- Austin, Texas, has been a magnet for Americans for the last decade, with its population ballooning by more than 20 percent.
- Earlier this month, Elon Musk announced he was moving to Texas, leaving the Bay Area where he launched and grew Tesla. Cloud-computing giant Oracle said that it will relocate its headquarters from Silicon Valley to Austin.
- Even before the pandemic, the growing presence of tech corporations, including Facebook and Google, in Austin’s “Silicon Hills” area have added to the influx of residents. And now, the ability to work remotely — perhaps indefinitely — has driven millennials out of expensive cities on both coasts to Austin.
- Locals and realtors told Business Insider that Austin’s property market is reeling from the new transplants, leading to a market defined by bidding wars over homes, record-high prices for the area, and other telling signs of intense competition.
- Visit Business Insider’s homepage for more stories.
Country crooner George Straight once sang, “All my exes live in Texas.” Odds are yours probably do, too.
From 2010 to 2019, the population of Texas grew by about 3.8 million residents, as Insider previously reported. Now 29 million residents call the Lone Star State home — more than the entire population of Australia.
Within Texas, the capital of Austin has been the center of interest for relocating Americans for most of the last decade. In the last 10 years, the Austin area had a net migration of 355,902 residents —a whopping 20.7{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} of its 2010 population of about 1.7 million.
In 2020, Austin’s lure has proved stronger than ever, as the coronavirus pandemic’s normalization of remote work — coupled with the influx of businesses that have sought cheaper office space outside of major coastal cities — boosted already high demand.
Tech giants like Oracle and Tesla recently announced plans for expansion or relocation into the Austin area, adding to the growing list of corporations setting up shop outside of the San Francisco-Silicon Valley stretch. And companies like Facebook and Google, which already have thousands of Austin-based employees, are reported to be seeking additional office space in the city as well.
Not to mention Tesla chief Elon Musk, who said last week that he, wife Grimes, and baby X Æ A-Xii would also be decamping to Texas. Speculation is mounting that he’ll pick Austin for a home base, near the factory his electric-car juggernaut Tesla is building.
Techies who once worked in major hubs on the East or West Coasts have relocated to Austin to take advantage of lower costs of living, favorable tax laws, and an overall better quality of life, locals and real-estate industry experts told Insider.
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“Austin offers people the cachet of a cool cultural center and a burgeoning tech hub paying high wages, while still remaining much more affordable than coastal markets like San Francisco, San Jose, and Seattle,” Zillow senior economist Jeff Tucker told Insider.
It helps that Austin’s trendy music and food scene and its popular annual cool-kid tech conference, South by Southwest (or SXSW), have elevated its national profile and added to its allure.
The influx of transplants is sending Austin’s property market into a frenzy, sparking bidding wars over the limited number of homes available and pushing real-estate prices to record highs. Most homes are selling for significantly over asking price. There are hour-long lines to get into some open houses, and multimillion-dollar mansions in posh neighborhoods are trading hands in hushed off-market deals.
And while journalist Alex Kantrowitz used LinkedIn data to show that tech workers are not landing in Austin in 2020 at a faster pace than in 2019, the city is still gaining 1.84 tech workers for every one that leaves. Plus, the LinkedIn figures only measured inflow and outflow from April to October of this year. Musk and Oracle announced their moves this month — so the city is bracing for more.
The effects of Austin’s ascent, though, ripple throughout the once-modest city. Concerns about affordability and a lack of infrastructure take on new weight as more companies, executives, and employees pile in.
Here’s a look at how Austin rose to this vaunted position, and a peek at life in the boom town right now.
The exodus from Silicon Valley to Austin’s ‘Silicon Hills’
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Locals have nicknamed Austin’s western swath “Silicon Hills” because of the growing number of companies from Amazon and Cisco to Intel and PayPal that have offices there.
The topography of the area is more mountainous than other parts of Austin — and definitely higher in altitude than Silicon Valley, its more famous Californian counterpart.
The biggest influx of new residents has been from California, said Austin realtor Ian Grossman of Keller Williams, emphasizing that many denizens of San Francisco and Silicon Valley see Texas as a cheaper, lower-tax haven. That trend seems primed to continue given the Austin expansion plans Google and Apple revealed this year.
“Google has a big presence here,” said Grossman, pointing to a high-rise in downtown Austin the tech giant built about two years ago, where more than 1,100 of its employees are now based. Google is also expected to lease space in a new development under construction next to its current tower.
See also: Silicon Valley tech talent is flocking to Austin, Texas, during the pandemic. Here’s what it’s like in the growing tech hub of “Silicon Hills.”
For its part, Apple recently announced its plans for a $1 billion, 3 million-square-foot Austin campus, which is expected to open in 2022. Per Apple’s press release, the campus will house 5,000 employees initially, with the capacity to grow to 15,000.
Amazon, too, has shared plans to grow its footprint in the Austin area, Grossman added, mentioning that the company’s fulfilment centers in the Austin suburbs, about 20 minutes outside the city, are set to increase capacity with the addition of an 820,000-square-foot Pflugerville fulfillment center set to open in 2021.
The biggest announcement this year, though, Grossman said, is Tesla’s plan to build a factory in the area, which has already broken ground. That plus Elon Musk’s announcement this week of a personal move to the area has drawn even more attention to the Lone Star State capital.
Austin may be relatively affordable — but it’s rapidly growing pricier
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Employees of the major corporations in Silicon Hills who relocate to Austin find its lower property prices appealing.
Houses are a hot commodity for millennials aging into homeownership and parenthood, Tucker, of Zillow, said, noting that Austin can also offer California emigrants a big break on state income taxes.
As the city tries to meet the needs of the influx of transplants moving into town, the local real-estate market has experienced rapid growth. Though demand for Austin real estate has trended upward for most of the last decade, local brokers say migration to the area has hit an all-time high in 2020, sending home prices skyrocketing.
Read more: Here’s when US home prices may stop skyrocketing
The median sale price in the Austin metro area at the end of October 2020 was $371,534, according to data Zillow shared with Insider, a figure 13.8{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} higher than the year before. By comparison, between 2018 and 2019, prices increased 8.4{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb}.
Zillow data also shows that Austin leads the nation in year-over-year increases in median listing price, a metric that indicates what buyers hope their homes can fetch. That figure that jumped 23.1{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} from 2019 to $446,642.
Much of 2020’s growth is thanks to the remote work trend brought on by the coronavirus pandemic. The adoption and liberalization of work-from-home policies have only worked to Austin’s advantage, Tucker said, emphasizing that, as a result, major tech companies and workers have broadened their horizons for headquarters locations and putting down residential roots. Some major firms are even letting their employees work remotely indefinitely.
‘There’s nothing like wearing shorts in December’
Courtesy of Visit Austin/Dylan Johnson
As the migration data shows, many new Austin residents arrived before the pandemic.
Take Ivan and Julia Serdyuk, who left New York for a stint in Germany before returning to the US and choosing to put down roots in Austin in 2019 with their young child.
The 35-year-old project manager and 36-year-old sales analyst considered a broad swath of geographic options when they repatriated.
“Everything on the map was open,” the couple told Insider.
But after reading that Austin ranked highly on several “best place to live” rankings, the pair said the city stood out. It had delicious food, outdoorsy activities and a reliable public-school school system for their 8-year-old. (Many of these attractive qualities, it should be said, continue to lure newcomers during 2020.)
“All the metrics weighed in our favor,” said Ivan, who enlisted Century 21 broker Julie Mattoon to help them buy a house after a year of renting.
Having lived in Austin for about a year and a half, they’re settled in a four-bedroom house. Tacos, hiking, and warm weather year-round are among their favorite Austin attributes.
“There’s nothing like wearing shorts in December,” Ivan joked.
Austin is running out of new homes
Mark Lee/
Demand from new arrivals is boosting prices, but so is a lack of supply.
Inventory in the Austin metro area is currently down a staggering 40.9{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} year over year, according to Zillow data. On average, Austin homes for sale went under contract after just 7 days. Buyers are snatching up properties on the market an average of 19 days faster than last year — and the rate at which Austin properties are zooming into contract is among the fastest in the country.
Current owners are afraid to list out of fear they won’t be able to find, afford, or win a bidding war for a new place to live. Home builders are struggling to keep up, according to Grossman, reporting they are unable to take on new construction contracts or requests because they are backed up with prior orders. Some, he added, even have wait lists.
Earlier and towards the middle of the year builders were basking in the busyness, Grossman said, but now the market is so hot they can’t keep up.
It can take an hour just to get into an open house
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“The market was almost moving too fast,” said Grossman, adding that one result is buyers getting shut out of deals even when they make over-ask offers.
Other hallmarks of a competitive market are becoming more commonplace.
With inventory so low, Grossman said, buyers are spurred to act fast because they fear missing out on today’s prices only to have to pay tomorrow’s higher ones.
Even for those with unlimited cash on hand, existing properties are as difficult to snag. “Even multimillion-dollar properties are getting multiple offers,” he said.
Even properties not listed on the public, consolidated Multiple Listings Service (MLS) — aka whisper listings — are being fought over via exclusive services that broker such off-market transactions.
One of Grossman’s clients recently entered into a bidding war on a $3 million new-construction house, he told Insider. They were prepared to make an offer $200,000 over the asking price — but had already been outbid, so they walked away.
Read more: ‘No-cap’ offers, 21 bids per house, and sales $100,000 over ask: Realtors describe the ‘feeding frenzy’ of the Idaho housing market as city dwellers flock to the Gem State
Grossman reports that even more modest homes that need work, listed for around $450,000, are going for as much as $60,000 over ask. And buyers are taking big risks — like waiving appraisal contingencies, which are typically standard for making sure a home doesn’t have any major, costly structural or other issues — if it means they can win a home.
Mattoon, of Century 21, has witnessed interested buyers line up up outside homes to see properties. Mattoon herself even waited almost an hour for a showing in recent weeks.
In what Mattoon calls a “fabulous but challenging” climate, she warns buyers to come in with a strong offer, brace for a bidding war, and be prepared to walk away without the property. As multiple-bid situations have become commonplace, chances of getting an Austin home at first offer are slim.
The downsides of a boom town
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As the influx of newcomers, middle-income, and wealthy alike drives up prices, locals in lower income brackets, including teachers, artists, and nurses, can get pushed out of of choice neighborhoods.
Even before the pandemic, the Austin Chronicle reported that high-earning tech and medical professionals made up the bulk of the population left in the pricier city center.
And with the unprecedented demand from deeper-pocketed folks flocking to Austin in 2020, locals are debating whether the city’s infrastructure can even hold up under the strain.
See also: Millennials and Gen Z are fleeing cities and buying up homes in the suburbs amid the pandemic
Plans to double the size of Austin’s local airport — which was the second-fastest-growing mid-size airport in 2019 — have been delayed as a result of the coronavirus pandemic.
Complaints of standstill traffic during peak hours on the city’s main drags have at least been partially addressed with a new initiative called Project Connect, a transit plan moving ahead that’s set to a new public transit system to the historically car-centric city. Among its promises to combat snarled roads: a new transit tunnel to separate light rail tracks from car traffic, and an expanded bus system with an all-electric fleet.
There are bidding wars over Austin’s poshest homes, too
Travis Baker Twist Tou/Gary Dolch
Bidding wars have even broken out over homes worth tens of millions of dollars, according to Gary Dolch, a Compass agent who’s specializes in luxury homes and has worked in Austin for over a decade.
Take a $26 million mansion on Lake Austin, which found a buyer and closed in less than two weeks after attracting multiple bids in a private sale, Dolch told Insider.
West Lake Hills, a suburb just west of downtown Austin, is one in-demand area, Dolch said. The lakefront properties there attract Austin’s wealthiest residents and can range from $1 million to $50 million. Like in the rest of the metropolitan area, prices have been increasing: Some lots that would’ve cost $3 to $5 million a few years ago are now selling for $10 million.
Read more: All-cash offers and 18 bids on a single home: Realtors describe the frenzied state of the suburban market as people abandon New York City
Rural ranches have proven popular this year, attracting atypically high demand from some affluent buyers looking for primary or secondary residences, Dolch says. After all, this is Texas, and ranch properties are common on Austin’s outskirts.
Even multimillion-dollar ranches in the “mid to upper teens” have fielded multiple offers, Dolch added. Buyers are increasingly seeking out estates with a lot of acreage and spacious homes amid the COVID-19 crisis, when distance and isolation have become coveted amenities.
“Tech has been here, but it’s exploding now,” Dolch said. Because the tech industry boom has resulted in more wealthy residents, he added, he’s taken to calling Austin “the new Emerald City.”
