Location now has more weight in home selection

I have my first anecdotal evidence that gas prices will hurt values in far flung areas and help real estate values in closer areas of Austin. I just helped someone relocate from Wimberley to Austin. The reason for the move? Gas prices have made the commute costs unacceptable. For this individual, the tipping point was reached and the decision was easy.

Wimberley is about 40 miles SW of Austin and is a beautiful, serene place to live. My client had lived there for 7 years, on the Blanco River, in a beautiful setting, but decided to move back into Austin because of gas prices. “I’ll save $350 a month on gas” is what I was told. The tipping point.

Another example; last weekend, I drove my 12 year old daughter out to Elgin to be a “mother’s helper” for the day, keeping her 4 year old cousin occupied and entertained while his parents could actually get a few things done and have grown up conversations. I chatted with my sister in law for a while before I left. I asked “so, do you guys still enjoy being out here in Elgin”?

Her facial expression answered the question. She said (with wrinkled, contorted face), “well, … it’s (the drive) starting to wear us down”.

10 years ago, their (my brother and sister-in-laws) commute into Austin was 35 minutes to their respective jobs in west and north Austin, about 25 or 30 miles each. Now she leaves at 6:15AM just to beat the traffic and avoid the stress of predicting the travel time, and not wanting to be late for work. Otherwise, they have to budget at least an hour of drive time because the traffic comes to a stop between Manor and Austin.

The early departures began long before $4/gal gas prices. Now, throwing higher gas prices into the mix has them at least thinking about where they live. The 100% contentment with Elgin of the past decade has melted away and been replaced with the early stages of a thought process that asks the question “does it still make sense to live way out here?”

I think their tipping point may be much higher than most, and they’re willing to accept more pain. At $5/gal I think Sylvia and I would receive the call saying “we really think we want to go ahead and move closer in now”. Uprooting is easier for some than others.

The tipping point will be different for different people, but I see a lot of big SUVs and trucks driving in from Dripping Springs each morning on Hwy 290. Sylvia and I had a listing appointment way the heck out in Dripping, toward Johnson City the other day. Those folks also say “we need to get closer in” as the husband will now be working a new job in north Austin. Ouch. That drive hurts.

On the flip side of the location spectrum, let’s look at a neighborhood like Travis Height for a downtown worker. In answering the question “do I really want to pay $200 to $300 per square foot for a small, old house?”, $4/gal gas helps the house seem a little bigger and the condition a little better, relatively speaking. In other words, as gas prices rise, the more expensive closer in properties gain an greater imputed value attributable to lower commuting time and cost.

Let’s imagine a hypothetical couple who moved from California to Dripping Springs on 5 acres 3 years ago. They were on the fence about whether to live close in or far out, but the lure of the Hill Country, some big land and a few goats was too intoxicating to resist. After being ground down with daily commutes for two years, realizing the effort required to maintain big property and drive on underdeveloped roads, and with gas at $4/gal, the smaller older place in Travis Heights is starting to look pretty good. And there is a real, meaningful dollar amount that can be factored into the pros and cons equation.

Only problem is, now who’s going to buy the house way out in Dripping Springs?

Posted by Steve
8 years ago
Steve

Steve is a Real Estate Blogger, Husband and Dad, UT Austin Grad, Runner, Real Estate Broker and owner of Crossland Team and Crossland Real Estate in Austin TX.

Click Here to Leave a Comment Below

Pat - 8 years ago

Suburbia is unsustainable for the future. Too bad we didn;t save all that farmland, we’ll probably need it. Buy a bicycle and vote for public transit. Save some air for your grandchildren.

Reply
TX Home Buyer - 8 years ago

What are the chances of the city of Austin getting together with some these other comunities and discussing a light rail plan?
Has one already been introduced?

Reply
Robbie - 8 years ago

While a lot of younger, working couples need to be closer in for work, schools, child activities, entertainment, etc., there will be older folks ready to slow down and get away from the city.

Those people will be buying those out-there homes. And with the baby boomers all starting to retire now, I think there will still be a market there.

You might have a case of retiring baby boomers and rural Dinks simply trading places.

But I think you’re right on about home prices. We’re hoping that our home near the corner of Bee Cave/360 will continue to appreciate as people search for homes closer to town (6 miles to Downtown for us).

Reply
Ruralist - 8 years ago

Completely agree with your post, except for one thing: 5 acres is not “big land”. Note even close. I’d say that a quarter-section (160 acres) just barely counts as “big land”.

Reply
non boomer - 8 years ago

I doubt the boomers want to live in the sticks. The boomers I talk to want to be near a hospital, their every day doctors(s), pharmacy, fine dinning, sams club or costco, shopping, grand kids and so on. The sun city idea is kinda what I’m thinking for the boomers.

Reply
Steve - 8 years ago

Light Rail: It’s being brought online soon. I own two homes very near the rail stop in Leander. But the Austin Statesman had an article some weeks ago comparing the current Leander Express bus trip to the new rail and, mazingly, the rail will be slower and more expensive than riding the bus, so I don’t know how that’s going to play out.

Baby Boomers: Speaking for Sylvia and I, we are going to want to be close in. It’s 7 more years until our youngest heads to college, and we’ll definitely downsize then, if sooner – after the first one heads off in 3 years.

Big Land: Well, we live on 1 acre currently, and it’s too much for me to mow. It’s not a productive use of my time so we have a lawn crew. We had 6 acres at one time and it is indeed a lot of work when wind storms damage trees, you have to keep fire hazards at bay by chopping brush, etc. I think 1 acre would be a challenge for many people, so I’ll stick with my statement that, at least for city dwellers moving out into the rural areas, 5 acres is indeed “big land”.

Non Boomer, I’m on the same page as you, though I’ve encountered Sun City aged buyers who want nothing to do with hanging out with a bunch of old people playing cards, golfing and talking politics. Me neither. When I’m old, I’ll want to be in denial about it and still living like I’m younger. 🙂

Steve

Reply
M1EK - 8 years ago

Steve, it’s not light rail – it’s commuter rail; and it’s slower because it doesn’t do what we tried to do in 2000: bring the rail directly to UT, the Capitol, and through the heart of downtown.

The commuter rail trip takes you a couple miles out of your way only to board a shuttle bus (ever tried to fill a bus completely?) and then ride through the stuck traffic a mile or two back west to UT or the Capitol. (different shuttles for each).

I’ve been writing about this on my blog for about 5 years now. It’s not light rail; it’s not what other cities did to great success with light rail; we’re actually modelling ourselves after a commuter rail service in South Florida (Tri-Rail) which has been a disaster for two decades.

Reply
Tony - 8 years ago

Large suburban property will probably go down in price in the short term, but there is an intrinsic desire for most people with families to live in a big house (big land less so). As energy prices go up, the houses that are farther out will not appreciate as much (they might even go down). But technology will very quickly resolve the energy problem. For example 100mpg (or more) one/two seater commuter cars that cost less than 10K. You will be able to own two of those plus an SUV when you want to take the whole family out.

It is possible that the technology will get here so fast that housing prices wont have time to really be damaged in the suburbs.

Reply
M1EK - 8 years ago

Tony, that’s wishful thinking – physics, chemistry, and the like can’t be beaten by economics. There’s not even a hypothetical fuel out there which will let suburban families continue the lifestyle they have today – driving alone huge distances in big vehicles. Not gonna happen.

Reply
Brian Wilson - 8 years ago

Hmmmm. I think you might not have understood what Tony was saying. Once we get to mass-market 100mpg vehicles (which will happen) we are in a better position than we are today as far as cost-per-mile goes. Granted maybe they won’t be SUV’s but if you read his comment he said that they would be used for the trips with the family, not for general commuting. I welcome higher prices for fuel (and I live 20 miles from work) as it will drive innovation in every area that fossil fuels are used. If there is money to be made, there will be solutions.

Unfortunately Austin (nor much of the western USA) does not lend itself to the “live where you work” ideal. A lot of people pretend that it does. The newer live/work developments are pretty much a joke unless you want to work at a coffee shop or a Best Buy. No doubt the central city ,which I love dearly, is where it’s at for immediate appreciation but if any of the 20 “Fastest growing places in USA” lists that are published on a seemingly weekly basis are even remotely true all of the people moving here need someplace to live. They can’t all live in the central city. There just aren’t enough homes. Not to mention a good amount of the major employers (especially in the high-tech arena) are located at the perimeter.

There are a lot of doomsayers out there spewing FUD but I feel pretty sure that everything is going to work out fine in the long run for everybody. Buck the Hick will have to give up his SUV and switch to something more fuel efficient, and Weatherby the Yippie will let go of his holier-than-thou attitude about those who didn’t make the same choices as he did as far as home location goes.

Reply
Steve - 8 years ago

High MPG vehicles were around in the 1980’s. If I remember correctly, a 1980 Honda Civic achieved 52 mpg EPA.

Since then, safety and emmission requirements have made such mileage impossible in a traditional vehicle. If we went back to 1980’s technology and produced retro Hondas’, I bet they’d get even better than 52 mpg today with the other advancements in technology that could be manufactored into the vehicle.

A small 100 mpg 1 or 2 person commuter vehicle would certainly have to be exempt from current airbag, brake ,etc. requirements.

Funny thing is, I’m seeing more and more motorcycles and scooters. Those have obviously no airbags and would not be my first choice for getting in a wreck on, but people are going to start choosing savings over safety at some level.

Steve

Reply
M1EK - 8 years ago

I understood what Tony was saying – and there is no way a family vehicle is going to get 100 mpg in the foreseeable future – it would require energy breakthroughs which do not appear to be in the cards. (Plug-in hybrids will likely throw away the battery life in today’s hybrids by not restricting the charge band like Toyota does with the Prius; so the expected cost of the vehicle rises dramatically).

Reply
Bob - 8 years ago

In the short term, I think you can roughly guess how much exurb houses will decline. Its the added monthly expense for gas that you would now pay as a daily commuter. You can play with assumptions, but that’s probably the difference between $2 and $5 (lets be ever so slighly pessimistic, but not overly so) per gallon, figuring an average 30mpg, and maybe those miles from downtown x 1.5 (since often there are two people working). You get very rapidly sums ranging from $100 to $300 per month. Each $100 per month is roughly $20k on a mortgage.

I would not be surprised to see homes out in Elgin/Manor or far northern Leander/Cedar Park to lose $20-60k in value, simply based on affordability. Those people that have jobs in the immediate area will get bargains. And perhaps, this is as it should be. Will prices actually decline? I suspect instead they will mostly stay the same, just not appreciating in normative price until inflation eats away at that hypothetical $20-60k loss of affordability. Thats just how the Austin market seems to work. Prices never decline (except in real dollars), just stagnate for a few years.

It still boils down to location, location, location. I think people still want surburban neighborhoods with good schools, but I wouldn’t be surprised if it means some areas not currently particularly “hot” will become so soon. In particular I’m thinking of the neighborhoods developed in the mid and late 70s around Austin. They are central enough for shorter commutes compared to newest developments, and although not commonly 2200+ two stories they way everything else is now, they are big enough to raise a family.

Unrelatedly, I also am fascinated that all those new developments are almost entirely two-story homes. A sold 70s ranch home without steps has got to have additional value owing to the population of aging boomers.

Reply
M1EK - 8 years ago

Bob, that’d be a good rational argument except that there’s a substantial imbalance between supply of and demand for urban housing already – because zoning is so artificially suburban here (as it is in most metro areas). Some discontinuities will doubtlessly result, making the math a lot more messy than you have theorized.

Reply
Leave a Reply: