Rent vs. Income

See how dramatically Austin rents and incomes have changed since 1980

Surprisingly, rents and incomes are growing at the same rate.

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Rents are rising in Austin, but are incomes keeping up? Surprisingly, yes, according to a new national study.

Apartment List analyzed U.S. Census data from 1960-2014 and found that inflation-adjusted rents have risen by 64 percent nationally, but real household incomes only increased by 19 percent.

During the particularly grim first decade of the 21st century, household incomes actually fell by 9 percent, while rents rose by 18 percent. For the total duration of the study, cost-burdened renters nationwide more than doubled, from 24 percent in 1960 to 49 percent in 2014.

"The U.S. renter population is larger than it has ever been (43 million households, or 37 percent of the total population), and nearly half of them are struggling to pay rent," writes Apartment List's director of data science and growth, Andrew Woo.

Austin, however, bucks the trend in the South and Midwest, where rent is up and income is either stagnant or down. Rent and income have risen significantly in the Capital City; both are about 40 percent from where they were in 1980. While rent may be a pricey $1,092 now compared to only $761 then, renters are bringing home $43,634 versus $30,227.

Apartment List points out that while Austin's population has more than doubled since 1980, the city's strong employment growth and attractiveness to millennials have given it the most impressive boost in the country.

Elsewhere in Texas, the scenario mimics the regional trend. In Dallas, incomes were rising steadily until about 2003, when they took a sudden dip and have struggled to recover ever since. Since 1980, rents have increased about 25 percent, from $761 to $948. The median income for renters right now is $38,406, just slightly above the $37,237 it was in 1980.

The numbers are depressing in Houston, too, where rent is up nearly 20 percent ($807 to $940) but income is actually down about 10 percent. A renter would have made about $42,225 in 1980, but now they make only $38,447.

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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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