Homebuilding is booming in Austin — and the action is centered in outer suburbs

Posted by Grossman & Jones Group on Tuesday, December 8th, 2020 at 1:58pm.

With Tesla's factory supercharging the Austin housing market, experts say the far-flung reaches of the metro stand to benefit as well.

“In an already hot real estate market, it’s turning it up to broil," said Vaike O'Grady, Austin regional director of housing market research company Zonda, formerly known as Metrostudy.

The construction of Tesla's $1.1 billion gigafactory is having an effect on housing from Georgetown down to San Marcos, O'Grady said. Realtors have said employees of the electric vehicle company are already scouring the metro for homes. In one example, a Tesla employee sought a home for less than $750,000 on the west side of Georgetown, learning along the way that Central Texas sellers don't need to haggle.

In another, a Tesla employee spent nine hours a day searching for homes under $350,000, before settling on a house in Buda, south of Austin.

The residential submarket of Kyle/Buda recorded the most home starts of any submarket in the area for the 12 months from September 2019 to September 2020, according to Zonda. That was a first in the recollection of O'Grady, who has been closely watching the local housing market for years. Kyle/Buda was also the top submarket for home starts in the third quarter of 2020.

“Because of lack of supply closer in, we are seeing more activity in the suburbs and the exurbs," O'Grady said.

Overall, home construction in the Austin area is booming. Through the end of September, 15,327 single-family building permits were recorded in the metro, up 9% from 14,054 permits through the same point in 2019, according to U.S. Census data collected by American City Business Journals.

 

Meanwhile, the reverse is playing out for many of the priciest and traditionally most sought after housing markets.

Among the 354 metropolitan areas The Business Journals analyzed, 236 reported year-to-date increases in single-family building permits through September, with areas in the Midwest and South recording the largest increases. Conversely, pricier and more congested metros — most notably California’s Bay Area as well as Denver and New York City — saw the largest one-year declines.

“Columbus and Indianapolis — those kinds of cities are going to emerge as winners over the next few years,” Dietz said.

Indeed, Covid-19 has relegated people to their homes for activities once reserved for commercial real estate. Home schooling, home workouts,  home offices — all are driving buyers toward larger residences. And because they’re spending less time commuting, those same buyers are proving increasingly willing to move farther from city centers to larger spaces at affordable prices.

In terms of raw increase, that 1,273 jump in permits ranked No. 5 in the country, behind only Houston, Dallas, Phoenix and Charlotte. Both the Houston and Dallas metros have more than 7 million residents while Phoenix has about 5 million. Meanwhile, Charlotte has a population of more than 2.6 million while the Austin metro has an estimated 2.3 million people.

Much of the new home construction in Central Texas is taking place in master-planned communities far from Central Austin. Three MPCs in the area ranked among the 50 top-selling communities nationwide in the first half of 2020, according to RCLCO Real Estate Advisors. Scarborough Lane's Sunfield community in Buda placed No. 16 in the United States with 327 home sales through the first six months of the year, RCLCO reported. Brookfield Residential's Easton Park development in Austin came in at No. 24 with 296 homes sold and Mariner Real Estate's Santa Rita Ranch community in Liberty Hill placed No. 31 with 249 homes sold.

The popularity of large communities outside dense urban areas can be seen nationwide, based on building permits collected by ACBJ, the parent company of Austin Business Journal.

In greater Kansas City, approvals to build single-family homes were up 26% year to date through September. So, too, were the Rust Belt cities of Columbus, Ohio, and Fort Wayne, Indiana. Near Fort Collins, Colorado, they rose 47%, and the rural area around Clarksville, Tennessee — just north of Nashville and south of the Kentucky border — reported a 63% increase, tops in the country among major metros The Business Journals analyzed.

Robert Dietz, chief economist for the National Association of Home Builders in Washington, D.C., said it’s no surprise the country’s biggest homebuyers are thundering into more rural, less populous, areas of the country. He said the coronavirus and its effects on remote-work policies have turbocharged buyer demand for bigger homes and a flight from congested urban areas, a trend that’s already triggered a surge in building activity in places long dismissed as too far-flung from hot job markets and top-ranked research clusters. 

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