Last month, we invited Israel Linares and Danny Khalil to educate us on the current status of the Central Texas real estate market at our monthly networking meetup. Israel and Danny are at the forefront of CoStar’s research endeavors in Central Texas, wielding their expertise in predictive analytics, risk assessment, and multi-sector market research to unpack the trends and trajectories of this dynamic region. While Austin and San Antonio are their focus, many factors affecting those urban areas are also affecting Houston and the Texas Triangle. Check out the full video on our YouTube channel.
1. Economic and Job Growth Drives Real Estate
One can’t discuss multi-family real estate without understanding the underlying economic and demographic trends shaping these markets. Central Texas, namely Austin and San Antonio, has seen an exceptional period of growth. Our cities are outpacing the national average in sectors such as education, health, leisure, and hospitality. This has attracted a surging migration not only of companies but also of talent from higher cost-of-living areas.
2. The Robust Job Market
Despite national concerns about labor, the latest job market reports for Austin and San Antonio are encouraging. Our cities have a resilient labor economy, with unemployment rates steadfastly lower than the national average. Yet, an uptick in recent layoff announcements warrants a cautious eye on the future. The availability of high-quality jobs directly influences the number of households seeking rental housing, so this is an overall positive factor.
3. Real Estate Market Trends: Beyond the Pandemic
The post-pandemic real estate market is facing a new set of challenges and opportunities. The Case-Shiller home price index indicates that house prices have been marching upward, a trend fueled by population growth, lower interest rates, and increased household formation. The market’s strength is evident, with the Fed’s actions temporarily taming inflation without harming the robust labor market.
4. Construction Booms and Supply Challenges
The construction landscape in Central Texas has been heating up, especially in the multi-family sector. Markets like Temple exemplify areas with steady growth and a moderate pace of new high-quality apartment developments. While storm damage in places like Georgetown has real estate investors worried about the rising insurance costs.
5. Absorption and Rent Trends
While supply-side pressures in San Antonio are causing rents to hover below peaks, there’s optimism that rent growth will resume in the coming years. However, Austin’s multi-family market is juggling high vacancies, with the rate peaking at around 13%—a sign tied to the construction boom seen in previous years.
6. The Investment Scene in Texas
San Antonio stands out for its high population growth, yet the median household income is slightly lower than average. Nevertheless, income growth has been outpacing the national average. Multi-family investment has remained strong throughout Texas metros. Austin, in particular, benefits from significant growth in suburban areas outside Travis County.
7. Consumer Confidence and Demand
There are signs that consumer sentiment is stabilizing, with inflation cooling down. This shift could translate to stronger demand for multi-family housing as early as 2024, offering a glimmer of hope in the context of the current high-supply environment.
8. A Future Outlook on the Multi-family Real Estate Market in Central Texas
Our guests from CoStar, Danny Khalil and Israel Linares, agree with us that while there are challenges in the current real estate market, the overall perspective is optimistic. Ultimately, Texas has proven to have a high level of economic resilience that supports Central Texas’s multi-family real estate market.
Additional Resources:
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