Forecasts and predictions for the Austin, Texas real estate market in 2021 suggest that home prices will continue rising for the foreseeable future. And that’s a pretty safe prediction, when you look at the current supply and demand situation within the Austin housing market.
The entire metro area is experiencing very low housing supply levels in 2021. At the same time, demand is soaring due to population growth and other factors.
In addition to boosting home prices to record levels, this profound imbalance between supply and demand is making the Austin real estate market extremely competitive in 2021.
Austin Metro Area Housing Forecast for 2021
The Austin, Texas real estate market has received a slew of positive forecasts in recent months. Economists and housing analysts expect it to be one of the top-performing real estate markets in 2021, in terms of home-price growth and competition.
In February 2021, the research team at Zillow predicted that the median home value for the Austin-Round Rock metro area would rise by a whopping 16% over the next year. That forecast extends into February of 2022.
During 2020, home prices within the Austin-area housing market rose by more than 10%, according to Zillow. As of February 2021, the median house value was around $385,000 for the metro area, and around $455,000 within the city of Austin itself.
Homeowners might be rejoicing in their newfound equity. But it’s not good news for everyone. The Austin real estate market has become significantly more expensive in just a few years. You can see that in the chart above.
As a result of this rapid home-price growth, residents who earn an average income for the area are finding it increasingly difficult to afford a median-priced home. It’s a pattern we’ve seen in the San Francisco Bay Area and in other hot housing markets like Seattle, Washington.
One of the Hottest Markets in 2021?
At the end of 2020, Zillow surveyed a group of more than 100 economists and real estate experts. Among other things, they asked the group which U.S. housing markets were most likely to outperform the nation in 2021, in terms of price growth. Austin, Texas rose to the top.
To quote their January 2021 summary report:
“An overwhelming 84% of those surveyed said Austin values would out-perform the national average, compared to just 9% who believe it would fare worse. Phoenix came in second with 69%, followed by Nashville (67%), Tampa (60%), and Denver (56%).”
Forecasts and predictions continuously name Austin, Texas as one of the hottest housing markets in the country. But why? What is it about the Texas capital city that makes it such a competitive real estate scene?
As usual, it comes down to two overriding factors. Supply and demand. There is very little of the former, but plenty of the latter.
Explosive Population Growth Is Fueling Demand
The Austin metro area population has grown considerably over the past few years. In fact, that’s an understatement. It’s one of the fastest-growing metro areas in the country — and might be the #1 fastest today.
This is one reason why we are seeing such strong forecasts for the Austin real estate market in 2021. It has a lot to do with growth-driven demand.
According to the U.S. Census Bureau, the population of Austin grew by 22% from 2010 to 2019. That’s more than triple the national growth rate for that same nine-year period.
The surrounding metro area has grown by leaps and bounds as well. In fact, some cities around Austin have experienced even greater population growth in recent years.
The city of Round Rock to the north recorded a 33% increase in population from 2010 to 2019. San Marcos, Texas grew by a whopping 43% during that timeframe. That’s the modern-day equivalent of a boomtown.
This alone could justify the strong housing market forecasts Austin, Texas is receiving in 2021. But it’s only half of the picture. Housing economics are driven by supply and demand.
The demand factor is obvious. With an influx of new residents, the Austin real estate market is receiving a steady inflow of home buyers. But we are also seeing extreme conditions on the supply side of things. So let’s talk about that next.
Real Estate Inventory Remains Woefully Low
A March 2021 report from the research team at Realtor.com showed how inventory levels have changed over the past year or so. That report contained housing market data for the nation as a whole, as well as the 50 largest metro areas.
We sorted their data to see which real estate markets have experienced the biggest drop in overall inventory levels. And guess which one rose to the top?That’s right … Austin, Texas.
From February 2020 to February 2021, the total number of active property listings within the Austin-Round Rock metro area declined by a staggering 73%. That was the largest inventory decline of all 50 metro areas included in that report. In other words, the Austin area real estate market “shrank” more than the other 49 metro areas analyzed in this report.
It stood out in other ways as well. To quote the March Realtor.com report:
“At the metro level, Austin, Texas, (+37.2%), Rochester, N.Y. (+27.6%) and Buffalo, N.Y. (+25.0%) posted the highest year-over-year median listing price growth in February  … Homes saw the greatest decline in time spent on the market compared to last year in Austin, Texas (-36 days), Charlotte, N.C. (-28 days) and Portland, Ore. (-27 days).”
Translation: This is a red-hot real estate market with steadily rising home prices, high competition, and quick sales. Buyers beware.
When you analyze housing market conditions for cities nationwide, Austin is ranked near the bottom in terms of inventory levels. There just aren’t enough homes listed for sale across the Austin metro area to satisfy the demand from home buyers. It’s not even close.
Meanwhile, this metro area continues to attract new residents from other parts of the country. So we have a supply-and-demand imbalance of extreme proportions. These conditions will likely persist through 2021 and into 2022, according to forecasts.
3 Factors That Make It an ‘Extreme’ Market
Time and time again, the Austin real estate market pops up on our radar. We conduct extensive research into housing market conditions nationwide, and we’ve seen this Central Texas city (and surrounding metro) on a number of top-ten lists, rankings and reports.
In many ways, it’s becoming an “extreme” real estate market. Consider the following:
- Major population growth. As mentioned above, the Austin-Round Rock metro area one of the fastest growing in the nation. Few other metropolitan areas come close to the level of growth we’ve seen in and around Austin. And there doesn’t appear to be any end in sight. This is partly what’s driving the bold predictions and forecasts for the Austin real estate market in 2021.
- Major inventory decline. Texas’s capital city doesn’t have the absolute lowest level of housing market supply in 2021. That “honor” probably goes to Seattle, Washington and a few other cities. However, the Austin metro area has experienced the biggest decline in inventory over the past couple of years. Supply levels have been low for a while now. In 2020, they sank a lot lower. As a result, the Austin real estate market is one of the most competitive in the country in 2021. Inventory has a lot to do with that.
- Major price growth. Austin, Texas also tops the list in terms of annual home-price appreciation. Few other cities can match it, in that regard. Among the nation’s 50 largest metros, Austin was ranked #1 in terms of annual price growth, according to Realtor.com’s March housing update.
Disclaimer: This article includes forecasts, predictions, and a general outlook for the Austin real estate market through 2021 and into 2022. Such forward-looking statements are the equivalent of an educated guess and should be treated as such. MetroDepth makes no claims or assertions regarding future economic or housing conditions.