If you’re looking to move to Austin, Texas, you’re left with two major housing options—buy or rent. While they both have their pros and cons, you may be confused about which option will not only suit your lifestyle and long-term goals but your finances, too.
As of June 2020, the cost of rent in Austin, TX, averages around $1,750. When compared to the median price for a single-family home ($424,050), renting a home may seem too expensive to justify the cost. However, renting may be the more reasonable option if occupants plan to stay in the house for less than three years.
Also, with the sporadic surge in the price of rent and housing, deciding on whether it’s worth renting or buying a home can be challenging. In this article, we will highlight some of the key reasons why you may want to buy or rent a home in Austin.
Why is Housing in Austin Expensive?
Most people assume that the extreme rise of housing prices is due to Austin’s rapid growth in the technological industry and the fact that they’re a hub for major corporations such as Dell, Amazon, and Apple.
However, according to Forbes, the real reason housing in Austin is expensive stems from the city’s inability to build more homes. High-rise and high-density construction are prohibited in many of its regions, and there are many preservation reserves.
With that said, is it worth buying or renting a home in Austin, even if it’s expensive? In the following sections, we’ll review the pros and cons.
Should I Buy a House in Austin, TX?
Purchasing a home in Austin comes with its advantages and disadvantages:
|There is the potential for long-term financial gain.||There will likely be maintenance and repairs needed.|
|You’ll have a fixed-rate for your mortgage.||Financial loss is possible.|
When you buy a home in Austin, you are building what is known as “equity” or wealth for the future.
With the constant rise in the price of homes, you are more likely to cash in on the equity your home may have accumulated over the years. In fact, from 2010 to 2019, the median price of homes in Austin rose from $193,520 to $318,000.
With that said, if you’re planning to live in Austin for an extended period, it may be wiser to buy a house and build equity instead of renting.
Most mortgage programs in Austin offer a fixed-rate mortgage. Buying a home in Austin eliminates the issue of dealing with inflation and the rising cost of rent. Mortgage payments in Austin are steady and fixed, unlike rent prices, which have experienced a 3.1% increase in the last six months.
Maintenance and Repair Issues
Studies have shown that as a homeowner, you are likely to spend between 1-4% of your home purchase price on repairs each year. Buying a home in Austin requires you to deal with annual or even monthly repair and maintenance issues. When you rent, your landlord or property manager is usually responsible for maintenance-related matters.
Potential Financial Loss
While homeowners are known to build equity in their homes over the years, this doesn’t mean profits. Depending on the market condition or future situations like a recession, the value of your home may fall drastically, leaving you with losses. While the Austin real estate market is on the increase, nobody knows what the future holds.
Should I Rent a House in Austin, TX?
Many people may tell you that if you plan on paying $2,000 to a landlord for rent, you are essentially throwing your hard-earned money away. After all, a rented home is not yours to keep, no matter how much you spend to live there. However, outside of this and a few other cons, there are also plenty of advantages to renting as well.
|Renting is usually more affordable for some.||You have no control over rent as it continues to increase to match economic conditions.|
|It allows you the flexibility to move out when you want.||You can’t build equity on a rental home.|
While the price of renting in Austin may be at an all-time high, renting a home is more affordable when compared with buying a house. You don’t need to save for a down payment, closing costs, appraisal, mortgage insurance, and other fees.
Buying a median-priced home in Austin may require out of pocket costs of up to $38,719. By renting, you’re only liable for monthly rent and a security deposit.
Allows for Mobility
If you’re not trying to stay in an area for an extended period, it might be better to rent a house instead of going through the stress of buying and then quickly selling a home. On the other hand, when you rent, you can easily pack your bags to move to another location.
Limited Control of Rent
When you rent, you have practically no control over the amount you are required to pay. Your landlord may decide to increase the price of rent to match the current cost of living in Austin. Since February 2019, rent prices have increased by 3.1 percent, with the likelihood of increasing more due to the rising cost of homes, migration, and economic boom.
No Equity Building
When you rent, every payment you make is gone forever. No matter how quick your rent payment or the amount of rent you pay, you can’t build equity on the property. So, whether the price of homes in Austin skyrocket, you cannot cash in on the equity the property may have accumulated. It all belongs to your landlord.
That is why if you intend to live in Austin for over five years, buying a house may be a better financial decision.
Buying or Renting in Austin: Is It Worth It?
Austin is one of the fastest-growing areas, not just in the state of Texas, but in the US overall. With the rising rates of employment, industries, and cultural diversification, moving to Austin may be a worth-while decision.
Ultimately, buying or renting a home in the city is a decision you must make based on your personal and financial situation. But keep in mind that current rent and housing prices are likely not to decrease anytime soon.