The $1 Million Club
When you think of luxury homes in Texas, Dallas or Houston might be the first places to pop into your head, given the sheer number of millionaires and billionaires living there. However, laid-back Austin actually is the luxury home leader among the state’s four major metro areas, a CultureMap review of U.S. Census Bureau data shows.
In the Austin metro area, 19.2 of every 1,000 owner-occupied homes — houses, condos, and other dwellings — are valued at $1 million or above, according to Census Bureau estimates for 2011 through 2015. Next in line is the Houston metro area, where that figure is 15.2 out of 1,000. After that is Dallas-Fort Worth, at 13.5 out of 1,000. At the bottom of the luxury ladder is the San Antonio metro area, where 8 out of 1,000 homes are valued at $1 million-plus.
Of course, some of Austin’s claim to the luxury home crown can be attributed to the region’s comparatively high prices for homes. In the third quarter of 2016, the median sale price of an existing home in Austin was $284,000, according to the National Association of Realtors. Among the four major metros in Texas, that was the top price tag for an existing home. Austin was followed Dallas-Fort Worth, $230,500; Houston, $217,000; and San Antonio, $212,300.
The Texas Association of Realtors says the median price of a luxury home in the Austin area was $1,381,252 in 2015. That year, luxury homes represented 2.2 percent of home sales in the region.
While Austin holds the bragging rights as the luxury home hub of Texas, that distinction actually might not be so brag-worthy. In June 2016, Forbes reported that Austin and San Antonio were the most overheated home markets among the country’s 50 biggest metro areas. At that time, according to Forbes, homes in both metros were overvalued by 19 percent.
According to a report from the Texas Association of Realtors, sales of luxury homes in the Austin area grew 23 percent during the first eight months of 2016 compared with the same period in 2015. In the first eight months of 2016, luxury homes in the Austin area also had the highest price per square foot — $345 — for luxury homes among the major metro areas in Texas, the report says.
“Rising home prices and development costs are pushing higher-end homes into the $1 million-plus price class. New construction in the luxury housing market can easily reach $500 or $600 per square foot, particularly among high-rise condominiums in urban centers,” says Leslie Rouda Smith, who recently wrapped up her term as chairwoman of the Texas Association of Realtors.
In the Austin area, transplants from the East and West coasts are helping drive up sales of luxury homes, as they’re finding their housing dollars stretch further compared with places like San Francisco and New York, according to a 2015 article in the Wall Street Journal.
However, residential real estate brokerage Redfin raised a red flag in May 2016 about Austin’s luxury home market. Redfin reported a nearly 12 drop in the average sale price of a luxury home in the Austin area from the first quarter of 2015 to the first quarter of 2016, falling to about $1.5 million. Among hundreds of U.S. cities, that was one of the biggest declines in luxury home sale prices during that period.
In the third quarter of 2016, luxury home sale prices in Austin rebounded somewhat, Redfin says; sale prices slipped just 0.8 percent from the third quarter of 2015 to the third quarter of 2016, when the average sale price was slightly over $1.45 million.
“Luxury buyers are out of step with the rest of the market because their wealth is at stake,” Redfin chief economist Nela Richardson said in May 2016. “Instead of cheering rock-bottom mortgage rates, luxury buyers recoiled from high-end spending in the face of volatile asset prices. Luxury demand, especially for vacation and investment properties, has been more fragile this year, causing prices to slump.”