East Austin Real Estate Appreciation

by Steve Crossland, REALTOR in Austin TX on December 6, 2006 · 4 comments

I decided to see what the actual appreciation has been in East Austin over the past 7 years, as reflected in average sales prices for some of the areas we call East Austin. The blue line at the top of the graph below represents the entire Austin housing market for houses only, and the other lines are the average sales prices for East Austin zip codes. I left the actual dollar amounts off the chart because they caused too much clutter and made the chart to hard to read. I have the actual numbers posted below the chart

East Austin Real Estate Appreciation

So what does this show us?

One way to measure the strength of a particular neighborhood or area of Austin is to look at its performance relative to the larger Metro area overall. In other words, looking at the slope of the lines above, if a particular area is performing about the same as the city overall, the lines would run parallel. This is in fact what we see with zip code 78721 and 78723 (the red and purple lines). Those East Austin zip code areas more or less maintain their relative positions to the citywide averages (and to each other) from 1999 through Dec 3, 2006 (when I ran the stats). So, a home owner in those areas of East Austin did not enjoy appreciation in home values any better or worse than the overall Austin average over the past 7 years.

East Austin zip codes 78702 and 78722 reveal something much different though. The relative position of those areas enjoyed much greater appreciation than the average of Austin. Let’s look at the chart below.

East Austin Average Sales
 
1999
2000
2001
2002
2003
2004
2005
2006
YTD Dec3
78702
$63,932
$84,384
$86,868
$88,915
$95,454
$111,076
$133,207
$175,399
78721
$55,520
$65,341
$76,164

$74,734

$67,844
$79,292
$91,103
$112,876
78722
$133,521
$160,812
$178,220
$170,381
$175,825
$187,820
$213,591
$238,693
78723
$84,727
$$104,806
$121,930
$123,135
$123,958
$121,572
$132,075
$149,204

For example, in 1999 The average sales price in East Austin zip code 78702 was $63,932 compared to an average sales price in Austin overall of $169,967. At that time, an average home in East Austin sold for about 38% of the average cost of a home in greater Austin (how ’bout that for cheap living!).

Fast forward to Dec 2006, the average sales price of a home in the 78702 zip code of East Austin sells for $175,399 compared to an average sales price in Austin overall of $239,735. At present, an average home in East Austin sells for about 73% of the average price of a home in greater Austin.

While the overall real estate market in Austin has appreciated a total of 41% over the past 7 years, real estate in the 78702 zip code of East Austin has appreciated a total 174% over the same 7 year period. East Austin is catching up to Austin’s average prices.

What about the 78722 zip code? This area is commonly called French Place and is roughly east of IH35, west of Manor Rd. and south of 38th street. It’s a fairly small zip code area. This area started to be noticed back in the early 1990s so it’s revitalization is more than a decade old. In 1999, an average home in the 78722 zip code sold for $133,521, which was about 79% of the value of the average Austin home. Now, December 2006, an average sales price in the 78722 zip code is $238,693, barely $1,000 less than the average Austin sales price overall. 78722 values have caught up to Austin.

Does East Austin still have room to grow in value or is its rapid real estate value appreciation about to level out? I don’t know for sure. It depends on whether buyers will continue to expect a discount in home prices relative to other “Central Austin” neighborhoods that are desired for their close proximity to downtown. In other words, East Austin is attractive to people who want to live close in but are priced out of Hyde Park, Travis Heights, Tarrytown, Zilker, etc. These buyers say to themselves “look at this, I can get the same Central Austin home for $100K less in East Austin”.

If the discount is driving the demand more than the area itself, the demand will level off once the perceived discount goes away. In other words, if East Austin becomes priced exactly the same as Hyde Park or Rosedale, will buyers still pick East Austin over those other areas?

Let’s look at another graph.

Central Austin Sales Graph

If East Austin continues its transformation such that buyers come to rank it on par with the other Central Austin neighborhoods, it’s reasonable to expect that the average sales values in East Austin will catch up with not only the values of Austin in general but will catch up with the values of its peer Central Austin neighborhoods. If that’s the case, there may still be $100K of upside remaining in the average sales prices of East Austin homes. It’s a big ‘if’. If buyers decide that East Austin is not as desireable as the Central Austin neighborhoods west of IH35, it will top out somewhere below the average prices of those neighborhoods.

See Austin Zip code map.

Side note: the steep upward curve in the 78703 zip code pricing is matched by a steep upward curve in the average square footage of homes in that area. All of the central areas saw increased average sqft sizes between 1999 and 2006, but the 78703 area was the most significant. The average size of a home sold in 78703 in 1999 was about 1500 sqft. In 2006, it’s 2429 sqft. I probably need to write a whole ‘nother blog about that and the McMansion effect on home prices in Central Austin.

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