Residential developers are filling in the gaps

"The area is going to be very slow to have any kind of big projects come to market that really kind of make a splash," he said, adding: "How big we can grow next year depends on how many lots we have, and looking here [in Southwest Austin], there's not thousands of lots to be brought to the market in the next 12 months."

Developers are competing to fill in remaining space, said Cassie Gibson, senior vice president of Residential Strategies Inc., which tracks Texas single-family development.

"Most of the new development that we're seeing is going to be a subsequent phase to an existing community," Gibson said. "As far as new development, most of that is going to be relegated to those smaller tracts, those infill-type pieces."

Tree apartments opened in September, Ladera Apartment Homes opened in late 2012, and Ethos apartments will open in January, said Derek Brown, managing director of Greystar Real Estate Partners LLC, which manages all three properties.

While some projects near Tree have been under construction, Brown said, many of them are what he calls "legacy sites."

"Some of these sites were slated to be developed in '08 and '09, and because of the downturn that didn't happen," he said. "So what feels like this big push of supply is somewhat overstated because ... sites are being developed, but it's taken five or six years for these sites to mature."

He said going forward, inventory growth in the Southwest Austin market will be normalized.

Affordability

Austin is growing less affordable by Texas standards, Inselmann said. The median home price in Austin is $227,600, he said, yet the maximum available loan for a household with a median income is $195,756, he said.

Jeff Embree, broker and owner of Waterloo Realty LLC, said single-family homes between Ben White Boulevard and Slaughter Lane attract buyers.

"The home search begins with 'Here's what I'm looking for, and here's what I can spend.' A lot of people [who move here] came to town thinking Austin was affordable, and then they wind up steering their car south," he said, explaining Southwest Austin is more affordable than some other areas in the city.

In January, Embree plans to develop a 0.97-acre property near the Davis Lane and Manchaca Road intersection, adding three modern single-family homes in the $300,000 price range.

"It was hard for me to find an acre," he said, adding that larger investors cannot acquire enough land to build homes and see a return on their investment.

"South and Southwest Austin are such desirable places to live," Brown said, citing a strong employer base.

The area is attractive, agreed Kevin Huston, regional marketing manager for Crescent Communities in Texas. Crescent bought the master-planned residential community Belterra in October.

"Especially where Belterra is positioned, it's right on the edge of Hill Country, but you're still able to get to downtown Austin in a heartbeat," he said.

There are still about 570 Belterra single-family lots left to be developed. He said Crescent will plan for those lots in 2014.

Most Southwest Austin homebuilders raised prices by 5 percent to 10 percent in 2013, Gibson said. Gibson said in general, single-family homes offered between $200,000 and $250,000 are closer to I-35; farther west, prices range from $300,000–$500,000.

"Land is at least twice as expensive when you get west of Brodie Lane," Hughes said.

Developers' options limited

Southwest Austin has had about 600 housing starts—new home construction projects—during the past year, Gibson said. Residential Strategies counted about 450 lots—a nine-month supply of vacant land for development—in the third quarter of 2013.

"We do not in the near future see a balanced, or 24-month, supply of lots in this market. There's just not enough identified land to be able to bring those levels back up," she said.

In some cases, developers seek to rezone lots zoned for commercial or other uses, Gibson said.

Hughes said the sites of Landmark Double Creek and Landmark Southpark were rezoned.

Environmental concerns also play a role. Some lots around Landmark Conservancy have 65 percent impervious cover, or covered space where rain cannot soak back into the ground. Oden purchased 22 acres of land and plans to maintain 15 acres of open space as well as add a water treatment facility, Mac McElwrath, Oden's director of development, said.

"Because [the site] abuts the nature conservancy, we wanted to go above and beyond by handling the storm water of the neighboring tracts at superior treatment levels," McElwrath said.

Gibson said she anticipates increased activity in areas adjacent to Southwest Austin that allow more development.