Is Austin In Housing A Bubble? Comparing Austin To Los Angeles

Austin Housing Bubble

When we moved to Austin everyone told us that this was one of the last accessible real estate markets in a major US city. After almost a year in the city I can tell you, those days are gone if you want to live in downtown Austin. Sure, you can live 30-45 minutes outside of town in a big house and still save big, but affordable downtown living has come to an end.

We moved to Austin from Los Angeles and I assumed that prices in LA were inflated, it turns out LA is actually significantly more affordable than Austin, even in incredibly desirable areas like Bel Air and Marina del Rey. Couple this with the fact that new luxury highrises are going up every few months and it looks like living downtown is only going to become more expensive. In short, there was a time to buy real estate in downtown Austin, and that time is long past.

According to a study done by RealtyTrac and published on MainStreet.com Austin is one of the five US housing markets that data shows is in a housing bubble.

“Property values have risen to Texas-sized levels in Travis County, which is home to Austin and some surrounding communities. Median prices there hit $374,900 in October, or 27.3% more than their February 2008 peak.” (Source – RealtyTrac)

What’s funny is that property in downtown LA is actually priced at about half the cost of real estate in Downtown Austin. Couple this with the fact that property taxes in Austin are more than double the average property tax rate in Los Angeles and the market here looks even more unattractive. Here’s a look at a couple of properties in Los Angeles, both in very desirable areas, compared to two in downtown Austin. I’ve tried to find very similar properties to make the comparison as close as possible.

Downtown Los Angeles (770 sqft 1BR 1BA)

losangeles-realestate1

Downtown Austin (642 sqft 1BR 1BA)

austin-realestate2

Marina del Rey (1,074 sqft, 2BR 2BA)

losangeles-realestate2

Downtown Austin (983 sqft, 2BR 2BA)

austin-realestate1

Just to be clear, I’m talking about property in Los Angeles and Austin that are in desirable areas where people could easily walk to work. Without a doubt it is cheaper to live out in Hill Country in Austin where housing prices are definitely lower but when it comes to living downtown I think it’s safe to say we’re either in a bubble or Austin is on its way to becoming one of the most expensive places to live downtown.

I love it here, we moved from Los Angeles because I think Austin is without a doubt one of the most incredible cities on the planet. I’m proud to live here and call Austin home and one of the main reasons we moved is so we could walk to everything. I just wish we could get a two bedroom condo for under $500,000 like we could if we lived like the Fresh Price, in Bel Air.

Photo Credit: LindsayEvette via Compfight cc

{ 7 comments… add one }

  • John February 24, 2015, 9:01 am

    Nice piece
    That’s not going to be sustainable ….

    Reply
  • Andrew February 24, 2015, 9:31 am

    I’m not sure you’re comparing apples to apples.

    In Austin, downtown is the most expensive real estate, and then its prices drop (rather significantly) as you move away from downtown. L.A. isn’t like that, is it? I realize you also put a Marina Del Rey property in there, which shows that this isn’t the case in L.A.

    Downtown Austin real estate is very expensive, and I have no idea if it’s worth it. That said, there’s lots of relatively affordable real estate within 10 minutes of downtown. You don’t need to go 30-45 minutes out of town to find stuff a lot cheaper than what you’ll find around big cities in California. You can buy a home under $300 a foot within a five to ten minute drive of the city. In some areas about the same distance it drops below $200.

    I’d also argue that San Francisco is a better companion city to Austin than Los Angeles. By that measure, Austin is downright cheap.

    Reply
  • Pinky Brand February 24, 2015, 9:39 am

    As a native I can tell you I’ve seen boom and bust cycles quite a few times in the area. It will happen again. The trick is to be prepared. While property taxes are higher, I remind that we have no state income tax in Texas. One way or another the taxman will get his share!

    I think living and working in downtown Austin is a relatively new phenomenon for the area—and the incredible draw that downtown Austin has on the younger generation only exacerbates the bubble pricing. It wasn’t too long ago that you’d practically have to pay anyone to live in downtown Austin.

    What goes up will for sure come down! Bet on it.

    Reply
  • Joe February 24, 2015, 12:12 pm

    Escribe texto o la dirección de un sitio web, o bien, traduce un documento.
    I think we find a ideal place to live that if you should move on but it’s just a comparison in a place deñ highest level of the city of Barcelona in Spain that if you can see that the year is old with reference to your previous work, but the price is affordable for its amtiguedad and the no area are in the center of town but within 15 minutes drive you arrive at your workplace to better located outside the metropolitan area of ​​this city.
    http://www.habitaclia.com/comprar-piso-para_entrar_a_vivir_y_tranquilo_sant_gervasi_bonanova-barcelona-i1151001677281.htm
    € 397,000 to Change: $ 449,773.21.

    In your country families who suffer the issue of subprime return the key to your home and not have to pay anything, here in Spain was like the bubble is in the air is not gone and evictions of those who happen the same with the subprimer banks take to the streets to families many without work by the circumstances of the crisis and social policies and cuts in the most basic of life for all poor, middle and rich human person before and rises taxes, nowadays in Spain there are over 6 million poor, but worst of these people is that they are the evictions by banks that still have them for dessert note must pay the mortgage debt was trash that Spanish banks to buy the German Banks.

    They say the economy rises in Spain and the changes they see and their political demagogues are what harm a middle class citizen – media,

    I for one have a local property renovated as new in a uptown not far from where be the floor of the link I send you now since 2009 not to sell or rent that just because in Spain the only valid are all rescued banks with public money and do not pay any money but give as collateral local. Now I’m going to mortgage my home to make my startup and then a large part of this figure mortgage go to a lifecycle fund with which to give a percentage each month and your death have a life insurance bailout money collected for heirs.

    Best,

    Reply
  • Steve R February 24, 2015, 1:35 pm

    Do you know how those two cities might compare to that of Las Vegas area condo’s/homes?

    Reply
  • R P February 24, 2015, 3:00 pm

    Native Texans are well aware of the 1980s Austin (& Texas) property bust. History often repeats itself. Do you know what caused the property bust in 1980s? Oil crash

    Fast forward and WTI has fallen from $110 to $50 in 6 months. Another oil crash, and yet to be determined whether it has bottomed.

    In addition, we are in the midst of tech bubble 2.0 thanks to 0% interest rates the last 7 years

    Be patient with real estate in Austin

    Went to school at UT in mid 90’s before all of the hype about Austin began. Well that’s not entirely accurate, even when my father went to UT in the late 50’s it was the place to be.

    Amazing city no doubt, one of the best in US. Just a bit congested now with all of the new transplants. Infrastructure of the city wasn’t built to accommodate so many people and mass transit.

    Reply
  • Alan Dodd February 25, 2015, 10:22 am

    @Joe:
    I understand, I’m based in Ireland where there was a massive property crash, now prices are going up again. Like Spain, there is no handing the keys back, or almost none. The reckless lenders get a free lunch here in Europe, so that German savers can go on holidays to the Canaries.

    The Central Bank here is raising the deposit required by law to 20% and bringing in borrowing limits of 3.5 times income. There might be a few exceptions for first-time buyers, but there will be loads renting. We’ll see how that pans out.

    Reply

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