Get In Touch Today! 512-910-4505 PARADISA COMMERCIAL>

What’s Driving Up Austin Home Buying Costs

November 11, 2019

Our fair city of Austin has topped the lists of best places to live for years on end. Of course, we can’t blame the outsiders who flock here in droves, but there’s a downside to the Lone Star capital being such an ideal place to plant your roots. Compared to median home value of $189,900 in Houston and $213,400 in Dallas-Fort Worth, the Austin metro has a median home value of $381,500

These high housing prices have even grown much faster in net total than in median price compared to other large Texas cities, rising $80,000 in the past eight years alone. In fact, the Weird City has the second most expensive home-buying market after Galveston. But it’s not just popularity alone — or the most delicious breakfast tacos — that are causing the rise of Austin construction and home costs without a dip in sight. Read on to find out about the different economic and regulatory issues that are driving up Austin’s home buying costs. 

Supply and Demand
It’s the most basic premise of economic theory. Like so many things in our marketplace, 

the supply of homes within the Austin area is a limited resource. City governing bodies have pushed for increased urban density over the years, but that doesn’t necessarily correct the imbalance of available or affordable housing. Over time, home buyers have continued to purchase within the Austin metropolitan area, and as a result the population influx has outpaced the housing market. 

Too many people are vying for a limited pool of homes, which makes Austin a low supply, high demand market. This often causes a feedback loop, where we see price wars between buyers that raise the amount paid for a single home. This can also feed into an overall increase in property values in the long run, translating into higher real estate prices overall.

Labor Shortage and Subcontractor Costs

Austin’s current labor market is lacking in quality managerial, professional, and subcontractor labor — which contributes to increased home buying costs in a number of ways. The current economic environment offers plenty of opportunities for workers within the construction industry. However, record unemployment levels put pressure on builders to offer more in terms of compensation in order to attract top talent. This is good for job seekers, but it increases the cost of business and indirectly drives up the costs of construction for buyers. 

Because there are plenty of opportunities for work, it’s also relatively easy for subcontractors to hop between jobs and choose the projects that pay the most. In addition, not every tradesman is the best in their field of choice, and if you want the best of the best, that usually means paying more.

Permit Requirements

Between 2008 and 2012, the Houston metro area granted between 21,000 and 28,000 building permits annually, and Dallas-Fort Worth saw between 14,000 and 18,000. In comparison, the Austin metro area granted fewer than 10,000 permits annually. And because this is compounded by the fact that the Lone Star capital routinely ranks at or near the top in population growth rate, it results in slow and cumbersome permitting process, which holds up builders from new construction and keeps market supply from catching up to demand. This also directly affects the costs for financing construction in various ways. The lagging permitting process means that any existing bank loans end up costing more because of the prolonged interest. It also requires builders to hire agents just to get their permits approved, which creates additional costs for the homebuyers, too. The cost of the permits has increased, too. Austin’s Development Services Department has increased fees for permits and reviews in order to fund new staff hires that will clear up the long wait times.

Increasingly High Expectations of Custom Home Building Clients

Building a home is one thing, but designing a custom or even semi-custom home is another. Today’s Austin residents look for builders that can design homes to meet their one-of-a-kind vision, down to the very last detail. The only problem is that many potential homebuyers tend to underestimate just how much— whether labor or materials —goes into the construction of a uniquely customized home build, especially to keep it within a realistic budget.

Those high construction costs only increase for homebuyers who want luxury amenities and features that are more high-end that what’s typically found in traditional homes, such as home theaters, expansive pools, spa bathrooms with walk-in showers, and radiant flooring. Buyers also want luxury materials such as quartz or marble for countertop, natural stone and wood, marble, etc. Because such high-quality materials will last a lifetime, they cost more to integrate into the home. The costs of some materials are even further compounded due to ongoing trade wars and tariffs.

Looking for an Austin Construction Team to Build Your Dream Home?

At Paradisa Homes, we’re experts in custom Austin construction who want to help bring your vision of a one-of-a-kind space to life, no matter what your aesthetic style. Contact us today to learn how our architects and designers can help you build the kind of home you’ll never want to leave.