Mass migration increases value of Austin homes

Migration to Texas is a trend that, although not new, is clearer because of data compiled this year by the state demographer’s office.

According to the data, Williamson and Travis counties saw a net migration of 44,289 residents from other states in 2013. The top states that people came to Travis County from in 2013 were California with 4,353 residents, Florida with 2,632 residents and New York with 1,494 residents.

This migration is part of what contributes to Texas’ thriving economy, experts say. It is also a contributing factor in rising real estate prices.

Migration and home values

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 that supply-and-demand 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.”

Potter said people moving from other states with high real estate prices can have a competitive advantage when bidding on houses in Texas, but he said salary is probably a bigger factor.

Barb Cooper, 2015 president of the Austin Board of Realtors, said the migration issues facing the state are more about the sheer number of people moving to Austin than where they come from.

“I don’t know if I would say it’s all California people pricing our folks out of the market; it’s just so many people,” she said.

Economy meets affordability

Although the influx of people moving to Austin is driving up real estate prices, migration is a critical component 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.”

Cooper said when companies relocate to Austin and bring their employees with them it contributes to rising real estate prices as well.

Sprague said he does not believe people are being priced out of the Austin market as a whole—just the most desirable sections.

“[When] someone says ‘I could have bought that house for $150,000 10 years ago,’ I say, ‘Why didn’t you?’” Sprague said. “I say, ‘Buy somewhere affordable to you.’”

Cooper said in her experience there are people who can only afford certain price points that are not available in the area anymore.

“Right now the median price is $274,000, and the average sale price is $341,000,” she said. “It’s a challenge for buyers just entering the market.”

Cooper said her clients are more willing to move farther out 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.”

Economic forecast

Migration continues to raise area home values Jim Gaines, a research economist at the Real Estate Center at Texas A&M University, said the Austin area has seen growth in median home values just shy of double digits for two years. He said economists worry when such 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 market level off in 2015, which it has not done. He said the cities and state need to encourage homebuilders to make it easier and cheaper to build homes to increase inventory. He said regulations and increased cost of construction have made it harder for developers to build new homes.

“[Lenders are] facing increased regulatory control from [regulatory agencies], and it’s making land loans more constrained because they can be very risky,” he said.

Cooper said ABoR does not view the rising real estate prices as an economic bubble, just a supply-and-demand issue.

“We’ve always had a strong market in Austin,” she said. “Even when there was a bubble we don’t think we were in a bubble.”

As for the Central Texas economy, Sprague said oil dipping below $50 a barrel could have negative effects, but he mostly 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.”