Migration raising home values
Lena Dix moved to Northwest Austin from Salinas, California, after a long stint in Los Angeles, in September. She said she wanted a change of scenery, and a former college roommate had an empty bedroom in her Balcones Woods apartment.
Dix is part of a trend that, although not new, is clearer because of data released in April as part of the American Communities Survey. According to estimates from the survey, Travis and Williamson counties saw a net increase of 28,851 residents from 2008-12.
According to The Office of the State Demographer, Travis and Williamson counties saw a net migration of 30,685 residents from July 1, 2013, to July 1, 2014, and the top state people came from in 2013 was California with 7,154 residents.
Other top states people migrated to Travis County from in 2013 were Florida with 2,632 residents and New York with 1,494 residents, according to the demographer’s office. In Williamson County the top states people came from in 2013 were Illinois with 1,156 residents and Arizona with 946 residents.
Northwest Austin saw an estimated increase of 15,100 residents from 2010-14, according to data from the Greater Austin Chamber of Commerce.
This migration is part of what contributes to Texas’ thriving economy, experts say. It is also a contributing factor in rising real estate prices.
Supply and demand
State demographer Lloyd Potter said the availability of jobs is the biggest driver for people moving to Texas.
“Texas has consistently outperformed other states,” Potter said. “Texas has really helped drive economic recovery.”
He said that influx of people moving for their job or to find a job has created a supply-and-demand issue when it comes to housing. He said the issue is worsened by the desire to have housing close to economic centers.
“Essentially that real estate gets valued more,” he said. “The people are paying more for it either in rent or in price. If you look where there’s a lot of economic activity, the value of real estate goes up.”
Dix, who works at a staffing agency five minutes from her apartment, said she came from a high-stress office job in Orange County, where she sat in traffic every day on her commute.
She took a pay cut for her job in Austin, and as a renter, she said, her financial situation is similar to when she lived in Los Angeles. More people moving to Austin has caused a rise in rent costs, but employers have not increased salaries to match the bump, Dix said. Like in California, she needs a roommate to afford the cost of living in her current area.
“I could probably afford an apartment on my own if I moved further north, but I don’t want to do that,” she said.
Although the influx of people moving to Austin is driving up real estate prices, migration is critical to the area’s economic growth, said Mark Sprague, state director of information capital for Independence Title.
“You have two options—you can have a growth market or not a growth market. There’s no in-between,” Sprague said. “I understand if you’re in this marketplace why you’re emotional about it, but it’s a good problem to have.”
Barb Cooper, 2015 president of the Austin Board of Realtors, said when companies relocate to Austin and bring their employees with them it contributes to rising real estate prices as well.
Many of these new jobs are in the tech industry. Cupertino, California-based Apple Inc. opened an office in Northwest Austin in 2004 and is building a 1 million-square-foot operations center off West Parmer Lane. The company plans to create 3,600 new jobs. Apple already employs more than 4,000 workers, according to the chamber.
Mountain View, California-based Google Inc. employs 500 people at its sales and marketing office on MoPac in Northwest Austin, according to the chamber. Google also opened an operations base for Google Fiber in downtown Austin in late 2014.
Sprague said he does not believe people are being priced out of the entire Austin market—just the most desirable areas.
“[When] someone says ‘I could have bought that house for $150,000 10 years ago,’ I say, ‘Why didn’t you?’” he said. “I say, ‘Buy somewhere affordable to you.’”
Cooper said housing is a challenge for buyers just entering the market. She said her clients are willing to move farther into the suburbs to find more affordable price points.
“I think people’s definition of ‘centrally located’ has changed a lot,” she said. “People are understanding the market—you’ll probably have a little bit of a commute.”
Northwest Austin, with a median home price of $310,000, is more affordable than downtown, where the median home price is $466,150, according to data from ABoR. The average apartment rent per square foot in North and Northwest Austin is $1.15 compared with $1.79 in Central Austin and $2.52 in the Central Business District, according to statistics from real estate firm Transwestern.
Jim Gaines, a research economist at the Real Estate Center at Texas A&M University, said the Austin area has seen substantial growth in home values for about two years. He said economists worry when double-digit growth is sustained for a long period of time.
“It becomes a problem if you move too quickly,” Gaines said. “That’s what caused the bust in California and Florida—they ran several years in a row of having 20-35 percent growth. It does create some problems, but we are not there yet.”
Gaines said economists expected to see the Austin market level off in 2015, which it has not done. He said cities and the state need to encourage homebuilders to make it easier and cheaper to build homes to increase inventory. He said regulations and banks’ hesitancy to lend have made it harder for developers to build new homes.
“The lenders got slapped real hard and are still being constrained because a land loan is very risky,” he said.
As for the Central Texas economy, Sprague said oil dipping below $50 a barrel could have a negative effect, but mostly he sees continued good fortunes.
“Most analysts would be very high on Texas compared to other states,” Sprague said. “If you had a ton of money would you put it in China, London, the East Coast? No, you’d put it in Texas.”