Market Spotlight: Austin, TX
Breneman Capital has developed a predictive appreciation model for the 37 largest markets in the US, with the primary purpose being to focus on the fundamentals - understanding not only how each market has performed but why it behaved the way it did. The model references multifamily appreciation rates from 2000 to 2022 and is backtested with an array of Economic, Demographic, Affordability, New Supply, Apartment Fundamentals, and Single-Family Home indicators. Through this analysis, we can pinpoint the specific indicators that are the primary drivers for each market’s performance. Each market is ranked by the sum of its indicators, weighted by their actual correlations and statistical significance with appreciation.
16 of the 37 markets were determined to have had above-average appreciation rates for 2022. In the coming months, we will release new articles profiling our model's results and the benefits of investing in each market.
In this article and in our analysis, “Austin” refers to the Austin-Round Rock, TX Metropolitan Statistical Area (MSA).
In our Market Outlook Model, Austin is head and shoulders above all markets in the US in terms of demographic and economic indicators that are most predictive of appreciation, it performed extremely well in economic downturns and clocked in above-average scores in our model every single year since 2007. Specifically, Austin was #1 in 2000-2022 5-Year Population Growth and 5-Year Job Growth and #2 in 5 Year GDP Growth from 2006-2020. Population Growth (%) and Job Growth (%) were the most predictive and highest correlated metrics with multifamily price appreciation in our analysis, and Austin was #1 in both.
Austin is the land of music, art, and vibrant culture. And Round Rock: the homely city just north of Austin that’s known for its small-town charm and big-city amenities. Combined, these two cities form one of the most dynamic markets in Texas – a prime location to invest in multifamily properties.
Why should you consider investing in the Austin? In this article, we'll cover five key reasons & benefits.
1) Strong and diverse economic base
Austin has a strong and diverse economic base and a booming economy. The region is an economic powerhouse, being the state capital with all the related government employment and large universities that comes along with it. Additionally, the cities have large hospital systems, and is home to many large companies, including Dell Technologies, Apple, Tesla, Facebook, and Amazon. Any one of these employment drivers would be reason enough alone to invest in Austin. The full list of major employers contains more details.
Additionally, the region has seen an influx of tech-focused startups in recent years – making it a great place for passive investors looking to capitalize on the growing industry.
This is primarily a byproduct of Austin's thriving job market and Texas’ extremely favorable tax offerings. The city has a low unemployment rate and consistently ranks as one of the best places for businesses to expand or relocate. This, in turn, leads to an ever-increasing demand for rental properties – making multifamily investments even more attractive.
2) Exceptional demographic and economic growth
Austin is a growth story with rock-solid underlying fundamentals:
5-Year Population Growth from 2000-2022 averaged 2.5 standard deviations above the national average (#1 out of 37 markets)
5-Year Job Growth from 2000-2022 averaged 1.9 standard deviations above the national average (#1 out of 37 markets)
5-Year GDP Growth from 2006-2020 was 1.6 standard deviations above the national average (#2 out of 37 markets, second only to San Jose where all the tech jobs are moving from).
These economic and demographic indicators are the most predictive of appreciation and Austin topped the charts by a very wide margin.
3) Access to great amenities and cool factor
Austin & Round Rock have a wide variety of entertainment, educational, and recreational opportunities. Austin is known for its live music scene and vibrant culture, while Round Rock offers more laid-back activities such as golfing and hiking. Additionally, Austin is famous for its delicious and diverse food scene, including famous barbecue joints, food trucks, and upscale restaurants–as well as its vibrant nightlife, with numerous bars, clubs, and live music venues scattered throughout the city.
The two cities also provide access to quality education at both the K-12 and college levels. The University of Texas at Austin is one of the top-ranked universities in the country, while nearby schools like St. Edward's University offer additional options for students looking to further their education.
Whether you're a student, a family, or just an individual looking for a great place to live, Austin & Round Rock has something for everyone.
Finally, area’s “cool factor” cannot be understated. Even beyond the numbers where Austin tops the charts it often wins the hearts of future residents or business relocations. When Elon Musk stated why Tesla would relocate to Austin, TX he said simply because that is where all the Tesla employees wanted to live and then cited how much more affordable the homes were in Austin compared to the Bay Area.
4) Texas triangle strength
Austin is the state capital of the most dominant business-friendly in the USA and sits at the center of the Texas Triangle. The Texas Triangle is one of the world’s most dominant economic engines and is formed by Texas’ four main urban centers, Austin, Dallas–Fort Worth, Houston, and San Antonio, connected by interstates: I-45, I-10, and I-35 and utilizes the Port of Houston.
The Texas Triangle is one of eleven megaregions in the United States, clusters of urban areas that share economic and cultural ties. You can hear more about the strength and dominance of the Texas Triangle in this keynote by geopolitical strategist Peter Zeihan.
5) High appreciation with stability
Austin & Round Rock have seen a steady rise in property values over the years. Often topping the charts for home price, rental rates, or multifamily appreciation.
In our Market Outlook Model, the Austin-Round Rock, TX MSA was the runaway leader in the economic and demographic indicators that are the most predictive of appreciation (See #2 above if you missed it) so expect this trend of far above-average appreciation to continue in the decades to come.
When it comes to stability, Austin performed extremely well in economic downturns and delivered above-average scores in our model every single year since 2007. As an investor, you want to not only grow your investment capital but preserve it in times of economic shocks. The downside protection that Austin affords is what is so appealing about Austin to Breneman Capital. It allows us to invest with serious conviction knowing we benefit from stability and low volatility along with the high growth potential.
Final thoughts: investing in Austin, TX
There is so much to like about investing in Austin: its strong and diverse economy, the state capital and large university stability, Texas’ no state income tax, great amenities for renters, booming population, thriving real estate market, and off-the-charts economic and demographic scores in our Market Outlook Model.
You have virtually every tailwind at your back as an investor and also benefit from a long track record of stability during times of economic downturns in Austin.
If you would like to invest in Austin, TX and the surrounding area, there's no better time than today. At Breneman Capital, we focus on helping investors like you invest passively in real estate in Austin and other select markets across the country.
About Breneman Capital
Breneman Capital is a private real estate investment management firm specializing in the multifamily property sector. Breneman Capital employs a deliberate investment approach, leveraging data analytics and proprietary technology to generate superior risk-adjusted returns for investors.
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