Real estate investing in Austin, Texas, a city that went from "hippie haven" to tech hive
Written by Brian Boucher
Reviewed by Mynd Editorial Staff
Austin’s reputation for bohemian living was cemented among the indie-film set by Richard Linklater’s “Slacker,” a cult classic set in the city and shot for $23,000 in 1989. One memorable exchange runs: Character A: “Sorry I’m late.” Character B: “That’s okay. Time doesn’t exist.”
“Low rent, fine weather and a tolerance for eccentricity have for decades shaped the Texas capital’s laid-back culture into a paradise for dropouts,” The New York Times observed in its review of the film.
If Austin real estate isn’t quite so cheap anymore, the city maintains its appeal, for university students, techies, startup founders, musicians and others.
The Texas city draws rave reviews. U.S. News and World Report ranked it the best place to live in Texas in 2022 (even though, due to affordability concerns, it dropped out of the top 10 in the country to number 13, still not too shabby). The paper also ranked Austin as the 10th-fastest growing city in the US in 2022, after it grew by a remarkable 33 percent between 2010 and 2020, attracting many a real estate investor.
The metro area’s population now stands at about 2.3 million, making it the country’s 28th-largest.
A letup in the frenzied Austin real estate market
The continuous population influx led to a wildly competitive atmosphere, especially during the pandemic, both for homeowners and those seeking investment properties.
When Curbed magazine reported in summer 2021 on the city’s “wild” real estate market, it led with an anecdote about an East Austin house without central air-conditioning that got snapped up in four days for $2.6 million, $850,000 above the listing price.
“Totally insane,” said one agent.
But even the poster child for hot, hot markets has returned to something resembling normal, according to a November 2022 report from the Austin Board of Realtors (ABoR). For the first time since February 2019, home prices were static year-over-year.
“It’s a relief to see more homes available and sitting on the market long enough to give buyers
an opportunity to think before they leap,” Cord Shiflet, 2022 ABoR president, said. “This healthy competition creates an opportunity for homebuyers, who may have struggled within the past two years, to take their time and find a home they love."
In November, home sales dropped by some 36.6 percent, the largest drop in closings in this real estate market by percentage since May 2020, in the early days of the pandemic. New listings declined 17.8 percent.
"Homebuilding has been declining and this will will continue over the coming year," says Ed Friedman, a director at Moody's Analytics. "New permits for single-family units have fallen by about 30 percent since the end of 2021. The reason is declining affordability because of rising mortgage rates, which are likely to rise further. The exceptional rise in house prices in 2021 also contributes to the decline in affordability."
Indeed, Austin real estate is hardly a bargain, according to ABoR’s numbers:
The metro area median home sale price in November was $467,955, unchanged year-over-year.
Average days on market was 58, up 36 days from last year.
As of December 2022, single family homes were renting for a median $2,115, up 10.6 percent year-over-year, according to John Burns Real Estate Consulting.
From a slacker haven to HQ for techies
The slackers in “Slacker” have put down their bongs and picked up laptops, gaining the city, nestled in the beautiful Hill Country, the nickname Silicon Hills.
The love story between the region and tech dates back to 1984, when a University of Texas freshman named Michael Dell launched a computer company that would grow to titanic proportions.
The Texas capital has been one of the beneficiaries of a widely reported exodus from Silicon Valley, outstripping cities like Dallas–Fort Worth, Las Vegas, Tampa, and Charlotte. WalletHub recently ranked Texas’s capital number 2 in the nation for STEM jobs.
According to a TechCrunch article from May, Austin is emerging “as a city of unicorns and tech giants, with VCs investing $5.5 billion in 2021, more than double in 2020. It pointed to Tesla's $1.1 billion "gigafactory," Oracle's moving its HQ to Austin, and Apple's $1 billion campus.
These companies join other major employers like IBM, Samsung, and AT&T that have already found a home in Austin.
But Friedman is concerned that the concentration of tech jobs may leave Austin vulnerable to shifting winds in the economy.
"Specifically, high-tech software and services businesses, typically the bulwark of the local economy, are signaling that 2023 will be a challenging year," he says. "Companies have reacted with caution to weakening revenues and the possibility of recession.
"At the national level," he says, "Twitter has laid off thousands following Elon Musk’s takeover, and Meta (formerly Facebook) plans to lay off 11,000 after stating that employment would be flat in 2023. Google and Apple have said they will be cautious about hiring. All have a significant presence in Austin."
Housing fever, meet cedar fever
If some are making out like bandits on selling Austin real estate, there’s always a downside. Soaring home prices, predictably, have put the brakes on what seemed an inexorable drive to increased diversity. “The Whitening of the urban core is indeed striking,” city authorities said in a recent report.
While the weather is inarguably mild for Texas, the climate holds a threat that many new arrivals learn about only when they pull their U-Hauls up to the curb.
Even the Lone Star State devotees at Texas Monthly don’t downplay cedar fever, “a scourge, a plague that smites the just and the unjust.” Allergies caused by local tree Juniperus ashei (ashe juniper) can cause sufferers to sneeze 300 times a day.
Another issue is that the city’s infrastructure wasn’t designed to handle all the growth. A 2021 Texas A&M study indicted the traffic as the 10th-worst of any city in the U.S. (Voters have approved a tax increase to help pay for Project Connect, which will include a new rail system, a downtown transit tunnel, and expanded bus service.)
The late newspaper columnist Molly Ivins, meanwhile, called Lone Star State politics “the finest form of free entertainment ever invented.”
Music, food, and a laid-back vibe
Nicknamed Bat City (there are more of the flying creatures in the area than people) and Hippie Haven (just watch “Slacker”), the city has plenty to recommend it, from the natural beauty of the surrounding Hill Country to live music, great food, and multifarious cultural assets.
The city has a relaxed culture, is welcoming to outsiders, and has a reputation that keeps drawing new residents. Texas’s state constitution bans personal income taxes, another lure for tech companies and outsiders.
However, property taxes are levied by local entities, and they are the seventh highest in the country. Effective property tax rates across the state are near 1.7 percent, and in some cases homeowners will pay an effective rate of more than 2 percent, with a high of 2.23 percent in Fort Bend County.
Visitors don’t have to look hard to find scrumptious smoked meats, breakfast tacos, and craft beer. And the culinary offerings go beyond barbecue; Travel + Leisure dubbed the city “America’s next great food town” six years ago.
The South by Southwest music festival (aka SXSW) has always exceeded expectations, with 150 anticipated attendees for its inaugural outing in 1987 ballooning to 700 on the first day. It added film and comedy and, later, new tech; Twitter gained early buzz here.
Some 160,000 attended in 2019; local news outlets indicate 2022 attendance was down about 20 percent from that high. All those visitors have a smooth trip in and out; Condé Nast Traveler’s readers voted the city’s Austin-Bergstrom International Airport the 10th-best in the country in 2021.
Universities set the stage for a tech hub
“Before Austin was a tech hub, it was a university town,” says Friedman, the Moody’s economist, “which raises kind of a chicken-and-egg question, because the state university has had a big-time computer science department for decades.”
The state system’s flagship campus admitted its largest-ever freshman class in the fall of 2021, including a record-high number of historically underrepresented students. Graduation rates have risen from only half in 2010 to nearly three-quarters.
A major feather in the state system’s cap: a pair of researchers in the molecular biosciences department won recognition for work to engineer an antibody to fight the novel coronavirus.
Twenty-six other colleges and universities (combined enrollment of nearly 180,000) also provide area employers with well-educated workers. Nearly 45 percent of residents hold a bachelor’s degree — well above the national rate of 36 percent. With a median age under 34, it’s one of the younger cities in the country, which lends vibrancy.
High art finds a home in Austin, too. The Washington Post praised Ballet Austin as “one of the nation’s best-kept ballet secrets.” UT’s Blanton Museum of Art is home to a spellbinding chapel-like building by Ellsworth Kelly, the only structure the famed artist has designed, and the Harry Ransom Center holds a complete copy of the Gutenberg Bible.
Preserving the city’s reputation for funkiness is an outsider art landmark, the Cathedral of Junk, which contains as much as 60 tons of trash, and reflecting the state’s diversity is the Mexic-Arte Museum.
5 best places to invest in Austin real estate
“The metro area offers great promise for those shopping for investment property, if outside the city proper,” says Wade Shoop, a Texas real estate broker with Mynd.
He says areas north of the city will benefit from the attractions that are nearby, including the Q2 Stadium, home to the Austin FC, a new Major League Soccer team, and the Round Rock Express, a minor league baseball team.
Another asset in the area is Domain, a mixed-use development that hosts companies like IBM, VRBO and Indeed.
Shoop picked out five promising areas for those looking for investment property in Austin.
“The big news in the Austin area right now, aside from the $1.1 billion Tesla gigafactory and the $1 billion Apple campus, is the coming of an enormous Samsung plant,” says Shoop.
Samsung has a huge manufacturing facility in Austin already, and the Korean electronics multinational has begun to build a $17 billion semiconductor plant in Taylor, which is about 30 miles east of Round Rock. (Yes, that’s billion with a B.) The plant could be as big as 6 million square feet and bring 1,800 jobs when it opens in 2025, not to mention the 10,000 construction jobs created to build it.
“It will totally change that area,” says Shoop, who foresees big rises in the real estate market.
“Samsung is moving a lot of its chip manufacturing out of China in order to diversify,” says Shoop. “This will really affect the Round Rock and Georgetown area, north of Austin.”
When the plant was in the works, Williamson County Judge Bill Gravell told KXAN that it would be Texas’s largest economic development project and the “largest economic development project with foreign investment ever in the United States.”
Median listing home price, November 2022, per Realtor.com: $370,240
Increase year over year: 19.4 percent
Median days on market, October 2022: 60, up from 39 one year prior
2. Cedar Park
Fast-growing Cedar Park has plenty of amenities, like the HEB Center at Cedar Park, which hosts everything from rap concerts to rodeos, as well as the Texas Stars, a minor league affiliate of the NHL’s Dallas Stars. Its population went from about 49,000 in 2010 to more than 77,000 in the 2020 Census.
Ensuring continuing growth are the new $1 billion, 133-acre north Austin Apple campus, which will start off with 5,000 employees (with more to come).
“This area might look on a map like it’s the middle of nowhere, but it’s just 20 minutes to the Apple campus,” says Shoop. Two major roads, the I-183 and the Ronald Reagan Drive, run through Cedar Park, and the Apple campus is on the latter (also known as Parmer Lane).
Median listing home price, November 2022, per Realtor.com: $522,450
Increase year over year: 4.7 percent
Median days on market: 74, up from 53 year over year
3. Liberty Hill
Liberty Hill has seen explosive growth since the 2010 Census, when its population was just 967; it now stands at just under 4,000. And there’s lots of growth to come, says Shoop, making it a very promising area for real estate investors. It’s about 35 miles west of the massive Samsung semiconductor plant, and some 40 miles north of Austin proper.
It’s also less than 20 miles northwest of the in-progress $1 billion Apple campus in north Austin. As for amenities, it’s the same distance from the 8,700-seat HEB Center at Cedar Park, where locals check out events from rock concerts to hockey games.
Median listing home price, December 2022, per Realtor.com: $615,645
Increase year over year: 10.1 percent
Median time on market: 71 days, unchanged year-over-year
Buda sits just between Austin and San Marcos, bordering the major I-35 highway.
“There has been tremendous growth here,” says Shoop. Growth in this bedroom community has mostly been driven by service industries like medical services, retail, and entertainment. The population, which currently stands at just over 15,000, more than doubled since the 2010 Census. It’s only about 15 miles south of Austin proper.
“Amazon has a couple of large warehouse facilities there, there are good schools, and with the opening of the State Highway 45, just to the north, getting from there to downtown Austin is no longer a trek on I35,” says Shoop, all boding well for the value of investment property in this small city.
Median listing home price, December 2022, per Realtor.com: $450,000
Increase year over year: 10.5 percent
Median days on market: 53, up from 42 one year prior
Bastrop is growing steadily, from nearly 58,000 in 2010 to upward of 84,500 in 2020. It’s just 25 minutes away from the Tesla gigafactory and only 20 minutes from the airport, and has plenty of good schools, according to Shoop. It lies about 30 miles east of downtown Austin.
“It’s right near Austin but really has a small-town feel,” he says, “with a cute little downtown area. There’s recently been a lot more new construction and development around Bastrop. For people who work on the south side, this could be a better option for a small town feel than some neighborhoods in the north.”
Median listing home price, December 2022, per Realtor.com: $449,900
Increase year over year: 12.8 percent
Median days on market: 49, down from 90 one year prior