Austin Real Estate Market Trends:
Articles By Roselind Hejl

(First I want to thank Mr. Kotkin for sharing his highly valued opinion with me.  Joel Kotkin is executive editor of NewGeography.com and is a presidential fellow in urban futures at Chapman University. He is author of The City: A Global History and is finishing a book on the American future.)

(Roselind)  I was pleased to read your recent article about the best cities for job growth.  You selected Austin as the #1 Big City for job growth.  What put Austin at the top of the list? 

(Joel)  Austin has a very good combination of assets.  You could call it blue state sophistication - universities, culture, music, high end knowledge workers - meets red state cost structure - that is, relatively cheap housing and low taxes.  It's driven a lot of growth.

Perhaps more than even other Texas cities, Austin benefits by having huge publicly-subsidized employers - the University and state government.  Ironically, these are more stable in Texas because there is still some private sector growth in the state, and costs are not totally out of control, as they are, say, in New York or California.  Again, the bizarre blue state in a red state phenomenon works out to Austin's favor.

(Roselind)  I read the article on your site about the four great growth waves in the U.S. and the cities they produced:

          a. The original power spot was the New York, Washington DC and Boston areas. 

          b. The rise of agriculture and industry gave us Chicago, Detroit, Cleveland, and Pittsburg.

          c. A westward migration after World War II developed Los Angeles, Seattle, Las Vegas and other cities. 

          d. Now the baton is being handed off mostly to Texas.   

This is a huge fundamental change that I was not aware of.  We are an artsy, laid back, university town.  The mantra is "Keep Austin Weird."  This was a misspelling of a "Keep Austin Wired" bumper sticker, but it seemed to resonate with Austinites.  How do you think this wave of migration and prosperity will affect Austin? 

(Joel)  I think Austin has this self-image but its reality is changing. When I go there, I see it more and more like an elite version of Dallas.  I remember Austin in early 1970s when it was a small college town.  Now it's more like other big cities in Texas.  The big difference is its shtick is different.

Houston's self-image is as a wide open "opportunity city".  Dallas craves respect as a sophisticated business city.  San Antonio relies on Texican charm.  In the same way, "weird" is Austin's shtick. And it works as long as the Texan fundamentals remain in place.

But it is clear that growth and success will change the city.

Los Angeles became a very different place by 1990 than it was in 1975 when I got there. There were huge improvements in food, shopping, culture and intellectual climate but declines in the wide-open, sun-worshipping classic LA culture. You will see some trade-offs as well.

(Roselind)  We have some interesting urban growth in Austin promoted by the city - part of an overall green incentive to be the greenest city in the nation.  These include the new residential buildings downtown.  There are also some "urban hubs" such as the Mueller area - the old airport converted to homes, offices, and retail.

Austin has always been a suburban town, since most its growth took place after World War II.  Commercial buildings, or even a grocery store, were not allowed in a residential area.  Even in our old neighborhoods, you go and come in your car. 

What do you think of these areas?  Are they happening in other parts of the country?  They seem to be what people want.  The trade off is that the lots and houses are very small compared to suburban houses.

(Joel)  Urbanism has a future, but it will likely remain a niche. Nationally the urban condo market is in free fall, in many ways worse than suburbs. I would estimate 10-20 percent of people want to live in dense environments, perhaps more in places like Austin and less elsewhere. The real estate industry hyped itself into hysteria.

Some trends - like huge numbers of downshifting boomers moving downtown - were vastly over-exaggerated. The research shows very few moved, and many who did were largely speculating.  Now there's a surplus of units that were built for the affluent and older people, and they are desired mainly by younger, less affluent people.  In places like Austin, these places likely won't remain empty, but some developers will take a huge haircut.

The problem with the "green" and "new urbanist" approach is that it is top down.  It does not jibe with job growth (overwhelmingly suburban), or market and price signals, and relies on government to force it onto the market.  Better to improve existing suburbs with parks, local pedestrian-friendly districts, and let the city develop organically.

In other words, let well enough alone and focus on schools, the economy, and basic infrastructure.  If there's going to be a huge shift to urban living, let the market drive it.  Btw, every city is right now on a green kick.  Nothing particularly unique about it.

Links:

Best Cities for Job Growth

Growth Waves and the Cities They Produced