East Austin Real Estate Appreciation

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
YTD Dec3



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.

4 thoughts on “East Austin Real Estate Appreciation”

  1. Steve, I look forward to your McMansion blog. When you post it, I hope you’ll also compare large home prices between, say, the 1st half of 2005 and the 2nd half of 2006. Your charts showing relative changes are very helpful. If you pretend all 2500+ sq. ft. central Austin homes are a separate MLS area, how do their numbers stack up against all central Austin homes? Have listings for large homes increased or decreased relative to overall listings? Is ADOM for large homes up or down relative to all homes? And how have average prices per square foot for large homes changed relative to all homes? Have they all gone up by 10%? (Improving quality might bias the numbers for new homes upward, so including post-2003 homes might skew the numbers.)

  2. I’m trying to make a comparison as it has been some time(2000) since I came to austin. I’m in Tucson and our government sponsor for businesses had recently gone to austin to make comparisons. I want to hear from people there telling us what you think of the following:

    Tucson’s population is now 1 million 12/06

    We are trying to attract biotech because of University of Arizona. Very little true manufacturing here otherwise.

    Qx. Looking back at when your population crossed 1 million – was there a difference in the retail stores and other businesses that decided to come to austin based on population. What other factors do you think made a difference?

    Did average wages increase substantially or only for high tech jobs?

    Looking back at real estate expansion(commercial) what area’s did you see significant growth in and why?

    If you know what you know now – what would you invest in -commercial development.

    Does your infrastructure (ie roads, government permits, others) handle the volume and was it there or did it have to be adapted?

    What don’t you like anymore?

    Thanks for your assistance.

  3. I have a little more faith in East Austin. It’s closer to downtown, and might actually be downtown someday. Light rail will be coming through in 2008. There’s a large focus on mixed use and vertical construction, creating density. Not likely that it will cap out because people aren’t getting the discount any longer and don’t think it has enough appeal on its own to pay higher prices. East Austin will be offering an environment unlike any other area because of it’s proximity to downtown, inclusion in TOD’s, possible historic preservation, ecclectic mix of people and cultures (that will remain in some form, due to affordable housing mandates). The pricing could level off and be somewhat comparable to Hyde Park but people will still come. It’s an area with unique, dynamic forces creating a culture all its own.

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