Active listings in Austin swelled by nearly 150% May 2021-2022 as the region begins to recover from the "dangerously low" housing inventory of the pandemic housing frenzy, according to the latest Austin Board of Realtors report.
For the first time since September 2020, the metro saw 1.2 months of available inventory, up from a critically low 0.4 months in early 2020. Still, median home prices continued their ascent and increased almost 20% year-over-year to tie April's record of $550,000.
Austin's inventory rose by 0.7 months form May 2021-2022. (Austin Board of Realtors)
While Austin's housing market has seen some signs of decline—residential home sales declined 6.7% year-over-year—available homes still spent 15 days on the market, a day less than May 2021. Texas A&M University research economist Adam Perdue said that while a crash is not imminent, prices should begin to stabilize as the number of available homes continues to increase.
“The Austin region saw dangerously low levels of inventory, as low as 0.4 months of inventory in January 2021, so this slight increase in inventory and active listings point to the market beginning to normalize," Perdue said. "While year-over-year price increases will continue to remain high, we project them to fall slightly lower than the long-term trend we’ve monitored over the past two years.”
Still, Perdue said that Austin's "bubble" isn't likely to burst anytime soon.
“The Austin housing market has experienced a multitude of factors that have influenced its current state, one of those being the high influx of companies and individuals migrating to the area both from within Texas and out-of-state, which has contributed to a strong and diverse economy attractive to people seeking opportunity," Perdue said. "These migrations of individuals and companies will continue to happen, especially as Austin is relatively affordable compared to some out-of-state markets when it comes to owning a home and operating a business."
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Travis County landlords are facing sharp increases in inflation-driven costs this year, leaving rental property owners with unappealing choices: absorbing these expenses or passing some of that on to their already-strained tenants.
A record 167,869 property owners filed protests against their appraisal notices, including rental property owner Matt Matza. Matza is doubly affected by the city's latest valuations: he's president of rental home financing company Visio Lending and owns two properties in the metro himself.
Unlike other homeowners, landlords are not eligible for property tax discounts through the Homestead Act. One-bedroom rents are up 112% this year, even as some landlords, like Matza, charge below market value.
“A lot of renters today are probably at their threshold of what they can afford as it is, and having any sort of incremental price increase beyond 3-5%,” Matza said. “And I think most landlords are probably pushing rents much further than that to accommodate the increase in expense load that landlords are experiencing.”
Matt Matza rents out properties in Austin. (Matt Matza)
For his high-demand downtown property, Matza said he’s shifted to short-term leases, attracting the large pool of migrating remote workers and new arrivals flocking to the city. He’s also working to keep rent down for his single-family property that’s been home to the same family for two years.
“For a lot of good landlords, and I'd like to think of myself as one, you want to have low turn-and-churn,” Matza said. “We're trying to help with the housing systems in Austin while making an appropriate return on our investment. You need to be cognizant of what your tenant can pay candidly… if your property taxes went up 40%, you can't push all that through to your tenant.”
Matza said there’s some “natural tension” that could arise between landlord and tenant as prices rise. But instead of losing tenants who can’t afford higher rent, he said many are choosing to stay: renewal rent increases grew at only one-third the rate of new leases in 2021, and many potential homeowners have been priced out of buying a house.
“Every year, it becomes more and more difficult for (my tenants) to buy a house,” Matza said. “And so they’ve stayed in there, and we’ve moved rents on them but less than probably what the market is… because it’s a great family and we’d like to keep them.”
The Austin metro's median home prices have risen hand-in-hand with rent and rose by nearly $100,000 in just a year. Matza said he’s seen clients take advantage of their home’s sky-high valuations and sell their properties, especially as rental property profit margins get slimmer.
“Your return on your investment may be lower than it was in the past, and that's due to housing prices being higher and obviously part of that is their tax burden on those," Matza said. "And some of the larger single-family real estate investment trusts... they're not really buying at the same pace they were buying over the last 2-5 years because the entry point has gone up so much that the rental yield isn't as high as it was in the past."
With more single- and multi-family properties cropping up in Austin than anywhere else, the city's inventory is slowly creeping back up, though it's far from healthy. If he had a crystal ball, Matza said he would expect to see a bit of a post-pandemic slowdown that could provide a welcome relief to strained landlords and renters alike.
"It's just hard to keep going up 30 or 40% and expect that to continue," Matza said. "I wouldn't anticipate a broad negative home price depreciation in Austin per se, because there's still going to be more people moving here than leaving here, but I think (the market) was just turbocharged through remote work and the pandemic and people coming here for tax reasons from the coasts."
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More homes of all shapes and sizes are cropping up in Austin than in any other U.S. city.
According to a Redfin report, Austin had more single-family building permits per capita than any other metro in the country in the first quarter of 2022. With 31.1 building permits per 10,000 residents, the city tops nine other Sun Belt cities that made the top 10 list.
And the city is doing more than just building that quintessential single-family home: Austin also topped the list for new multifamily property permits, with 26.1 permits per 10,000 people in the same quarter. The city has plans to add density and affordability to the most popular areas of the metro, including properties near stops on the planned Project Connect rail.
Austin has been the crown jewel in the Sun Belt's mass migration—and later, severe housing shortage—as remote workers and outpriced big-city dwellers flocked to fairer skies amid the pandemic. And that population swell has been felt across the region: in Austin, one-bedroom rentals rose 112% in just a year, and bidding wars have become common as prospective homebuyers fight in the limited market.
In April, Austin's median home prices set yet another record as they rose to $550,000. Inventory sits at 0.7 months, far below the six-month sign of a healthy market. But rapid building may be putting an early dent in the shortage. In April, active listings jumped 52.5%, causing the biggest year-over-year rise in inventory since 2017.
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