Electric car giant Tesla unveiled plans this week to build a $1.1 billion factory in Austin. Rumors had swirled for months prior that it might be happening, but this week, the news became official.
In building the factory on some 2,100 acres, Tesla has said it could hire 5,000 people over time.
The news follows 2018 and 2019 announcements by tech giants Apple and Google that they too plan to hire thousands of people in the Austin area in coming years.
While the jobs created by Tesla will definitely only fuel the city’s economic boom (Austin has ranked on numerous lists in recent times, including coming in at No. 3 on the Milken Institute’s Best-Performing Cities 2020 report), they will come at a lower salary than those created by the likes of Apple and Google. According to the Austin Business Journal, the factory could employ about 5,000 workers with an average annual salary of $47,147 and a median salary of $68,303.
Still, the new factory combined with a continued influx of people moving from both coasts – which has only reportedly increased in the wake of the COVID-19 pandemic – will no doubt lead to an even tighter housing market. And while Austin’s median home price may be significantly lower than say, New York or San Francisco, it’s been on such a rise that many have questioned whether the city remains affordable by Texas standards.
To Austinites, the rapid pace of home appreciation over the past 10 years has been startling with dramatic hikes in property taxes presenting even more threats to home ownership.
But for outsiders moving in, especially from the Bay Area, home prices in Austin are a bargain. Therein lies the friction – if transplants continue to relocate, it’s inevitable that housing prices will continue to climb. But to what degree remains uncertain.
For an idea of how hot the city’s housing market is, let’s look at the most recent statistics from the Austin Board of Realtors‘ June and Midyear 2020 Central Texas Housing Market report.
The number of home sales in the Austin-Round Rock Metropolitan Statistical Area spiked by 9.3% in June 2020 compared to the same month last year, according to the report. However, largely due to the COVID-19 pandemic, sales were down overall by 5.2% for the first half of 2020, according to ABOR’s report.
Sales dollar volume also increased 13.1% to $1.67 billion and pending sales increased by 33.7% to 4,737. And housing inventory declined 0.9 months to hit 1.8 months of inventory, demonstrating an extremely competitive and tight market across the region.
Despite an increase in pending sales, new listings dropped 5.4% to 4,170 listings, and active listings dropped 32.2% to 5,300 listings.
In June 2020, the median home price in the five-county metropolitan area increased 4.6% to $340,000. To give you an idea of how much the market has grown, that marks a 62.9% increase over the area’s median home price of $208,750 in June 2010. (For context, this compares to a median price of $1.38 million in the Santa Clara County metropolitan area.)
Still, inventory remains low and the market remains a seller’s one.
Chrissy Hand, a Realtor who works with Coldwell Banker in Austin, told HousingWire she has not seen a slowdown in business due to the COVID-19 pandemic. In fact, quite the opposite.
“I’m the busiest I’ve ever been,” she said. “And I know a lot of people in my office are saying the same.”
Migration from both coasts continues, including people continuing to relocate from the Bay Area to work for companies such as Apple, and others tired of dense, expensive areas such as New York, Hand added.
Hand also said that in the weeks leading up to Tesla’s announcement, she had a couple of investor clients reach out to her to set up a search for pockets of the city that are near where the factory is being built.
“When the news hit the wire, I had a client text me right away,” she said. “It’s a pretty exciting piece of news for Austin. Plus, it’s nice that it is a company with the sizzle and cache of Tesla. While these won’t be six-figure jobs, they will still be good jobs that will allow people to chase the American dream and buy a house.”
Homes with pools or that are move-in ready are particularly desirable in the COVID-19 era, according to Hand.
“People are paying premiums for homes with pools or that don’t require any work,” she said, noting that one home she recently listed for $795,000 ended up selling for $850,000, largely because it was move-in ready in a desirable location. “That’s always been the case but even more so, as people really don’t want to have contractors in and out.”
Karen Choate, also a Realtor with Coldwell Banker in Austin, said the biggest challenge for agents in the city is lack of inventory.
“Most homes for sale, if they are priced at fair market value, will have multiple offers in a matter of days, if not hours,” she said. “With both Tesla and Apple building here, I expect home prices and values are going to continue to go up for the next five to 10 years.”
As in other markets, Choate points to historically low interest rates being another driving force behind the speed of the growth in the Austin market.
“People are finding they can buy more house when the financing charges are low, and they are able to achieve a higher equity position in their home much sooner,” she added.
Lucy Tschirhart, an Austin-based real estate agent, said the new Tesla factory will speed up already rapid growth for gentrifying east Austin.
Specifically, Tesla is headed towards an area known as Del Valle, southeast Austin neighborhoods near the area “with still widespread hesitancy because those areas were not desirable because of historically socioeconomic status,” she said.
“The jobs and attention Tesla brings will spur growth in those areas more rapidly, continuing the path of affordability in Austin being pushed outwards and especially eastward,” Tschirhart said. “The reputation of Tesla, with its high socioeconomic customer base, is going to wake up many Austinites who have been stuck in the old ways of thinking that East Austin is not a place to live.”
As mentioned above, part of the driver behind the increase in home prices is the number of people and companies moving to Austin or in the case of Tesla, building a factory here. In this piece, I looked deeper into the increasing amount of tech companies in particular that had relocated to the city over the past few years. Also, over the past couple of years, I have covered how Apple’s plans to spend $1 billion on building a massive new campus in the city as well as Google’s plans to hire more people have impacted the real estate market in Austin.
“My agents have talked for years about the fact that when people come to Austin from the East and West Coast, but especially from high tech areas in California, they have what we call ‘reverse sticker shock,’“ Kevin Scanlan, former president of the Austin Board of Realtors, told me last year in this piece for Forbes. “They come here and can often get double the size for one half or one-third of the price. Plus, the quality of life versus the cost of living makes it a very attractive destination.”