Home prices are going up as fast as construction cranes near the new Apple campus!
Could the same happen near the new Tesla factory?
In December 2018 Apple announced their new $1 billion campus in NW Austin that is projected to eventually employ 15,000 people. At the time I wrote a blog describing the effect the original Apple campus had on nearby home prices and how this new campus might have a similar effect.
It’s been 18 months since the announcement and the campus is finally beginning construction. There are 4 construction cranes on site and permits show an August ground-breaking. Even though employees won’t move in for at least a year, it hasn’t slowed the tremendous amount of nearby home buying interest from investors, current Austin Apple employees and employees relocating from other parts of the country.
How much has this interest caused nearby home prices to spike? Here is a breakdown of the median sold price of single family homes built before 2010 in nearby neighborhoods and cities to the new campus. Numbers include home sales in FY 2018 compared to sales in YTD 2020 (as of Aug 1).
Not surprisingly the highest appreciating neighborhood is Rattan Creek/Hunters Chase which is the only neighborhood withing walking distance of the new campus. Its 26% appreciation in 18 months is double the Austin average. Next up with over 20% appreciation are the second two closest neighborhoods to the campus, Forest North/Springwoods and the 78727 Milwood neighborhood that boundaries to RRISD. The only other neighborhood to surpass 20% appreciation is Scofield Farms which besides being close to the new Apple campus is also nearby the Domain which is also experiencing a tremendous amount of office construction and employment growth.
Interest Rates – Another reason for the big appreciation numbers
While 26% appreciation over 18 months in Rattan Creek may seem extraordinary, it’s really not as shocking as you might think. When Apple announced their new campus in December 2018, the average 30 year mortgage rate was 4.63%. It’s been steadily dropping to today’s current rate of 2.99%. To put that in perspective, if you purchased the median priced house in Rattan Creek in 2018 ($297,500) with 5% down and financed the rest, your monthly mortgage payment, not including taxes and insurance, would have been around $1454/mo. If you purchased the median priced house today ($375,680) with similar terms, your payment would be $1503/mo. Only $50/mo more for almost $80,000 more house.
It’s safe to say there is a big premium for nearby real estate to the Apple campus but had there not been such a dramatic drop in interest rates, the appreciation might have been closer to 15% instead of 26%.
What does this mean for Tesla real estate?
Unlike Apple, Tesla is building their campus in a rural area. There were just over 100 resale homes sold within 4 miles of Tesla so far in 2020 compared to 700 resale homes sold within 4 miles of Apple. There is also plenty of available land for new housing developments near Tesla unlike the Apple campus which has very little developable land nearby.
Tesla will also be located along the lightly traveled (compared to other Austin roads) SH130. This will allow for 10-20 minute commutes from many parts of Austin including Manor, Pflugerville, South, East and Central Austin. Because of this it’s most likely that Tesla employees will be willing to live further away from their work than Apple employees who need to live within a few miles of the campus if they hope to have a less than 20 minute commute to work.
Even without Tesla, the east side of Austin will see tremendous growth in the next decade. Amazon is building their almost 4 million sqft distribution hub off of SH130 in Pflugerville, the Parmer Innovation Center is continuing to expand, Oracle has relocated their 1000’s of Austin employees to SE Austin and millions of square feet of office space are planned/under construction in central east Austin.
The Tesla announcement will give home builders even more confidence to begin developing their lots. According to Metrostudy there are 15,299 building lots planned within 5 miles of the Tesla campus and 53,639 lots within 10 miles. While the real estate story of Apple was the run on scarce nearby resale housing, Tesla looks more like its real estate story is going be new rooftops sprouting up in Del Valle, Manor, Pflugerville and all along SH130.