for the better part of a decade. In the time real estate bottomed out to today, the city’s median home value has appreciated 145.7%. After nine consecutive years of appreciation, the median home value in Austin is now $562,723.

Here’s a list of the neighborhoods that have appreciated the most (according to NeighborhoodScout):

  • Huston-Tillotson U / E 11Th St

  • Govalle Ave / Webberville Rd

  • Nile St / N Pleasant Valley Rd

  • Pershing

  • S Pleasant Valley Rd / S Lakeshore Blvd

  • E Riverside Dr / Montopolis Dr

  • E Cesar Chavez St / 1st St E

  • E Martin Luther King Jr Blvd / Poquito St

  • E 12Th St / Chicon St

  • Rogge Ln / Wellington Dr

Whether or not these are the best neighborhoods in Austin to invest in remains to be seen, but there is no denying the progress they have made in a relatively short period of time.

It is worth noting that price forecasts have been adjusted due to the recent Coronavirus outbreak. While experts predicted prices would increase by 4.0% in 2020, expectations were too low. Austin’s rate of appreciation reached double digits in 2020, and there’s no reason to think rates won’t go higher in 2021. In the last year alone, the median home value in Austin has increased 35.7%. Moving forward, a lack of inventory will continue driving prices up. With a mere 6.8 weeks of supply, there isn’t enough supply to meet demand, enabling homeowners to increase prices accordingly. In the next 12 months, supply and demand constraints could increase prices by an additional 37.1%.

Impact Of COVID-19 On The Austin Real Estate Market

The Coronavirus has impacted the whole of the Austin real estate investing community. In a matter of a few months, the pandemic shifted fundamentals in favor of long-term investors. While years of appreciation were already starting to eat into profit margins for rehabbers, historically low interest rates and demand for rental units have made the prospect of becoming a landlord more attractive. However, it is worth noting that the impact of COVID-19 on the Austin real estate market extends beyond local investors.

Outside of the Austin real estate investing community, traditional buyers and sellers have been given several reasons to actively participate in the market. Buyers have entered the market in droves in an attempt to take advantage of today’s low interest rates. Today’s interest rates are the direct result of the Coronavirus, as the Fed has promised to keep them low to spark activity within the national housing sector. At approximately 2.81%, it’s never been cheaper to borrow money, and more people will be eager to take advantage of institutional capital. Essentially, ready and willing buyers don’t want to leave money on the table.

If that wasn’t enough, demand resulting from the attractive interest rates is likely to increase prices for the foreseeable future. Not unlike today’s interest rates, the threat of appreciation has forced many people to act as fast as possible. People want to purchase before prices rise higher than they already are, which brings us to my next point: homeowners.

The market left in the wake of the Coronavirus is unequivocally a seller’s market. The only reason buyers are so active, in fact, is because they want to purchase before the market leans even more heavily in favor of sellers. Today, sellers have many things working in their favor, not the least of which include supply, demand, and pricing. If for nothing else, plenty of people are looking to buy, but there isn’t enough inventory to meet demand. Inventory levels were low before the pandemic, and builders haven’t been able to add as much to supply as they would have like to. Shutdowns and quarantines prevented many builders from working for months, which didn’t help detract from the shortage of available homes. As a result, supply is still constricted, allowing homeowners to demand a premium.

Austin Real Estate Market: 2020 Summary

  • Median Home Value: $401,999

  • 1-Year Appreciation Rate: +5.4%

  • Median Home Value (1-Year Forecast): -0.7%

  • Average Days On Market (RedFin): 11

  • Median Rent Price: $1,750

  • Price-To-Rent Ratio: 19.14

  • Austin-Round Rock Unemployment Rate: 7.5% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 964,254 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $67,462 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 8.38%

  • Foreclosure Rate: 1 in every 7,475 (1.3%)

Austin Real Estate Investing 2020

Austin housing market trends looked a lot like overarching U.S. trends in 2020. In particular, the pandemic created tailwinds that greatly influenced how things would transpire over the course of the year. At the start of 2020, fear and uncertainty brought about by the arrival of the Coronavirus caused the entire housing sector to take a step back. Prospective buyers were scared to tour strangers’ homes, and sellers pulled their listings from the market because of the threat of dropping home values. In a matter of months, the highly active Austin housing market became stagnant. Fortunately, the setback was only temporary, and the disruption actually turned out to be a catalyst for activity.

To stimulate the market, the Fed kept interest rates low. With lower borrowing costs, more people were expected to get off the fence and try their hand at the local market. Low rates, combined with increased savings (due to lockdown orders across the country), spurred a great deal of activity, which largely shaped Austin housing market trends. Most notably, rising home prices caused local investors to rethink their strategies. While flipping was once the most popular exit strategy, the new environment (low rates, high prices, and demand) catered to long-term exit strategies. As a result, more investors turned to rental properties in 2020.

Austin Real Estate Market: 2019 Summary

  • Median Home Value: $368,600

  • 1-Year Appreciation Rate: +6.5%

  • Median Home Value (1-Year Forecast): +3.4%

  • Median Rent Price: $1,700

  • Average Days On Market (Zillow): 49

Austin Real Estate Investing 2019

According to Austin real estate news, median home values appreciated faster than the national average at the time (March 2018 through April 2019), 6.5% and 6.1%, respectively. After a year of higher-than-average increases, the median home value in the Austin housing market sat comfortably at $368,600. Despite increases, however, prices were still expected to grow at a fast rate. According to Zillow, prices were expected to increase by as much as 3.4% in one year, which served as a testament to the city’s potential.

With median home values up approximately 6.5% from the previous year and expected to reach as high as $381,000 by 2020, the local appreciation rate was actually underplayed. Due to the city’s growing technology industry and increasing job opportunities, millennials have made Austin a popular destination for first-time homebuyers, driving prices up faster than expected. Meanwhile, price increases haven’t scared anyone away, as buyers continue to show up in droves to this day.

The Austin real estate market, not unlike the majority of markets across the country, saw its lack of available inventory drive up prices in 2019. However, real estate in Austin remained in high demand. Thanks to a thriving economy and booming tech industry, demand has yet to taper. As a result, real estate investors can still expect a lot from the local market.

Austin Real Estate Market: 2016 Summary

  • Median Home Price: $289,100

  • 1-Year Appreciation Rate: 6.7%

  • 3-Year Appreciation Rate: 25.2%

  • Unemployment Rate: 3.4%

  • 1-Year Job Growth Rate: 3.9%

  • Population: 885,400

  • Median Household Income: $52,431

Austin Real Estate Investing 2016

Investors and homeowners were treated to a blend of rising home prices, expanding appreciation rates, and affordability in the first half of 2016, as all three outpaced the national average. Home prices were up year-over-year, as appreciation continued its upward trend. Gains in home prices over the previous three years extended the trend of positive price growth after the recession. For all intents and purposes, Austin real estate news was great for everyone partaking in the market at the time.

The 2016 Austin real estate market was a hotbed for investor activity. Home prices and total equity gains were highly in favor of owners and investors at the time. Total equity gains were far above the national average. The median home price was $289,100 during the second quarter, compared to the national average of $239,167. As a result, total equity gains surpassed the national average for at least seven years.

Positive appreciation trends were thanks to the city’s expanding economy. Along with unemployment improving (lower than the national average at the time), employment rates continued to rise through 2016. Job growth during the second quarter reached 3.9%, compared to the 1.9% exhibited by the rest of the country. Employment held up its end of the deal and continued its upward trend. As a result, the 2016 market set the foundation for today’s most attractive markets.

Austin Real Estate Market: 2015 Summary

From a historical perspective, major Texas metros have remained relatively immune to the fluctuations of the economy. While not entirely void of price changes, cities like Austin traditionally remained consistent. However, all of that changed with the onset of the downturn. For the better part of a decade, the local real estate market outpaced nearly every major metro across the country, and 2015 was (at the time) the culmination of years of positive growth. For all intents and purposes, Austin became one of the hottest real estate markets in the country five years ago.

The median home price in the area was about $246,000 in 2015. As a comparison, the average home in the United States was priced around $216,567. In the year leading up to 2015, homes appreciated about 9.3%, whereas the national average was just 4.7%.

The economy, as a whole, was thriving in 2015. At 4.2%, the city’s unemployment rate was well below the national average of 5.9%. As a result, the Austin housing market could compound off the previous success and become what it is today: a powerhouse in the investing world.

Austin County Map:

Map of Austin neighborhoods

Not unlike most markets across the country, Austin has seen its lack of available inventory drive up prices in a relatively short period of time. However, real estate in Austin remains in high demand. Thanks, in large part, to a thriving economy and booming tech industry, demand doesn’t appear as if it will taper off anytime soon. As a result, Austin real estate investors can expect the city to weather the current Coronavirus storm and come out on the other end stronger.

Have you thought about investing in the Austin real estate market? If so, what are you waiting for? We would love to know your thoughts on real estate in the comments below:

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