Tesla packing bags and moving to Texas – and like many former Californians, is hoping to find affordable housing in the process.
During Tesla’s TSLA,
The company’s chief executive, Elon Musk, told investors at its annual meeting on Thursday that it was relocating its headquarters to Austin, Texas. Musk himself announced in December that he had moved to Texas and was sharing his time there and in California.
The high cost of housing in California was a major reason behind this decision. “In the San Francisco Bay Area) it is difficult for people to afford homes and many people have to come from far away to work in the company’s factories and offices,” Musk said. “There’s a limit to how big you can scale in the Bay Area.”
It’s a move that will seem familiar to many who have moved from California’s valuable coastal market to a more affordable part of the country. And Texas is often at the top of the list where these families relocate.
Robert Diets, chief economist at the National Association of Home Builders, said three of the top five markets for single-family housing are located in Houston, Dallas and Austin-Texas.
“The way business is run in a way that is partly driven by relatively good housing savings, will increase these profits for Texas,” Ditz said.
Here’s the bad news:
According to a report published in August by the National Association of Realtors, home prices in Austin rose more than 45% last year. A popular holiday destination in Berkshire is Pittsfield, Mass.
So for existing homeowners in Austin, the arrival of people from other regions of Texas and the rest of the country has rapidly increased their housing wealth. But for tenants and first-time home buyers, this has made housing much less affordable. Data from Realtor.com shows that the average asking rent in Austin has increased by 21.7% compared to a year ago.
Where Californians are going
What’s more, those who are tired of expensive housing markets like San Francisco and San Jose usually don’t go that far.
“If you look at where people are moving from San Francisco, it’s still irresistible in other parts of California,” said Daniel Hale, chief economist at Realtor.com. Other cities in California are the top 10 destinations for people leaving San Francisco.
For people in nearby San Jose, they are a bit more risky to go out of state for their next move, but still have seven of their top 10 destinations in the Golden State.
But while people in this part of California prefer to move out of state, Texas is one of the most frequent landing spots – especially cities like Austin and Dallas.
Although the exodus from California has not only benefited Lone Star State. A 2018 report from Trulia found that nearby Las Vegas was the most popular destination. Other popular markets among Californians include Phoenix, Miami and Tucson, Ariz.
In more recent years, small towns in the country’s Mountain West region have benefited people with expensive lifestyles in California, including places like Boyce, Idaho and Bozman, Montana.
Texas is seeing a new housing crisis
Part of why Texas has long been so popular with home buyers from other parts of the country is that it is relatively easy to build a home there.
“Texas has lower regulatory costs related to land development and home construction and this enables additional housing supplies,” Dietz said.
This has helped keep housing costs more affordable than the more expensive coastal markets. According to the National Association of Realtors, the average home price in Austin in the second quarter of 2021 was $ 515,100. Meanwhile, the median price for San Francisco was 1.39 million, and in San Jose it was $ 1.7 million.
Ed Pinto, director of the American Enterprise Institute Housing Center, said move-up buyers “can find a huge arbitration opportunity to move to Austin.”
And compared to California? “A square foot house in Austin can be bought for 30 cents on the dollar,” he said.
Although austerity is not guaranteed forever, it is difficult to understand how much the relocation to Texas has accelerated home-price growth in the state’s main housing market. In Austin, in the second quarter of 2021, 46% of people bought homes from elsewhere, Hale said.
“Whether it’s grooming or boring depends on the state of your ownership,” Hale said.
Although housing regulations in Texas make it easier to build housing there than in other parts of the country, this is only one factor that contributes to the cost of housing.
“This increased demand has reduced housing capacity in areas like Austin,” Dietz said. “Texas needs more housing, and sorting out supply-chain and adding skilled workers to the construction sector is essential to achieving this goal.”