Californians are fueling Austin’s housing frenzy: ‘We’ve never seen migration like this’

There are dance parties on weekends, bike and hiking trails and fishing ponds. Children can take a golf cart on wide, low-traffic roads to attend the local elementary school — parents optional, depending on age. In the Bay Area, it can take a year or two to secure child care. There’s no wait in Austin.

“I feel like we have more friends here now than we’ve ever had in California,” Josh Rubbicco said. “People were so welcoming and friendly.”

The weather is warm and similar to the East Bay, said Rubbicco, who works for a software company with a Bay Area office that’s allowing permanent remote work. Texas Hill Country’s offerings are reminiscent of Napa, thanks to an array of wineries and distilleries. In the nearby town of Driftwood, there’s the 54-year-old landmark Salt Lick Bar-B-Que, built on a family ranch, with its vast cooking pit overflowing with meats and drawing hungry crowds. A 25-minute drive to downtown means easy access to Austin’s raucous bars and restaurants, where live music was blasting and drinks were flowing last month, even as much of the country was still locked down.

There are some downsides: intense storms, more bugs and humidity. But for the Rubbiccos, like many Californians before them, the math behind the move was irresistible.


The price of a typical house in the East Bay is now around $1 million. A larger, newer house in Austin with a yard and access to better schools is around half the price, though that’s swiftly rising.

Austin’s median home price surged 35% in May compared to the prior year, to a record high of $566,562, according to the Austin Board of Realtors. Total home sales were up 55%, to 1,270, compared to the prior year.

Experts say Austin’s boom, particularly during the pandemic, has been accelerated by Californians and Bay Area giants like Apple, Facebook, Google and Tesla that are all hiring in Austin. Last year, a record 22,114 jobs were added from companies relocating and expanding in the region, including at least 5,000 from Tesla in its new mega-factory rising just east of Austin, according to the Austin Chamber of Commerce. Palantir co-founder Joe Lonsdale, podcast host Joe Rogan and Tesla CEO Elon Musk all made the California-to-Texas move during the pandemic. That’s a lot of newcomers looking for homes.

“If the house is pretty attractive, we might see anywhere from 30 to 50 offers, and the Californians tend to win because they understand this game a lot better than the Texans,” said Ray Shapley, the Rubbiccos’ real estate broker and an Austin native. More than half of his clients are now from California.

Prices of 20% to 25% over asking are common. Shapley knows a buyer who paid for a newly built house, never moved in and sold for a profit of more than $200,000.

Luxury home builder Toll Brothers, the developer building the Rubbiccos’ new home, has 36 lots to sell in Dripping Springs, a suburb just southwest of Austin, with prices starting in the low $800,000s. Shapley said such homes would have taken a while to sell before the pandemic. Today, there’s a waiting list of over 200 people, the company said.

 Californians are fueling Austin’s housing frenzy: ‘We’ve never seen migration like this’

Jessi and Josh Rubbicco moved from Bay Area to Austin, Texas, with children, Emma, 4, and Brady, 2. Austin is closing in on San Jose as the 10th largest city in the U.S.

Photos by Ilana Panich-Linsman/Special to The Chronicle

“The pricing power of Austin, which is number one in the country, is driven by California, plain and simple,” Toll Brothers CEO Douglas Yearley said on an earnings call last month. “The phenomenon is fascinating. We’ve never seen migration like this.”

The five-county Austin area saw a 48,873-person population increase through domestic migration last year, a 17.7% jump from 2019, according to census data released last month. Texas was the second-most popular out-of-state destination for residents from six Bay Area counties between March and November last year, drawing 749 address change requests, according to U.S. Postal Service data. However, more than 96% of address changes from those counties were within California.

Austin’s population is now on the cusp of 1 million people and about to surpass San Jose as America’s 10th largest city. It’s just 18,300 people behind Silicon Valley’s biggest city, which lost 1.3% of its population, according to census data dating to July 1, 2020. In the same time frame, San Francisco’s population shrank by 1.4%.

“I think what we’re seeing is this fundamental change to Central Texas. I think that we’re seeing this massive restructuring or migration in the U.S. right now,” Shapley said. “I think the last few decades kind of belong to California. I think the next few decades might belong to Central Texas.

“As someone who was born here and loves Central Texas the way it is, I don’t know that I necessarily love that.”


Mark and Jamie de Grasse moved to Austin in 2014 from the Los Angeles area, after the sale of Mark’s marketing company to a Texas firm.

They traded one- to two-hour commutes in Southern California for a 10-minute drive from their southwest neighborhood to downtown. De Grasse, who now runs his own business, said the lack of state income tax makes it easier to hire workers, particularly for small business owners.

He and his wife also found a sense of community that was lacking on the West Coast. Neighbors offer help for both routine tasks and during disasters like last winter’s devastating storm and power outages.

“You definitely feel like you’re missed if you’re gone,” Jamie de Grasse said. “When I was in California, I don’t ever feel that I knew my neighbors.”

They bought a house in Austin for around $450,000 and sold it for $675,000 two years later. Houses in Southern California were twice as expensive and 50 years older, they said. Last fall, they bought their dream house. It has 3 acres, a pool, warehouse, barn and pasture for two horses. It cost $860,000, and with additional renovations, Jamie de Grasse estimates that it’s now worth $1.5 million.

 Californians are fueling Austin’s housing frenzy: ‘We’ve never seen migration like this’

The de Grasse family is at home in Austin, Texas: Damien, 9; Jamie and Mark de Grasse; Declan de Grasse, 8; and Colin Paschke, 12.

Ilana Panich-Linsman/Special to The Chronicle

Not everything is cheaper in Austin. Property taxes are higher than in California, exceeding 3% in some areas, compared to the 1% base rate in California.

And there are no protections like California’s Proposition 13, which limits how much property taxes can increase. Austin houses are reassessed every year, potentially exposing homeowners to crazy market conditions like the current frenzy.

“We pay probably over $1,000 a month for property taxes,” Jamie de Grasse said. “It’s significant. But I’m OK paying that. Because we have good schools. We have good roads.”


San Francisco had its hippies in Haight-Ashbury and beat poets in North Beach, neighborhoods that now have some of the highest rents in the country. Some of Austin’s quirky appeal — and its “Keep Austin Weird” ethos — has also vanished or been uprooted. A college town known for indie rock music, tacos and brisket is now an economic powerhouse, and tastes are getting more expensive.

In 2016, Sfanthor House of Wax, which featured replicas of movie monsters, closed its castle-like building on South Congress Avenue. It was demolished for an office and retail project called Music Lane. The wax monsters have fled to the downtown Museum of the Weird, replaced by upscale brands like Equinox, Everlane, Lululemon and Sweetgreen.

Just west of downtown, a vacant lot on Castle Hill served as a graffiti mecca. For seven years, it welcomed anyone to spray-paint on concrete walls with views of the brown dome of the Texas State Capitol. Now it’s fenced off and is being excavated to prepare for new condos. Prices for the units start at $3.61 million, and two have already sold, according to television station KVUE. The arts group behind the murals reached an amicable deal to open a new arts center 10 miles to the east.

The relentless growth pressure has city officials and housing experts worried that Austin may be experiencing the early stages of a housing crisis like the one that consumes the Bay Area.

“We used to say, ‘Well, we’re not San Francisco yet.’ But it’s starting to feel a lot like what you all experienced,” said Nora Linares-Moeller, executive director of HousingWorks Austin, an affordable housing advocacy group.

 Californians are fueling Austin’s housing frenzy: ‘We’ve never seen migration like this’

New homes are built around Austin. And, in some neighborhoods, the homes have waiting lists with hundreds of people wanting to purchase them.

Ilana Panich-Linsman/Special to The Chronicle

A key difference is Austin has room to grow, said Jake Wegmann, an associate professor at the University of Texas who studies housing. The city spans 271 square miles, with only the meandering Colorado River as a natural barrier.

“The one saving grace that we have, and the way in which we really don’t look like a California city or a West Coast city, is that there is lots of room to sprawl,” Wegmann said, calling it a “pressure release valve.”

“I don’t think that (home prices) are ever going to be quite as extreme as they are in the Bay Area,” said Wegmann, who previously studied at UC Berkeley.

But growing outward instead of upward has a cost. Workers who flee to cheaper satellite areas have to pay more for gas to get to jobs downtown. Traffic is worsening.

The neighborhoods most vulnerable to gentrification, primarily in north and east Austin, are where many low-income Black and Latino residents live, according to a 2018 city-sponsored study.

“We’ve had more folks be pushed out more and more,” said Awais Azhar, an Austin planning commissioner and HousingWorks board member. “We know there’s a lot of folks who historically lived here whose incomes are not keeping pace.”

Voters are responding. After measures failed in 2000 and 2014, residents passed a $7 billion transit plan last November, funded with higher property taxes to expand bus and rail lines. It includes $300 million for an anti-displacement fund that could aid struggling homeowners or build new affordable units.

There are three new rail lines going north and south, including an underground tunnel in downtown, planned over the next decade.

“This is Texas, and people love their cars. But we will not survive as a city … if we’re not able to provide alternative modes for transportation,” Austin Mayor Steve Adler said.

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As in the Bay Area, Austinites have been happy to raise money for transit and housing, but the fight over where to put taller buildings has been bitter.

A nearly decade-long effort to update Austin’s 1984 land development code to allow denser housing in single-family neighborhoods has been mired in backlash, delays and a lawsuit that’s reminiscent of Bay Area housing fights, Wegmann said.

A six-year, $8.5 million plan called CodeNext was canceled in 2018. Adler called the effort “divisive and poisoned” at the time, while reiterating support for an overhaul.

Last year, a City Council-backed rewrite stalled after 19 homeowners sued and a judge ruled in their favor. The city has appealed the decision.

“The city does not have enough housing,” Adler said. “Our biggest challenge moving forward is preserving the diversity and the creativity that exists in our city. It’s an affordability issue, it’s a housing issue, it’s an access to opportunity issue.”


Perhaps the most visible sign of Austin’s housing turmoil, aside from the cranes dotting downtown, are the tents.

In a scene familiar to Californians, homeless people camp under freeways and in public spaces, including within a waterfront park across the street from a massive, partially built tower leased by Google. A few blocks away, tents encircled Austin’s City Hall last month in a protest, after voters passed a ballot measure in May that made camping in public spaces a criminal activity, reversing a 2019 City Council vote. Police began clearing them this month.

The city has a plan to build housing for 3,000 homeless people over the next three years, roughly its entire unhoused population, and Adler is optimistic. He doesn’t see San Francisco as an economic rival, but rather a place that can offer a lesson: Act fast.

 Californians are fueling Austin’s housing frenzy: ‘We’ve never seen migration like this’

People walk and scoot down South Congress Avenue in Austin. The capital city is in a housing frenzy, partially driven by incoming Californians.

Photos by Ilana Panich-Linsman/Special to The Chronicle

In contrast, the Bay Area’s problems seem intractable. Homelessness would take an estimated $11.8 billion to solve, according to a recent report. The nine-county median home price hit a record $1.3 million in April.

“It might be too far gone at this point to turn that around. At least not for decades,” Wegmann said.

But for all the cost disparities, he doesn’t see the demise of the Bay Area, which is still the “capital of innovation,” home to the biggest tech companies and powerful institutions like Stanford and Berkeley, along with natural beauty and sublime weather. Even Oracle, which moved its headquarters to Austin last year, is keeping some employees in the Bay Area.

“I don’t think any of that’s going away in the Bay Area. But I do think that the Bay Area is headed for a future where it’s a little bit less dynamic … more slow-growing” he said. “Austin is going to be more fast-growing and dynamic and fast-changing.”

For the Rubbiccos, the daily grind of getting up early, getting kids to day care and commuting on BART to an office just to open a laptop and take phone calls has given way to a home life that allows a focus on children and family — and a bigger house and yard to enjoy it.

“I love the Bay Area, I was born and raised there. I have nothing bad to say about it,” Jessi Rubbicco said. “I think we were just looking for something different for our family. COVID put in perspective what we wanted.”

Roland Li is a San Francisco Chronicle staff writer. Email: roland.li@sfchronicle.com Twitter: @rolandlisf

 

Article source: https://www.sfchronicle.com/local/article/California-Austin-Texas-migration-home-prices-16275299.php

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