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When home-price growth accelerated throughout much of the country in the early pandemic housing market, some predicted prices were eventually bound for a steep fall.
In most local markets, that prediction didn’t exactly pan out.
In Austin, it did.
The site of the inaugural Inman Connect Austin conference next month has followed one of the most unique trajectories of any housing market in the U.S.
Inman met over video chat with Brad Stein, the president of developer Intracorp Homes’ Texas operations and a speaker at the upcoming conference, to get the lay of the land.
Stein discussed how an influx of both high-skill labor and new multifamily development shaped the rise of one of the biggest pandemic hotspots — and its steep fall. The conversation has been edited for length and clarity.
Inman is looking forward to bringing its signature Connect real estate event to Austin next month. Can you give our readers a quick idea of what the Austin housing market has been like lately, and where Intracorp fits in the bigger picture there?
Brad Stein: I think that right now, in this particular snapshot in time, that I would say we’re seeing challenges in the Austin housing market. This market is not immune to the same challenges that other markets are seeing, and we think that is mostly related to [the] interest rate environment. Hopefully, that will change soon. But I think people will tell you that transaction activity has been down and values have been down.
But if we look at where home values increased from 2020 to 2021, in April of 2020, our average resale price was $350,000 and that was a high. It had been increasing steadily for probably the previous 10 years coming out of the Great Recession. And then in the 12 months from April 2020 to 2021, it went from $350,000 to $450,000. And then from April ’21 to April ’22, that was kind of the peak, rising [from] $450,000 to $550,000.
So now we’re back in $450,000-ish, and so we’re still at a level that is really healthy, and that is way above where we were in 2017, ’18, ’19 — all really good years. So I think once we can get past really high interest rates that are keeping people from transacting, both on the sale side and the buy side … I think you’ll see a lot of transaction activity, and I think we’ll see good values return to where they were after the pandemic.
So I feel really encouraged about this market [Austin] long-term. I think all the fundamentals for a strong housing market still exist in this market.
And then Intracorp’s place in this market is that we’re focused on luxury or a second-level move-up urban infill product. And so we’re going to be doing high-rise condos, mid-rise condo projects, townhome projects. We’re going to be doing those in urban infill environments, either downtown, Central Austin, South Austin, East Austin. So that’s kind of the role we play in the housing market.
It’s an interesting place to be in, I feel like, from the multifamily perspective. Because, yeah, you have values that suggest that there is demand for new units to come in. But at the same time, we’ve seen sustained declines in rents and prices. What have those dynamics looked like, just from the developing perspective?
I feel strongly that the fundamentals of the housing market — both the for-sale and the rental housing market — in Austin, over the long term, are really strong.
If you look at our population growth and our job growth, those are two major indicators. And so we might not see the population growth that we had in 2021 to 2022. But if we see the growth that we had in previous years … that [would really help]. We still have historically low unemployment, and so that job-growth story continues here.
And so those are the underlying fundamentals, so that even when we have a short-term hiccup in our housing growth — whether that’s fueled by a combination of interest rates and oversupply — we’re going to work through that oversupply in a short period of time just because of the sustained population growth.
And I think that oversupply is really only in the multifamily rental space. I really don’t believe that there’s oversupply in the for-sale housing space. Even though values are down a little bit, I believe that that’s interest-rate-driven. And then on the multi-side, we definitely saw a large amount of deliveries, and it’s going to take a while to absorb that.
If you look at the last two years, the starts have really slowed down, and that’s just been because of the difficulty of raising capital for new projects. And so we won’t have a bunch of new deliveries based on starts that were really slowed in 2023 and 2024.
But you’ll begin to see these new starts pick up next year, and we’ll absorb this multifamily supply in 2025 and ’26 so that projects that are starting in ’25 — and delivering in ’27 and ’28 — will probably do pretty well.
Is there anything else you’d like our readers to know as they look forward to Inman Connect in October?
I think that this remains one of the most dynamic housing markets in the country. And even as Austin has seen a big fall in values, we — they, Austin — was at the top of the hill there for a bit. The higher you go, I guess, the harder you fall.
When we see that decline, I think we all need to remember what the prepandemic growth levels were like. We were in a really healthy economy then and a really good housing market. And so if we return to those levels, that’s not really a reason for people to panic.
