On October 7th, Tesla announced they’re moving their headquarters to Austin. Shortly thereafter, housing inventory dropped to 0.99 months’ and the median price per square foot grew 5%. At the end of October, there were 16,114 new listings year-to-date. There were 15,665 new listings for the same period in 2020 and 16,314 in 2019. The number of new listings this year is ordinary. When our inventory gets choked out, it’s due to increased demand, not a lack of new listings.
Strong demand in the spring and October caused the average cost per square foot for the City of Austin to grow 31.5% in 2021. That’s more than three times the growth we saw for the year in 2020 (10.2%).
In January 2021, several major tech companies announced moves to Austin. For the following six months, inventory hung below 1 months’ supply. It caused the median price per square foot for housing to climb 20% during that period. The median price then peaked at $335/sq. ft. in June.
When strong demand drives down inventory, competing offers make prices surge. Demand let up in July and so did prices. From July through September, pending sales fell 21% as inventory grew above 1 months’ supply. The median cost per square foot fell 7% during that period. Then, last month pending sales jumped 15% which dragged the number of active listings down 16%. We may see more scattered spikes in demand like this now that Austin is tied to the first trillion dollar junk-rated company.
Beyond the shift in demand, condo prices also took an interesting turn in October. In general, single-family homes appreciate faster than condos. But when the average sales price for Austin homes grew from $681K to $697K this October, most of that growth came from condos.
The City of Austin is doling out density bonuses for Downtown high rises while their plans to increase density remain held up in court. The median sale price for condos saw a 14% lift from $385K in September to $440K in October. Meanwhile, the luxury condo market had an extreme pull on the average condo sales price. The average jumped 21% from $484K to $585K in October. These developments came on the heels of Texas’s homeless camping ban and increasing Austin traffic.
Austin has been one of the fastest growing major metros for a decade, but now the city’s fundamentals are changing. It’s time for Austin homeowners to start planning for how the real estate market has transformed their net worth. In January 2019, the average home sales price was $448K. October’s average sales price was $697K. It’s worth considering how best to capitalize on $249K of equity. That’s especially true because $250K of capital gains can be realized tax free on the sale of your primary residence ($500K if married).
The average Austin homeowner would add $28K to their net worth in 2022 by realizing tax-free gains on their home’s appreciation and reinvesting it. That picture looks substantially more enticing in premium areas like the 78701, 78703 and 78704 zip codes. Since we started offering custom pro-forma and real estate finance reports for our clients, it has become one of our most popular services. Stay tuned for an upcoming special report where we’ll break down the most profitable strategies for using the value of your home to grow your wealth. Or send us a message to receive a custom report for your property and goals.
