I’m pretty worried that Austin’s future isn’t super-bright. Or at least not as bright as the Austin Chamber of Commerce wants you to think, although I guess that would always be true. And I want to again include a disclaimer here that A) i don’t know what I’m talking about and B) i’m not particularly well-read on this subject and C) you shouldn’t listen to me. Oh and D) I can’t or won’t cite anything supporting any of this. Consider this a grumpy old man editorial column in a small town paper from here down.
There are a bunch of things that seem unstable about this city right now. Austin’s growth rate is around 10%. The few things I have read seem to indicate that 4-5% is about the peak growth rate for an economy to be considered stable. Infrastructure and salaries have not kept pace with increases in property value - folks who have lived here for a very long time are seeing tax rates that are on par with coastal cities and Austin’s own growth rates, but salaries have only gone up a meager 3%, barely keeping pace with inflation. Infrastructure growth is way behind - Austin is over a million residents and growing (fast) but without the benefits of the light rail systems you see in cities like Salt Lake, without carpool lanes, and with an only recently revamped express bus system that is stuck in the same traffic everyone else is. These conditions have created increases in economic and racial inequality in other cities and it seems likely that they will continue to have that effect here in Austin. The reasons for this are complicated for sure.
Also, at least from where I stand, most of Austin’s rapid technological growth is fueled by tax incentives luring California-based companies like Intel to relocate some significant portion of their operation to Texas. Austin and Texas are not so much I think innovation sectors or whatever or job creators so much as very efficient job relocators. And the only part of Texas that Californians can stand is Austin, which I totally understand. But my point is that MOST of these companies are new to the area, residing in large concrete and glass campuses just like the ones they left behind in CA, and whose presence is predicated on massive tax breaks from the state and city governments. As property values climb, salaries and yes even eventually business taxes will have to climb accordingly, and whatever US municipality has convinced their legislature that being pro-big-business is a good long term plan will become their new home.
This is the thing about Austin - it’s a booming housing market as long as employment is stable. The big mortgage crash barely touched Austin back in what 2007 or whatever. Austin crashes when the employers crash, like when dot coms became appropriately valued on the stock market back around 2001. We moved here a year or two after that happened (we found out later), and boy, let me tell you, this was a fun and affordable place to live then!! Except nobody could find work but. Anyway temporarily relocating business that were not grown here and have NO loyalty or connection to this city is in my opinion a recipe for disaster with recent obvious justifications.
But hey.
The other thing is similar to cities like Vancouver, though on a much smaller and potentially more diverse scale, a lot of Austin’s rising property values have NOTHING to do with the city and state’s efforts to relocate Californian industries and everything to do with foreign real estate investment. That big ball of money rolling around the world looking for better than 5% returns (which literally directly triggered the massive mortgage collapse ~8 years ago) is mostly hovering over cities like Vancouver and London, but little Austin doesn’t need a very big share of that in order to get way unbalanced. And because of so-called “pro-business” Texas “regulations”, the Austin real estate market and all the predatory middlemen in and around it are highly incentivized to not just participate in this process but to actively support it so they can get helllllla dividends.
The end result is small houses made from poor materials in boring neighborhoods miles from downtown are selling for $300,000 or more, competitively, mostly changing hands between outside investors who are making weird percentages on each transfer of ownership, all of which is driving out people who actually live and work in the city and who helped make it the place that we fell in love with for so long.
And the odds that this can go on forever seem bad. Maybe Austin IS the next San Francisco, but allocations of VC don’t make that very believable, and Austin lacks the international gateway status most cities need to ride out the big hits.
As a homeowner or whatever this is a … tricky fork in the road. Is it better to stay here and rent for a while to see what happens? Rents are high right now but they’ll drop like a stone when all the big semiconductors bail for Atlanta or Baton Rouge. Assuming the landlords don’t burn everything down and cash out before then. Should we keep buying houses that we know are wildly overvalued and just hope we don’t get left with hundreds of thousands of dollars of unrecoverable debt? Or should we just peace out for a while and come back when things settle down?