Booming central Texas real estate market continues to spur rapid sprawl

The median home selling price rose 26% year over year in New Braunfels. As of May 2020, the median selling price was $ 251,000. In May 2021, that price rose to $ 316,228. (Lauren Canterberry / Community Impact Journal)

Eric Bramlett has been a real estate agent in Central Texas for 18 years, and he said that since the end of the 2008 economic recession, the local housing market has always been strong, following constant seasonal patterns and holding relatively stable in total sales and prices.

But something happened around the middle of 2020 that caused the market to take off, according to realtors and economists.

Due to the increase in teleworking brought on by the COVID-19 pandemic, they said, many new remote workers have moved to other more expensive cities, which are no longer tied to their commute to work. Locally, employees who use their home as a workspace have a different idea of ​​their needs. As the unemployment rate hit double digits nationally, those who kept their jobs accumulated disposable income.

“We were the hottest market and basically dumped gas there,” Bramlett said.

Prior to April 2021, the monthly median selling price of a home in New Braunfels had never exceeded the $ 290,000 mark, according to data tracked by the Four Rivers Association of Realtors. The median price rose to $ 295,001 in April 2021, and in May, the most recent month available, the median selling price of homes sold in the city was $ 316,228.

These blazingly rapid price increases create an affordability challenge, according to James Gaines, research economist at the Texas Real Estate Center at Texas A&M University.

“You don’t need to have a doctorate in economics to understand that if prices are rising faster than income and housing affordability is based on the relationship between income and price, then [homeownership is] less and less affordable, ”said Gaines.

This frantic pace of price increases cannot last forever, according to Patricia Fernandez, 2021 president of the Four Rivers Association of Realtors. Eventually, Fernandez said she expects the price to return to a certain level of normalcy, although it may take years as supply catches up with demand.

“Builders are building as fast as they can, but you know it still takes time. This is … not an easy process. Fernandez said. “I mean, it takes years of development to get the groundwork done. “

“Perfect storm” of construction challenges

Even though demand could stabilize after the pandemic as people begin to redefine their spending habits, increasing supply remains difficult for many builders.

Aaron Boenig is the co-chair of Brohn Homes, a developer that focuses on homes that fall in the price range for first-time homebuyers. The company is building homes from Georgetown to Bastrop to San Marcos – areas less expensive than Austin – but Boenig said it is increasingly difficult to build at an average price, even in outlying areas.

Land prices are a factor that makes it harder for developers to build affordable homes, but Boenig said buying the land is only a challenge. Long waits for approval of building permits, rising prices for materials, especially lumber, and labor shortages are also affecting developers. Boenig called it a “perfect storm” which restricts supply.

In the Austin subway in May, there was 1.3 months of inventory available, according to the Austin Board of Realtors. Months of inventory are a measure of the time it would take to sell all existing properties on the market. A balanced market, according to Gaines, has about five to seven months of inventory.

“I think it’s unprecedented, the way builders sell homes; I’ve never seen anything like it in this industry, ”said Boenig.

Alternatives to single-family families

Adrianne Craft, a licensed real estate broker with Keller Williams Realty, said buyers really have a hard time finding homes, and not just in the Hays and Comal counties areas where it is largely concentrated.

“A year ago, I would say buyers could be a little more picky about the condition of a home,” said Craft. “A buyer may choose one house over another because it has no carpet or has white cabinets. … Whereas now buyers have to concede everything.

Craft added that every deal it has negotiated this year has seen multiple offers where homes typically sell for 10-20% off asking price. This is a situation that often does not favor first-time buyers, especially those looking for single-family homes, who make up the vast majority of homes on the market at any given time, she said.

One solution that city officials in the Greater Austin area have considered in recent years is to diversify the types of homes. Dan Parolek, CEO of Opticos Design, a California-based company that helps collaborate on housing and community issues, has given numerous presentations to city officials in central Texas, from New Braunfels to Austin.

Parolek’s presentations focus on a concept called Missing Intermediate Housing, which involves homes ranging from duplexes to townhouses to eight-unit buildings, and which are within walking distance, or located near business centers. or city centers with popular amenities.

These options, Parolek said, are more affordable for people, including first-time buyers, who can’t make cash offers to become homeowners.

“Every market, regardless of the size of the city, has been affected quite dramatically by the increase in costs,” Parolek said. “It has become more difficult for… some kind of entry-level household to buy a house. “

While Parolek agrees that single-family homes are the most plentiful option for homebuyers, he said surveys have shown they aren’t necessarily the most popular option. He added that through his own research, national data shows that 60% of all homes will need to run out of mid-range housing by 2040 in order to meet demand.

“I think there will always be a demand for single-family homes [homes], but I think more and more there is a growing demand that is not being met for these types of missing average housing, ”he said. “I’m not saying there’s no demand for single family homes, but historically that’s all we’ve provided, and the industry is struggling to adapt and change fast enough to respond to the request.”

Small towns are experiencing strong growth

When Robin Sheppard sold her 35-year-old Austin home in December 2020, she didn’t expect her to be still looking for a home more than six months later.

Rising tax rates, heavy traffic, and rapid growth within Austin played a key role in Sheppard’s decision to leave the capital and relocate to San Marcos. She would still be close enough to visit friends but in a less populated city, she said.

“I had lived in Houston for many years and moved from there to come to Austin because Austin was so much smaller and had a wonderful feel,” Sheppard said. “This is not the Austin I came from.”

Within 2.5 days of listing her home, Sheppard received seven offers and accepted an offer of $ 50,000 that exceeded demand and included a contingency that allowed her to live in her home rent-free for 30 days. after closing.

“I just thought, ‘Wow, that’s great; now I can go buy myself a house and I have room to travel, “but it wasn’t like that,” she said.

By June, Sheppard had placed bids on more than six properties that met her requirements for secondary accommodation that she plans to rent cheaply to a friend. Despite its multiple offers on several properties, including one that exceeded $ 42,000, it was outbid each time.

Many who plan to move to one of the smaller towns along the I-35 corridor expect to find more availability at a lower price than larger metropolitan areas, Fernandez said.

However, soaring demand and declining supply have made once affordable markets highly competitive.

“You can choose any city in that hallway, and it’s the same story,” Fernandez said, adding that buyers who qualified at one point for a home worth $ 350,000, for example, might have to place bids for homes listed in the high end of $ 200,000 with the expectation of paying significantly more. “All this middle market [is] being eliminated from the playing field. “

As population growth in I-35 cities continues to outstrip supply and companies such as Amazon and Tesla invest in central Texas, Fernandez expects interest to increase in cities. east of the highway.

“[East] is the only direction you can go right now, because even when it comes to Waco, it’s exactly the same market we have, ”Fernandez said.

Some buyers looking to live in a specific city choose to buy a house that is not yet built and rent it out until their house is finished.

Laurianne Rodriguez is from New Braunfels, and after her husband was posted to Randolph Air Force Base in San Antonio for his last posting, her family contracted a builder in February for a house under construction in her hometown.

“We contracted early, and we’re extremely grateful that we did, as there is a point at which we would have already been billed out of our house,” Rodriguez said.

Due to rising construction costs, the price to contract the same model in June jumped $ 125,000, according to Rodriguez.

Until their house is completed, the family rents in New Braunfels so their children can start school in the same school district as their new home. Finding a rental for a family of four has been difficult, Rodriguez said, and she hopes to be able to move in within a year. If Sheppard, who is still trying to find a home in San Marcos, can’t buy one next month, she said she will look for a rental property as well.

“I feel like I’m homeless, you know; it’s just not pleasant, ”Sheppard said. “At the end of this month if I haven’t [a house], then I’ll rent something. … I’m not looking forward to it, but it will definitely be the next step. I cannot stay with other people indefinitely.

Previous Cantwell visits Vancouver to promote affordable housing program
Next Countries that invest in renewables enjoy higher economic growth and lower income inequalities