6 ms·

I suspect the cost of living data for Austin trails reality by some significant margin. The sources don't indicate the age of the data, but even if it's only a

I suspect the cost of living data for Austin trails reality by some significant margin. The sources don't indicate the age of the data, but even if it's only a couple of years old, it's going to be wrong by enough to be a factor. I have lived in Austin for a couple of years, and also lived here (and owned a house here) about 8 years ago. The cost of homes here has gone up tremendously since then. I was shopping for a house a few months ago, and was simply unable to buy one; those in my price range wouldn't accept my offer because it wasn't an all-cash offer (despite being $5000 or more over the asking price). Investors paying cash are buying aggressively here, driving up prices. Rental rates have risen at an even faster pace. Certainly, it's cheaper here than in Silicon Valley. Five years ago, I was paying $2145 a month in rent for a house a couple of blocks from downtown Mountain View. Today I'm paying $1690 a month for a house quite far outside of downtown Austin and on the east side; renting in downtown is not an option, even at $2000+ a month. Apartments are somewhat cheaper, and buying a house is still notably cheaper than Silicon Valley, but the gap has been closing rapidly. In short, Austin has grown incredibly fast in recent years, and the real estate market hasn't been able to absorb that growth in anything like a reasonable manner. So much so that I'd be shocked if the graphs in this article still reflect reality for Austin.

nugget 12y ago
Tremendously is relative. Austin and SV real estate prices are not close at all. High property taxes keep home prices lower across almost all of Texas. Austin prices are limited in their 'irrational exuberance' upside since there's no way to finance a property tax bill and existing homeowners start to suffer. California is the opposite with low tax rates and proposition 13 covering existing homeowners - perfect conditions for price speculation.
- s73v3r 12y ago
  The real estate prices aren't close, but what about salary? What about the real estate price relative to salary?
  - hkarthik 12y ago
    The salaries in neither area match up to current housing prices, nor do they keep up with the increasing prices year over year. What I have observed is that housing prices going up by 20% usually results in salaries only going up by 8%. After 5 years, houses cost twice as much but salaries are only 40% higher. And to see those salary gains you have to switch companies and risk being labeled a "job hopper". The game is rigged for developers in most of the tech hubs. There is a reason so many of us opt out of it by working remote in low cost areas.
briandear 12y ago
So the question is, how much does that Mountain View place cost today? You don't need 1 million to buy a decent house in Austin. In SV/San Fran, good luck.
- WhitneyLand 12y ago
  In a lot of places even 1 million isn't a decent house, once you try and accommodate kids. If you consider sqft of home/land, amenities and distance to highly rated schools, Austin can be 10x less expensive, and it's easy to show examples of this.
- exelius 12y ago
  You do if you're looking in south Austin (78704). Even tiny 1br bungalows go for $750k+. Unlike SV though, if you go a few miles outside south Austin there are plenty of affordable homes in good neighborhoods. They may not be as hip or convenient, but at least they exist.
- raincom 12y ago
  Average $1.8M for 3b/3b in Mt View. $1.2 for 2b/1b. I paid $1600 for 2b/2b for a decent apartment (2625 California St) in Mountain View--in 2001. Now the same apartment goes for $3200.
mark-ruwt 12y ago
This is a common refrain, but one I consider misguided, having lived in Austin since the first .com collapse. While Yes, housing costs have moved up, others have remained flat (so relatively compared to other cities, have moved down). As silly as it sounds, my favorite metric is "Cost of Drinking". Find the fancy cocktail bars in any city's downtown. In Austin, nothing on the menu is above $12 at Midnight Cowboy or The Garage. Now compare that to the other cities on this list.
- ChainsawSurgery 12y ago
  > In Austin, nothing on the menu is above $12 at Midnight Cowboy or The Garage. Now compare that to the other cities on this list. I dunno if that's a great metric - or maybe it is and Austin's more expensive than you and I think. Cocktails at Gramercy Tavern are $14.
- adrianparsons 12y ago
  It's true that cocktails are extremely high quality in NY and generally the same price as they are elsewhere. That said, you can't get a $2 Shiner Bock here.
  - clavalle 12y ago
    Please tell me where to get a $2 Shiner.
    - jkestner 12y ago
      HEB. More seriously, it takes a happy hour. Doc's takes half off all Texas beers.
- wahsd 12y ago
  I am not sure you are fully connected into the situation anymore. Rents have increased around 40% over 5 years on average and that includes the outlying areas that aren't really even Austin anymore. Home prices are skyrocketing and out of control, e.g., Mueller development is in the $800,000 range for 3/3 on what looks to be about a 1/8 acre lot where you have a car sized back yard and you're paying around 2% property taxes per year. Then there's also the Fitch assessment that Austin home prices are the most overvalued IN THE COUNTRY http://www.bizjournals.com/austin/blog/real-estate/2014/12/austin-home-prices-most-overvalued-in-the-country.html?page=all http://www.bizjournals.com/austin/blog/real-estate/2014/12/a... There is absolutely not way that the data is accurate, just alone the velocity of the Austin market guarantees that the data is inaccurate.
nkozyra 12y ago
Sometimes we're provincially biased, though. What you describe is not all that unusual nationwide. And not to point out the obvious, but five years ago was rock bottom for this nation's economy (and housing market). I don't think that's a fair comparison, even if it is Mountain View v. Austin.
chiph 12y ago
I have the same problem in Austin. Prices are going up faster than I can save, even accounting for the downpayment leverage. There's no way that I can compete with the all-cash offers that are $10k and $20k above asking price that are being made by investors and people from California and overseas. Knowing that it's a bubble, I think I'm going to have to wait until it pops, and just keep renting until then. Because commuting from Buda or Georgetown isn't attractive to me.
- tootie 12y ago
  Oh Austin is so cute. I've lost apartments in Brooklyn getting outbid by $300K.
  - yourapostasy 12y ago
    Austin's metro economy is currently insufficiently developed (that is, it hasn't found a way yet to geographically lock in any desirable, large-scale economic network effects) to support the kind of globally-unique signature metro economy associated with the metro areas like NYC, London, Tokyo, Singapore, Shanghai, etc. Those signature economies can support the kinds of incomes it takes to regularly yield six-figure bidding gaps.
- vonseel 12y ago
  Yeah, and what developers here are going to have $500k cash to drop on a 3/2 in Crestview.
Spooky23 12y ago
The life hack to actually come out ahead is to avoid these places and find a good opportunity in a cheaper place. I don't know a lot about Austin, but I'm familiar with NYC, and I think that example works too. If you define the "cool" part of NYC as being in Manhattan, once you have a family it's irrelevant, because you can't live there... like 98% of everyone else, you end up in Jersey, the boroughs, or Long Island. Three hours north of NYC, a house costs 60-80% less, and you have the essentially the same access to NYC cool stuff without the hassle of NYC. In my case, paying 7% of income for a mortgage on a nice big house that I will own in 15-20 years and banking savings is more appealing than some interest only loan on a $750k raised ranch in a big metro area. Barring building a successful business, a lottery-style liquidity event or selling your soul to some hedge fund, I don't see a reliable way to live in NYC, SFO, etc and coming out with any wealth.
- wspeirs 12y ago
  Yea, NYC has a HUGE advantage because of the train system going into and out of the city. You can easily commute south to Jersey or north to Connecticut. Each stop going away from NYC drops ~$20K on comparable houses (with a few exceptions like Greenwich). I've heard in the bay area the train system is terrible.
- maratd 12y ago
  > Three hours north of NYC, a house costs 60-80% less, and you have the essentially the same access to NYC cool stuff without the hassle of NYC. You really don't need to go that far. In fact, you shouldn't. You'll hit Lake George and the prices will start to go back up. An hour or two out and you'll be closer and the houses are just as cheap. You can also go West into NJ and you'll experience the same price drop. The problem is that you'll be 30 min away driving from a decent grocery store. In fact, you'll be 30 min away driving from pretty much everything.
- cylinder 12y ago
  Three hours, seriously? That is no longer within the metro area of NY, not even close. If you're talking about suburban commuting, houses upstate in Westchester are still $1 million with a fat 3% property tax bill. The trains suck and have a history of safety issues and you have to spend 2 hours a day on one. No thanks. Don't try to settle in the NY metro w/ a family unless you are in finance, your quality of life will suck. If you aren't living in the city there's no point to being here, I would much rather be somewhere like Utah, California, Wash state.
exelius 12y ago
This is true if you're speaking of downtown Austin. Most tech companies are in north Austin, which is decidedly less cool and more strip mall-ish. You can still get a huge house for $200k if you look in Round Rock or Cedar Park -- both of which are within a 15-20 minute commute of the Braker/Metric area where most of the low-cost office space that attracts startups is. It's not super sexy, but cheap housing still exists in Austin if you're willing to drive a little bit.
- pm90 12y ago
  Which is becoming a much bigger problem because of the crushing traffic and limited public transportation.
  - exelius 12y ago
    Welcome to Texas, you must be new here.
slm_HN 12y ago
>I was shopping for a house a few months ago, and was simply unable to buy one; those in my price range wouldn't accept my offer because it wasn't an all-cash offer I don't understand this. If you're pre-qualified for a $500,000 dollar loan how is your offer worse than someone willing to pay $495,000 cash?
- yourapostasy 12y ago
  Deal velocity. An "all cash" offer at 1% less than asking is more attractive to the seller's agent (not necessarily the seller) than a loan-process-backed offer, because the agent wants to close quickly and move onto the next deal. The loan process adds days and weeks to the deal, while the "cash" offer can literally close tomorrow. I'm scare quoting "cash" because what is really happening most of the time is the cash represents investor pools of already-fronted, already-loaned-out sums; it's only the minority of "all cash" offers that are actually an individual investor writing out unencumbered checks (and even then, that check is still somewhat encumbered by future flip profit expectations). Really what is happening is you are seeing competition between de facto loans already-made and turned into ready cash, and loan promises.
  - maratd 12y ago
    > not necessarily the seller Usually the seller too. A quick tip for those in the market. If you're trying to beat out cash offers, there's a sweet spot in every market where after a certain price point, the cash buyers drop off.
    - yourapostasy 12y ago
      My understanding of the Austin market (please correct me if you know otherwise, I was just an interested observer of the market so as to educate myself before pulling the trigger, not an active participant) is there are two such sweet spots: well below the Austin median (like the $150K area), and way into the stratosphere (like the $1.5M+ area). Below the median, the fixed costs and time commitments per transaction eat up too much of the flipping profit. In the stratosphere, and their deal velocity slows down too much (plus there are issues with money management, i.e., left holding the bag when the bottom cycle arrives). Neither of these sweet spots to avoid hordes of cash buyers are likely to appeal to the median HN reader trying to find a residence in Austin. Too low and either the school district is below acceptable performance and/or the commute distance too far (though Austin metro area has it easy commute time-wise compared to places like LA, SF, NYC, ORD, MIA). Too high and unless you are cashing out of an even greater asset-inflated area, you can't afford it.

nugget 12y ago

Tremendously is relative. Austin and SV real estate prices are not close at all. High property taxes keep home prices lower across almost all of Texas. Austin prices are limited in their 'irrational exuberance' upside since there's no way to finance a property tax bill and existing homeowners start to suffer. California is the opposite with low tax rates and proposition 13 covering existing homeowners - perfect conditions for price speculation.

s73v3r 12y ago
The real estate prices aren't close, but what about salary? What about the real estate price relative to salary?
- hkarthik 12y ago
  The salaries in neither area match up to current housing prices, nor do they keep up with the increasing prices year over year. What I have observed is that housing prices going up by 20% usually results in salaries only going up by 8%. After 5 years, houses cost twice as much but salaries are only 40% higher. And to see those salary gains you have to switch companies and risk being labeled a "job hopper". The game is rigged for developers in most of the tech hubs. There is a reason so many of us opt out of it by working remote in low cost areas.

briandear 12y ago

So the question is, how much does that Mountain View place cost today? You don't need 1 million to buy a decent house in Austin. In SV/San Fran, good luck.

WhitneyLand 12y ago
In a lot of places even 1 million isn't a decent house, once you try and accommodate kids. If you consider sqft of home/land, amenities and distance to highly rated schools, Austin can be 10x less expensive, and it's easy to show examples of this.
exelius 12y ago
You do if you're looking in south Austin (78704). Even tiny 1br bungalows go for $750k+. Unlike SV though, if you go a few miles outside south Austin there are plenty of affordable homes in good neighborhoods. They may not be as hip or convenient, but at least they exist.
raincom 12y ago
Average $1.8M for 3b/3b in Mt View. $1.2 for 2b/1b. I paid $1600 for 2b/2b for a decent apartment (2625 California St) in Mountain View--in 2001. Now the same apartment goes for $3200.

mark-ruwt 12y ago

This is a common refrain, but one I consider misguided, having lived in Austin since the first .com collapse. While Yes, housing costs have moved up, others have remained flat (so relatively compared to other cities, have moved down). As silly as it sounds, my favorite metric is "Cost of Drinking". Find the fancy cocktail bars in any city's downtown. In Austin, nothing on the menu is above $12 at Midnight Cowboy or The Garage. Now compare that to the other cities on this list.

ChainsawSurgery 12y ago
> In Austin, nothing on the menu is above $12 at Midnight Cowboy or The Garage. Now compare that to the other cities on this list. I dunno if that's a great metric - or maybe it is and Austin's more expensive than you and I think. Cocktails at Gramercy Tavern are $14.
adrianparsons 12y ago
It's true that cocktails are extremely high quality in NY and generally the same price as they are elsewhere. That said, you can't get a $2 Shiner Bock here.
- clavalle 12y ago
  Please tell me where to get a $2 Shiner.
  - jkestner 12y ago
    HEB. More seriously, it takes a happy hour. Doc's takes half off all Texas beers.
wahsd 12y ago
I am not sure you are fully connected into the situation anymore. Rents have increased around 40% over 5 years on average and that includes the outlying areas that aren't really even Austin anymore. Home prices are skyrocketing and out of control, e.g., Mueller development is in the $800,000 range for 3/3 on what looks to be about a 1/8 acre lot where you have a car sized back yard and you're paying around 2% property taxes per year. Then there's also the Fitch assessment that Austin home prices are the most overvalued IN THE COUNTRY http://www.bizjournals.com/austin/blog/real-estate/2014/12/austin-home-prices-most-overvalued-in-the-country.html?page=all http://www.bizjournals.com/austin/blog/real-estate/2014/12/a... There is absolutely not way that the data is accurate, just alone the velocity of the Austin market guarantees that the data is inaccurate.

nkozyra 12y ago

Sometimes we're provincially biased, though. What you describe is not all that unusual nationwide. And not to point out the obvious, but five years ago was rock bottom for this nation's economy (and housing market). I don't think that's a fair comparison, even if it is Mountain View v. Austin.

chiph 12y ago

I have the same problem in Austin. Prices are going up faster than I can save, even accounting for the downpayment leverage. There's no way that I can compete with the all-cash offers that are $10k and $20k above asking price that are being made by investors and people from California and overseas. Knowing that it's a bubble, I think I'm going to have to wait until it pops, and just keep renting until then. Because commuting from Buda or Georgetown isn't attractive to me.

tootie 12y ago
Oh Austin is so cute. I've lost apartments in Brooklyn getting outbid by $300K.
- yourapostasy 12y ago
  Austin's metro economy is currently insufficiently developed (that is, it hasn't found a way yet to geographically lock in any desirable, large-scale economic network effects) to support the kind of globally-unique signature metro economy associated with the metro areas like NYC, London, Tokyo, Singapore, Shanghai, etc. Those signature economies can support the kinds of incomes it takes to regularly yield six-figure bidding gaps.
vonseel 12y ago
Yeah, and what developers here are going to have $500k cash to drop on a 3/2 in Crestview.

Spooky23 12y ago

The life hack to actually come out ahead is to avoid these places and find a good opportunity in a cheaper place. I don't know a lot about Austin, but I'm familiar with NYC, and I think that example works too. If you define the "cool" part of NYC as being in Manhattan, once you have a family it's irrelevant, because you can't live there... like 98% of everyone else, you end up in Jersey, the boroughs, or Long Island. Three hours north of NYC, a house costs 60-80% less, and you have the essentially the same access to NYC cool stuff without the hassle of NYC. In my case, paying 7% of income for a mortgage on a nice big house that I will own in 15-20 years and banking savings is more appealing than some interest only loan on a $750k raised ranch in a big metro area. Barring building a successful business, a lottery-style liquidity event or selling your soul to some hedge fund, I don't see a reliable way to live in NYC, SFO, etc and coming out with any wealth.

wspeirs 12y ago
Yea, NYC has a HUGE advantage because of the train system going into and out of the city. You can easily commute south to Jersey or north to Connecticut. Each stop going away from NYC drops ~$20K on comparable houses (with a few exceptions like Greenwich). I've heard in the bay area the train system is terrible.
maratd 12y ago
> Three hours north of NYC, a house costs 60-80% less, and you have the essentially the same access to NYC cool stuff without the hassle of NYC. You really don't need to go that far. In fact, you shouldn't. You'll hit Lake George and the prices will start to go back up. An hour or two out and you'll be closer and the houses are just as cheap. You can also go West into NJ and you'll experience the same price drop. The problem is that you'll be 30 min away driving from a decent grocery store. In fact, you'll be 30 min away driving from pretty much everything.
cylinder 12y ago
Three hours, seriously? That is no longer within the metro area of NY, not even close. If you're talking about suburban commuting, houses upstate in Westchester are still $1 million with a fat 3% property tax bill. The trains suck and have a history of safety issues and you have to spend 2 hours a day on one. No thanks. Don't try to settle in the NY metro w/ a family unless you are in finance, your quality of life will suck. If you aren't living in the city there's no point to being here, I would much rather be somewhere like Utah, California, Wash state.

exelius 12y ago

This is true if you're speaking of downtown Austin. Most tech companies are in north Austin, which is decidedly less cool and more strip mall-ish. You can still get a huge house for $200k if you look in Round Rock or Cedar Park -- both of which are within a 15-20 minute commute of the Braker/Metric area where most of the low-cost office space that attracts startups is. It's not super sexy, but cheap housing still exists in Austin if you're willing to drive a little bit.

pm90 12y ago
Which is becoming a much bigger problem because of the crushing traffic and limited public transportation.
- exelius 12y ago
  Welcome to Texas, you must be new here.

slm_HN 12y ago

>I was shopping for a house a few months ago, and was simply unable to buy one; those in my price range wouldn't accept my offer because it wasn't an all-cash offer I don't understand this. If you're pre-qualified for a $500,000 dollar loan how is your offer worse than someone willing to pay $495,000 cash?

yourapostasy 12y ago
Deal velocity. An "all cash" offer at 1% less than asking is more attractive to the seller's agent (not necessarily the seller) than a loan-process-backed offer, because the agent wants to close quickly and move onto the next deal. The loan process adds days and weeks to the deal, while the "cash" offer can literally close tomorrow. I'm scare quoting "cash" because what is really happening most of the time is the cash represents investor pools of already-fronted, already-loaned-out sums; it's only the minority of "all cash" offers that are actually an individual investor writing out unencumbered checks (and even then, that check is still somewhat encumbered by future flip profit expectations). Really what is happening is you are seeing competition between de facto loans already-made and turned into ready cash, and loan promises.
- maratd 12y ago
  > not necessarily the seller Usually the seller too. A quick tip for those in the market. If you're trying to beat out cash offers, there's a sweet spot in every market where after a certain price point, the cash buyers drop off.
  - yourapostasy 12y ago
    My understanding of the Austin market (please correct me if you know otherwise, I was just an interested observer of the market so as to educate myself before pulling the trigger, not an active participant) is there are two such sweet spots: well below the Austin median (like the $150K area), and way into the stratosphere (like the $1.5M+ area). Below the median, the fixed costs and time commitments per transaction eat up too much of the flipping profit. In the stratosphere, and their deal velocity slows down too much (plus there are issues with money management, i.e., left holding the bag when the bottom cycle arrives). Neither of these sweet spots to avoid hordes of cash buyers are likely to appeal to the median HN reader trying to find a residence in Austin. Too low and either the school district is below acceptable performance and/or the commute distance too far (though Austin metro area has it easy commute time-wise compared to places like LA, SF, NYC, ORD, MIA). Too high and unless you are cashing out of an even greater asset-inflated area, you can't afford it.