Urban housing construction continues to climb in Northwest Austin; local experts say density solutions necessary

The real estate market in Northwest Austin has dropped to n1 month of inventory for single-family houses available in May, down from 2 months of inventory last year. At the same time, apartment construction has been on the rise.

The real estate market in Northwest Austin has dropped to n1 month of inventory for single-family houses available in May, down from 2 months of inventory last year. At the same time, apartment construction has been on the rise.

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Going vertical
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Development In a DECADE: Unit delivery
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Deep dive: Apartment data by Northwest Austin Zip Codes
Northwest Austin is in the midst of a housing shortage, as indicated by new figures from the Austin Board of Realtors, that may lead to a complete shift in the area’s real estate market.

With a shrinking amount of land available to develop and ahead of more people moving into Northwest Austin for employment opportunities, local real estate experts say the solution to the housing shortage will likely come in the form of high-density apartment complexes and attached housing units.

“I see Northwest Austin really being a second downtown Austin, basically,” ABoR President-elect Romeo Manzanilla said. “You’re talking about a mass number of people living in the area. I think home prices are going to continue to rise. I can see more apartment buildings, more garden-style homes and more condos—a lot more of ... utilization of space available for higher density.”

TOUGH TERRAIN


Homebuilders are simply beginning to run out of room to develop in Northwest Austin, Manzanilla said. The area is dotted with its signature sloping, rolling hills that make it difficult, or sometimes impossible, to build on.

“There aren’t a lot of flat areas that can still be developed,” Manzanilla said.

Across Northwest Austin, infill neighborhoods—communities that are more densely packed and fit between existing neighborhoods—may be the last remaining option for homebuilders.

That obstruction has led to an historically low number for residential housing inventory in Northwest Austin. Inventory refers to how long it would take for every house to sell in the market if no new homes were built or were being sold on the market.

Housing experts said a healthy, balanced market typically maintains six months of inventory. In May 2018, Northwest Austin’s single-family housing inventory stood at two months, according to ABoR’s market report. That number dropped to one month of inventory by May 2019.

This has in turn lead to spiking home prices. This past May, the median price for all Northwest Austin residential properties rose to $359,900, according to ABoR data, which represents a 5.9% year-over-year increase.

Vaike O’Grady, the Austin regional director for market research and intelligence firm Metrostudy, said she has heard from single-family homebuilders that it is difficult to find labor. However, O’Grady believes the lack of readily available land to develop on is the root cause for low inventory and rising home prices in Northwest Austin.

“There’s just not a lot of home construction going on in [the] area,” O’Grady said. “We need more increased density to get home prices down.”

APARTMENT HUNTING


According to figures from ApartmentData.com, there are 42,684 total apartment units in the six ZIP codes that make up Northwest Austin, as defined by Community Impact Newspaper, as of June. Of those total apartments, 14.98% have been constructed since 2014.

More are on the way. Market research company ALN Apartment Data reported in June the area between Duval Road and Metric Boulevard has 3,824 apartments in the pipeline—more than any other submarket throughout Austin.

“Because [Northwest Austin] is so large, it tends to have a consistent supply of new renters,” said Sam Tenenbaum, Central Texas market economist for the CoStar Group.

Demand for apartment units in Northwest Austin continues to grow for a number of reasons, including employment opportunities at tech hubs such as Apple’s recently announced campus expansion.

Starter-home prices are beginning to become inaccessible as well, Manzanilla said, pushing people out of the real estate market and into apartments.

In April, the median price for a single-family home in Austin hit $400,000—the first time the number has hit that mark. That same month, single-family homes in the six ZIP codes of Northwest Austin hit a median price of $420,000. Home prices in Northwest Austin remain higher than the median price for the entire city of Austin.

“Let’s face it, homes are becoming more expensive, and people are being forced to rent because of a down payment. The apartment market is strong. ... Northwest Austin keeps getting closer and closer to employment centers,” O’Grady said. “Northwest Austin is becoming much more urban.”

O’Grady believes attached homes, such as condos and townhomes, will become more attractive to buyers in the near future. Data from ABoR shows sales of newly constructed condos in May were up 25.9% from the previous year.

As Northwest Austin evolves into an urban center, the area will see more urban housing solutions, she said.

“If you’re going to sell affordable houses, you need it to be an attached-home market,” O’Grady said.



DENSITY AND VOLUME


The city of Austin is set to reignite the conversation over its land use code, and Northwest Austin may become ground zero for the debate.

In a speech to the Northwest Austin Business Council in March, Austin City Council Member Jimmy Flannigan said council is determined to address the issue in the next year.

“We have a council right now that is ready to do the big thing. We are ready to tackle the land code. Not in six years. Not [for] $8 million [like with CodeNEXT], but in the next 12 months,” said Flannigan, who represents District 6 in Northwest Austin.

O’Grady and Manzanilla both said they agree higher-density housing, whether it be apartments or attached urban units, is necessary to meet market demands and keep the price of housing at a stable level.

“Density is always an issue in terms of maximizing the space in use,” Manzanilla said.

Because of the low housing inventory, Manzanilla and O’Grady said they believe remodeling existing single-family homes that were built in the 1970s or 1980s will become more prevalent throughout the area. O’Grady pointed to Clarksville as an Austin neighborhood currently experiencing a similar face lift.

But high-density housing in particular is important, Manzanilla said, because there simply is not space to build anywhere else in Northwest Austin. With thousands of tech workers expected to flock to the area in the next decade, apartment and urban units will become necessary to house everyone.

“There isn’t a lot of raw land in the northwest area. There is definitely that need for those higher-density projects,” Manzanilla said.
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