Overview Austin Real Estate

Written on June 28, 2007

One thing that attracted me to Austin was the low cost of real estate compared with northern New Jersey. A brand new, 3 bed/2 bath house with many upgrades such as granite countertops, lots of tile, etc., in a good neighborhood can be had in the suburbs for the low $200Ks. Keep in mind that property are higher here than most parts of the country. They generally run +-2.7% of the market value of the house, so be sure to factor that into your monthly payments.

Although houses are generally affordable in suburbs such as Round Rock, Cedar Park, Pflugerville, Kyle, and Buda, central Austin is quite expensive. Anything within 15 miles of downtown in a good neighborhood on the west side of Interstate 35 is fairly expensive even by the Northeast and California standards. For example, a small 50 year old bungalow in Hyde Park can easily run over $400K. Generally, anything east of Interstate 35 is much lower in price than the west side of the Interstate. The most expensive areas of the city are directly west of downtown, the Hill Country around Lake Travis, and the area immediately south of downtown along MoPac. Austin's rich and famous (i.e. Lance Armstrong, Michael Dell, etc.) are known to live in and around the city of West Lake. The poorer, and ethnic neighborhoods have traditionally been directly east of the Interstate. But the area immediately east of of I35 downtown it is rapidly changing as several luxury condos and lofts are under construction.

My advise to new buyers in the Austin area is to think very carefully about the neighborhood and location before you buy. It is possible to buy exactly the same house, from the same builder, for tens of thousands of dollars more or less depending on the location. Think about the appreciation potential of the neighborhood you are thinking of buying into. If it's cheap, there's probably a good reason why. What appears to be an expensive neighborhood may in fact be cheap because of its potential to appreciate. For example, central Austin was much more expensive than Round Rock during the late 90's .com boom. But when the .com bust came starting in 2000, Round Rock property prices plummeted. Meanwhile, central Austin property values more or less held steady and resumed their upward trend when the bust ended in 2003. Meanwhile, Round Rock property prices are finally just getting back to where they were in 2000. Central Austin property prices are far, far above what they were even in the height of the .com boom. Steve Crossland has an excellent blog and documents this in this entry. You can see from the chart that when the real estate market started turning down in 2001, Austin was able to hold its value with only a slight dip in 2002 with a quick recovery in 2003. Round Rock did not bottom until 2004 and is just now getting to where it was at the peak in 2001.

So although you may get more for your money further out in suburbs like Cedar Park or Round Rock, it may actually be more expensive to live there in the long run because of lower appreciation. Of course, this may not matter to you if you intend to die in your house and never sell. But the average homeowner moves every 7 years, so having to sell is something to consider.