Spring and summer is typically the busiest season for Austin’s real estate market. But since the pandemic hit in March, only the housing sector has seen improvements.
The Austin metro saw a 21.5% year-over-year increase in home sales last month, with the median sales price climbing more than 10%. Rentals, on the other hand, are still struggling to recover from the financial hits.
“[March to July] is our peak leasing season, so historically there are usually pretty good size gains month over month this time of year,” said Cindi Reed, vice president of regional development for ApartmentData.com. “This is not typical for this time of year.”
On the homefront
Recent strong home sales indicate that the local market is bouncing back, despite the ongoing pandemic.
“July was a very encouraging month for the Central Texas housing market,” Austin Board of Realtors President Romeo Manzanilla said in a Wednesday press release. “[W]ith two consecutive months of positive numbers, we are growing more confident that this is sustainable and can help be the spark that gets our economy back on track.”
Manzanilla attributed the recovery to Austin’s “dangerously low” housing inventory, which makes the housing market “ultra-competitive,” and with “historically low” interest rates.
Recent economic development initiatives may also responsible.
Laura Huffman, president and CEO of the Austin Chamber of Commerce, said demand for housing is driven by the recent arrivals of electric car manufacturer Tesla, which promises 5,000 jobs at its forthcoming Southeast Travis County Gigafactory, and defense contractor BAE Systems, which announced last weekplans for a new campus at Parmer Austin Business Park that will house more than 1,400 employees.
“Even amidst the pandemic, Austin still shines as a magnet for companies that appreciate our robust business climate and abundant talent pool,” Huffman said in the same release.
The median home price in the city of Austin is now $423,000, up 11.3% from last year, according to ABoR data. This growth extends to the surrounding areas, including Williamson and Hays counties, which both posted double-digit year-over-year increases in overall sales and median home prices.
A renter’s market
The Austin apartment market, however, is another story.
Since March, the average monthly rent in Austin has declined by about $37, or around 3%, according to a market report compiled by ApartmentData.com.
Reed attributes this to a combination of factors, including low interest rates spurring homeownership; a large amount of new and forthcoming inventory, including at least 49 Austin complexes in the pre-leasing stage; and what she feels is a decline in the number of people moving.
Class A, or luxury, apartments, have seen a more “significant decline” in Austin, with their average monthly rent down nearly 5% in the same period. Downtown, which primarily offers Class A units, has proven to be one of the worst performing submarkets during the pandemic period.
“I have to speculate and wonder: Who wants to pay the high price to live downtown but you don’t get the benefits of the urban lifestyle?” Reed said, explaining that COVID has temporarily shut down a lot of the bars, restaurants and music venues that draw people to the area.
While there are some signs that the rental market may return to its pre-pandemic state—including a slight increase in the average rent from June to July and the return of students to college campuses—the apartment industry is still vulnerable to the COVID-19 recession.
Many landlords are worried about rental collection now that stimulus funds have likely run out and evictions remain on hold.
“There’s a lot of fear of what’s going to happen moving forward,” Reed said. “It could go either way.”