You have probably heard a lot about rising rent, inflation, and a general increase in the cost of living.
But if you live in Austin, Texas, or even just do business around there, then these things might be surprising to you.
Why is that? Is Austin insulated from the rest of the economy?
No, certainly not.
Anyone who lives or works there can tell you that it has been seeing changes as of late. The real question is whether or not it is as tumultuous as other cities.
And the answer to that question is an even firmer “no”. Let’s analyze those two things though.
On the one hand, you have the changes that Austin has gone through recently. And on the other, you have the issues that it has been shielded from.
These two elements are not as far apart as you might think. Sometimes both of them make Austin better, and sometimes both of them make Austin worse.
But they both reflect how the Austin real estate market has picked up.
1. The Changes Austin has Gone Through
So, flashback to 2020. Most of the country goes into heavy lockdown. Economies flounder. Many people lose their jobs.
A stimulus check that might pay for half a month’s rent gets sent out. It is an unmitigated disaster. But not everyone went into lockdown.
Quite famously, many southern states refused to lock down even as the pandemic’s death toll ravaged their cities. Thousands upon thousands died… But the economy stayed open.
One year later it’s 2021. The rest of the country opens back up and sees an economic boom. Where most years have peaks and valleys in the amount of money being made, 2021 was a straight climb for many people.
This makes sense following the 2020 recession.
But what does that mean for Texas? Particularly somewhere as metropolitan as Austin?
What that Means for Texas
Essentially, Texas gets to profit off of the rest of the economy bouncing back at the same time that the Texas economy never really went into recession.
Sure, lots of people died and the rest were overworked. But the money never stopped flowing, meaning it doesn’t need to get moving.
That is the primary change that Texas has seen at large: Every other state in the union shrank due to the pandemic. But Texas stayed mostly the same.
That means the state’s economy is bigger just by comparison. At the same time, it means it has more resources to grow with.
Property values are bigger, more deals are coming in, corporations are moving to the state. Everything is getting bigger, besides working wages, obviously.
2. The Issues Austin is Shielded From
You probably noticed that our timeline was a bit funny. In 2020 most people experienced a recession. In 2021 things boomed as the economy came back.
But what about now? What has happened to define 2022? The answer to that is all around you: A looming depression.
This is the main thing that makes Austin appealing to real estate investors: While the rest of the country is scrambling to brace for an incoming world economic collapse, Austin is still riding high off of the boom of 2021.
Since there was never a big 2020 recession, the economy is still rolling.
Will this last forever? Certainly not.
No economic conditions last forever, no matter how good or bad. But being insulated from economic collapse is an over simplification of what is happening.
There are two things to keep in mind about the nature of Austin’s economy right now: The first is that its biggest advantage is that it is self-sustaining.
And the second is that it will still feel the effects of an economic collapse. Everyone will. It just won’t be as bad as elsewhere.
The Self-Sustaining Economy
An economy is self-sustaining when it takes in more value than it outputs. It is important to note that a self-sustaining economy is not one that is totally insulated from the outside world. That is basically impossible. As long as people in Austin are paying for Netflix, some of the money in the Austin economy is leaving the economy. But that small amount that’s leaving doesn’t matter.
What matters it that the amount of money either being taken in or generated by the Austin economy is greater than the amount of money leaving or being degenerated inside it.
Austin has a lot more inner migration than a lot of cities. The most common way for people to lower their rent is to move. The most common way for them to get a raise is to change jobs.
The diversity and size of Austin’s economy means they can do both without leaving the city.
Reduced External Influence
Influence coming in from the rest of the economy will not be nothing. In fact, it may be significant.
But from its tech and streaming industries to its cheap labor, both Texas in general and Austin specifically have made themselves indispensable to the rest of the country.
Because of this the amount of money that comes into Austin will stay the same even as the amount of money being trafficked in other parts of the country falls significantly.
The amount of money being generated in Austin will take a hit, but because of its general independence this will keep property values and services at an affordable rate.
Conclusion
Real estate in Austin is picking up because Austin itself is showing signs of being a haven for many people looking to weather the incoming economic storm.
Many corporations have already shown signs of knowing this. Property living spaces are being bought up while private businesses are being sold off.
This results in more and more money being settled in reliable investments rather than on venture capital interests.
The short version of all of this is that it is a bad time to be a part of the working class. If you want any more information from Teifke Real Estate, they have tons of articles on it.
Leave a Reply