A video showing several abandoned homes in a "zombie" neighborhood in Austin, Texas, has gone viral online as the former pandemic boomtown is experiencing an exodus of residents.
"Austin developers are giving up on neighborhoods," Austin realtor Jeremy Knight said in the video published on YouTube on Tuesday.
"Look at this: we are in a neighborhood in south Austin, and it's completely abandoned right now. This neighborhood was supposed to have like 200 homes in it and look, it is sitting vacant and barren. These homes are falling apart," he continued. "It's the entire neighborhood."
Footage shot around the neighborhood by Knight shows empty and unfinished properties with broken windows and rotting wood in their foundations. The video has been watched over 9,500 times.
Newsweek reached out to Knight for comment via email on Wednesday morning. Knight said he did not yet wish to disclose any further information about where the Austin neighborhood in his video was located. "Realtors did not abandon that neighborhood. The developer has run into problems with funding," he told Newsweek.
"As for the market dynamics in Austin that are causing builders problems," he said, "many of them bought these projects and started in 2020/2021 as the market was beginning to skyrocket.
"There was a lot of demand with more people moving to Austin. Unfortunately, the city of Austin has a lot of red tape and logistics to get through. Many of these projects take years to get greenlit. Now add the delays with workforce during the pandemic, the backlog, and developers rushing to buy in Austin, and then a turn in the market of 21 percent peak to trough. The valuations many of these developers put on these projects no longer make sense," he said. "Add the fact that interest rates have doubled and nearly tripled since the projects started. Many of these small developers are facing headwinds."
The Austin housing market was one of the hottest in the country during the booming years of the pandemic, when prices skyrocketed driven by a massive flow of people moving to the Texan city. Due to its warm weather, buzzing city life and vibrant culture, relative affordability and a lack of a state income tax, thousands of people moved to the city in the past few years from states like California and New York.
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At its peak in May 2022, the median sale price of a home in Austin was $669,000, according to real estate brokerage Redfin. Moody's Analytics estimated that the Austin housing market was 61 percent overvalued in the second quarter of 2022.
The city was particularly hit by the housing market correction that followed the price peaks of early summer 2022. Between late summer 2022 and spring 2023, home prices modestly dropped across the country as many aspiring homebuyers were squeezed out of the market by suddenly much higher mortgage rates and demand declined.
But whereas the price drop at the national level was minimal, home prices plunged in Austin. In January 2023, the median sale price of a home in the city was $525,000, down by 6.3 percent compared to a year before. In the final quarter of 2023, the city was overvalued by 36.9 percent, according to Moody's Analytics.
While Austin still offers a relatively affordable housing market, which is currently cheaper than cities like San Francisco and New York, the opportunities for remote work that had driven so many people to move to the Texas city have dried up, and tech companies have reduced their headcount in Austin.
Read more: How to Get a Mortgage
"Now that the pandemic has ended, offices are calling people back into work and we are seeing people return to the cities that they originally left," Cody Horvat, a real estate broker for The Scott Group, previously told Newsweek. "This isn't necessarily a bad thing for Austin, nor do I think the housing market there will see a massive dip in pricing."
Home prices in the city have steadily climbed in the past three months. In January, the median sale price of a home in Austin was $500,000; in February, it was $523,719; as of March 2024, it was $550,000—2.8 percent higher than a year before but much lower than the pandemic-era peak reported in the city.
Update, 4/24/2024 10:29 a.m. ET: This article was updated to include comments from Jeremy Knight.
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Giulia Carbonaro is a Newsweek Reporter based in London, U.K. Her focus is on U.S. and European politics, global affairs ... Read more
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