Mon, Jan 10, 2022 4:24 PM
By Bethany Blankley | The Center Square contributor, The Center Square
(The Center Square) – Austin was named the hottest housing market in the country in 2021 by Zillow, a national online real estate marketplace company. Now, it’s likely to fall to 10th hottest, Zillow projects.
“Home value growth in 2021 consistently broke records, both nationally and in many local markets,” Zillow reported. “This growth has been fueled by historically low mortgage interest rates, pandemic-influenced decisions on where households want to live, and demographic shifts – both from aging millennials and retiring/downsizing boomers – that have all combined to keep housing demand very high.
“At the same time, inventory of available housing has been limited, as builders play catch-up after years of underbuilding and sellers list their homes in fewer numbers. None of those trends is expected to change much in 2022 from 2021, and limited housing supply coupled with sky-high housing demand is a classic Econ 101 recipe for rising home values.”
Last year, “from April to August, Austin held the top spot in quarter-over-quarter home value growth,” Zillow notes.
According to Redfin, the average sale price of a home in Austin was $545,000 in November 2021, up 26.8% from 2020. The median sale price of $536,000 last year represents more than a 20% annual increase, NPR Austin reports.
As of December 2021, the average sale price per square foot was $310, up 27.6% from 2020, Redfin notes. Homes in Austin received five offers on average and sold within 32 days.
As prices skyrocketed, so did other costs. According to Bureau of Labor Statistic data, the Austin-Round Rock-Georgetown area saw a cost-of-living increase of 17.8% from 2010-2020. Housing costs increased by 20.7%, utilities costs increased by 13.4%, and overall cost-of-living increased by 1.8%.
This was before inflation hit a 40-year high last year.
Also last year, Austin ranked second among the most overvalued metro home markets in the country. Homes sold for 50.72% more than they should have, according to an analysis published last year by Florida Atlantic University and Florida International University researchers.
“Austin's rapidly expanding economic industry is driving more people into the city, which is increasing the housing demand,” Marco Santarelli of Norada Real Esate Investments said. “A surge of people moving in from other parts of the country, combined with rapid population growth and low mortgage interest rates, has turned Austin and its surrounding area into a sellers' market.”
Rising home values are also impacting the Austin rental market.
“After a slowdown in the early months of the pandemic, rent prices came roaring back, especially in what were previously some of the most affordable markets,” Zillow reported. “As rising costs make it harder to save for a down payment, expect demand for larger rentals to increase, including for single-family homes, as families stay in the rental market longer.”
The average monthly rent for an 875 square foot apartment in Austin is $1,560, according to Apartment Data Services. Rents surpassing $1,500 a month represent an increase of roughly $300 in six months, NPR Austin reports.
The occupancy rate in Austin is 92.5%, with a rental rate growth of 30% over the past 12 months, ADS notes.
There are currently 47 rental communities under construction in the Austin area with over 13,000 units being built. Another 37,000-plus units have been proposed for construction in 126 new communities, according to ADS.