Rent Report

Can millennials and baby boomers afford rent in Austin?

Residences at The Domain Austin apartment

Boomer renters in Austin are more cost-burdened than elsewhere in the U.S.

As anyone who’s looked for an apartment in the last 10 years knows, rents are on the rise. And it’s not just Austin apartments — nationally, sustained growth in the renter population has helped increase rents in cities of all sizes and locales. According to the U.S. Census Bureau’s American Community Survey, a whopping 35 percent of American households are renter-occupied. And nearly half of those households — 47.1 percent, to be exact — are cost-burdened, which means they spend more than 30 percent of their monthly income on rent.

Apartment experts Abodo recently released a study tracking those cost-burdened renters by generation. Renting is no longer only a young-person’s game — renters are staying in the market long past their 20s, and many older Americans are choosing to rent in retirement as they downsize. Abodo’s study looks at three broad age categories: millennials, Generation X, and baby boomers.

Almost two-thirds of millennials rent, with a median gross rent of $980 per month. And with a median income of $39,900, the percentage of renting millennials who face cost burdens is high: 46.5 percent.

But it’s even higher for boomers. Although a lower percentage of boomers rent (23.3 percent), almost half of those renters (49.1 percent) are cost-burdened. Such a burden might reflect renting boomers’ fixed incomes, as well as the high cost of assisted living in retirement. Of the three generations, boomers have the lowest median income ($33,000) and the lowest median rent ($890).

Generation X is somewhere in the middle. Just under 38 percent of them rent, which indicates that many have achieved the financial stability to put down payments on houses. (A median income of $44,470 doesn’t hurt.) Of the three generations, Gen X renters have the most expensive taste, paying a median rent of $1,050. Over 44 percent of those Gen X renters face cost burdens.

In Austin, Gen X renters are doing particularly well. Only 38.3 percent of are cost-burdened, compared to the 44.4 percent nationwide. The percentage of renting millennials facing a cost burden, 45.1 percent, is slightly lower than the national percentage of 46.5 percent. Only boomer renters are doing worse than the national numbers. In Austin, 50.1 percent of boomer renters are cost-burdened, compared with 49 percent nationwide.

With millennials putting off homeownership and boomers re-entering the rental market, the nation’s housing supply finds itself at an interesting crossroads. Will wage growth keep pace with housing costs nationally? And in Texas’ rapidly growing cities, will supply be able to match rapidly growing demand? Only time will tell.

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How Austin fits into Zillow's predicted housing market growth in 2025

Photo by Justin Wallace on Unsplash

Potential homebuyers in Austin may see improving mortgage rates and home prices in 2025, according to Zillow.

It looks like a few more people are about to turn their online home shopping daydreams into reality in 2025. Zillow, the famous real estate listings website, says in a press release that next year will likely bring "a gradual but bumpy decline in rates, impacting sales and price growth."

It attributes the forecast to "erratic and dramatic mortgage rate movements" throughout 2024, which will continue to affect the market. The website's housing market predictions report estimates that 2025 will see about 100,000 more sales than 2024, that home value growth will be "low and slow" at 2.2 percent, and that inventory and new listings will continue recovering from pandemic weakness.

On a local scale, Zillow's latest data shows Austin has already experienced a 3.4 percent drop in annual average home values from 2023 to 2024, which will continue fluctuating in 2025.

As of November, Zillow's home value index says the average home in the Austin metro is worth $443,995. That figure is greater than the Austin Board of Realtors' median home sales price in Austin-Round Rock-San Marcos, which came out to $435,000 last month, reflecting an estimated 2.4 percent increase for just the month of November year-over-year from 2023.

Pick the right season to buy
Potential buyers may see better opportunities for purchasing a home during the fall and winter, which is a typically slow season for home sales. Across 36 out of the 50 biggest U.S. metro areas, Zillow's heat market index showed a drop in competition from October to November.

"There's a strong sense of déjà vu on tap for 2025. We are once again expecting mortgage rates to get better gradually, and opportunities for buyers should follow, but be prepared for plenty of bumps on that path," said Zillow chief economist Skylar Olsen in the release. "Those shopping this winter have plenty of time to choose and a relatively strong position in negotiations."

Zillow suggests buyers may have the ability to negotiate "from a position of safety" during the slow winter months. This is especially true for Austin-area buyers, who only saw 10.4 percent of homes sell for more than their listing price in October. The website says buyers can take advantage of opportunities to buy contingent on inspections or repairs, and they may avoid bidding wars during this time.

"While the number of options available to shoppers today are lower than they will likely see in the spring, there's also less competition in the field," the report says. "The [national] share of homes that sold for more than list price was below 28 percent in October (the latest data available), continuing a downward trend that began in July."

Buyers will head to the Southwest
Eyes are also turning to the American Southwest as the top region for homebuyers in 2025, as 13 major metro areas – including Austin and San Antonio – are now considered “buyer’s markets” where buyers have more negotiating power than sellers.

However, this prediction depends on the gravity of falling mortgage rates. Homebuyers should also keep a close eye on mortgage rates in 2025, which could drop unpredictably like they have been for the last three weeks in a row. If the rates dip further than expected, that doesn’t bode as well for buyers.

“It is anticipated that a significant mortgage rate dip would bring more buyers than sellers back to the market, increasing competition and tilting negotiating power in favor of sellers,” Zillow says.

Small-home living is gaining traction
As Austin and other major cities are battling for more high density housing, buying trends are also leaning towards smaller (and more affordable) homes.

Zillow even goes as far to say that the “pandemic-era need” for large houses is officially a thing of the past.

"The term 'cozy' is appearing in more listing descriptions — 35 percent more in 2024 compared to 2023 — reflecting current design trends that have shifted away from cavernous open floor plans, toward contained spaces that have their own style and purpose," the report says.

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