Austin is the capital city for the State of Texas. Home to over 2.2 million residents. It has become a hotspot for millennials and creatives in particular, as they seek a balance of job opportunities and cultural amenities. Austin residents have access to world-class food, music, art, and a thriving nightlife. Texas also charges no income tax towards residents, making it a desirable state for both businesses and living.
Austin is a red hot market right now. The city was the top destination for those looking to move to a different metro area in the fourth quarter of 2020. The abundant job market is driving a highly educated workforce here, meaning renters can afford more. Rental vacancy in the Austin area is at a five-year low, hovering at just 3 percent. Average rental rates have slowly increased over the past five years and are currently at $1,548, but still remain below the national average of $1,740. Austin's home prices are rising rapidly. The median home price was just up 19.7 percent year-over-year, now sitting at $370,000, 40,000 above the national average. The city's price to rent ratio is just under 20, meaning it's more affordable for residents to rent than to buy. An eventual balancing of supply and demand should bring affordability concerns to more reasonable levels.
Austin is predicted to become one of the leading Fintech cities in the world, currently producing just over 135,000 jobs in the management, business, and financial operation occupations. In 2020, 12 percent of Austin's GDP came from manufacturing. The city of Austin is home to over 260 different life science and healthcare-related companies. Austin is also one of the top 20 markets for global tech.
The largest university in the greater city of Austin is the University of Texas at Austin, which has nearly 52,000 students enrolled. There are several private and non-profit universities in the area, including saint Edwards University, Huston-Tillotson University, and Concordia University Texas. Together, these schools have a combined total of just under 8,500 students enrolled.
The area surrounding the University of Texas can be a notable area for investors simply because of the continued demand for student housing. Two of the most popular and affordable are North University and Hyde Park. Central East Austin and East Austin are desirable areas for UT students, but prices for single-family residences are much more expensive than other areas. The group of neighborhoods, including Johnston Terrace, MLK- 183, and East MLK have a mixture of single-family homes and historic homes, making it an ideal location for fix and flip investors, developers, and buy-and-hold landlords. Neighborhoods just south of the popular neighborhoods such as Bouldin Creek, Zilker, and Travis Heights provide more room for returns, particularly in the area of South Manchaca. Round Rock is the largest suburb outside of the greater Austin metropolitan area and has become a desirable location for families and those seeking more affordable prices and space.
Austin, Texas is rapidly growing, and with that comes opportunity and challenges for real estate investors in the next few years. High demand for expansion, job opportunities, and desirable city amenities mean higher prices in a more competitive market. There's definitely opportunity to invest and profit in this area. But investors should get to know the market intimately and determine the best target market for them based on their investment goals and criteria.