Austin is one of the best cities to live in, and there’s been a dramatic spike in growth, but, how has this impacted the real estate market?
From the price of hiking boots and television sets to cell phones and single family homes, the law of supply and demand rings true. First described by Adam Smith in 1776, the general concept is that if the supply of something exceeds the demand, the price per unit will fall. And conversely when the demand is greater than what exists, prices will rise.
When sellers of something are able to find buyers, and buyers seeking something can purchase what they want, then the market is referred to as “balanced” or “in equilibrium” and prices pretty much remain stable. The unabated growth of the Austin area in recent years has created a substantial increase in demand for housing, so the real estate market is not balanced. There are many more buyers than sellers.
The buyers’ market in 2021 nationwide continues a presence in this City of the Velvet Crown. One of several nicknames for the State Capitol of Texas, the velvet crown refers to the beautiful violet glow of light which sweeps across the hills around sunset. And who doesn’t want to live with that natural radiance out the front window?
Real Estate Supply and Demand due to Growth in Austin
According to Ramseysolutions.com and other sources, it takes seven months to build a house. Of course, before breaking ground, you need architectural plans and permits in place. Depending on available utilities, it might take longer digging a well and septic system and connecting to available infrastructure. Average build times are higher for custom construction and a bit lower for subdivision built-for-sale houses. That latter category has shorter build timelines because contractors have done this before and everything is cheaper by the dozen. The logistics can be streamlined with subcontractors moving through one house after another, and materials can be purchased and shipped in bulk.
The point is that once the demand exceeds the supply on something like a laptop computer or bomber jacket, the manufacturing company can ramp up production, add another shift and make more products to meet an increased demand fairly fast. With real estate, well, you can’t just ramp up production and put more houses and condos on the market quickly. And the land is finite. Big as everything is in Texas, there’s no way to drum up more land.
Thus, the response to a shortage of housing involves innovation and creativity on the part of the buyers, the industry and the government. Some folks who never contemplated home renovation find a house in an area they love and buy it with the idea of gutting part of the interior to make it closer to what they really want. Others tweak their size requirements and buy smaller or larger or settle for a few years of condo life waiting for their ideal single-family home to materialize.
The Interest in Sustainable and Tiny Homes
Tiny homes and container residences are appealing to the minimalist movement and environmentally-conscious home buyers. Bob’s Containers, a national container company headquartered in the Austin area, is a leader in container residences, with one goal to sustainably keep shipping containers in use and out of rusting away. “We are committed to driving positive change by manufacturing residential and commercial containers that encourage sustainable living, reduce environmental impact, and make quality housing and investment opportunities more accessible,” states the website bobscontainers.com.
Another angle home buyers might consider is buying a duplex and having one rental income help support the mortgage. Some folks will purchase a triplex or quadplex, knock down a few walls and make a large home living space, while still having one or two apartments generate revenue.
Consider Different Building Materials
On the building front, more prefabrication of house parts and large segments, like concrete-insulated panels and timber frame panels, are available instead of individual pieces assembled on job sites. Mobile devices and advanced software technology have contributed mightily to coordinating project management and streamlining performance and costs. Everyone in the loop can be updated in real time no matter where they are. Veev, a homebuilding company founded in 2008, tried revolutionizing home building with contemporary modular homes, but went belly up late in 2023. But still, more modular house components are being produced and utilized successfully.
How the Tech Sector has Impacted Austin Real Estate
Austin has attracted numerous tech companies, which has played a major impact in the growth of Austin real estate. The government is a big player here, too, holding the strings on zoning, density, infrastructure, the permit process, and rules and regulations which may hinder or advance real estate development. One great challenge for Austin is that the tech sector’s growth is fueling the housing shortage. These employees have high salaries and demand high-end solutions to housing, transportation, education and recreation.
And companies can play a part. Like the mining operations of yesteryear, which built housing for its employees, Elon Musk of Tesla is planning construction of hundreds of homes for his workers. Dubbed “Project Amazing” but named Snailbrook, the planned community on 3,500 acres near Bastrop may offer rent as low as $800 per month in more than 100 houses. History repeats itself on this one.
Creativity and ingenuity are the hallmarks of Austin’s history and contemporary life. Population growth in and around Austin will continue to drive innovation in conjunction with government agencies and the construction industry.
Feel free to contact us at Habitat Hunters if you have any questions about this.
