My wife and I lived in Austin, Texas back in the early 80s (yeah, I’m dating myself) and it still had a bit of a back woods feel to it. I remember it being a pretty small town relative to Dallas where I grew up. So, under the assumption that the world doesn’t change, I thought it might make a great place to retire someday. We could cash out our East Village home here in Chicago, take the proceeds, and buy a mansion from some Austin yokel and live like royalty.
So when we were in Austin 3 months ago we decided to look at some homes. Boy were we in for a rude awakening. That town has become the Silicon Valley of Texas in the last few years and Chicago housing affordability is considerably better. I know. It’s hard to believe.
Let’s start with the data. The National Association of Realtors produces an affordability index by metro area for around 180 metro areas. As they explain it “a composite HAI of 120.0 means a family earning the median family income has 120% of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home.” According to this database Austin’s affordability index for 2015 was 168.9, which is not bad. However, Chicago’s index is even more affordable at 192.1.
But there’s a problem with indices like this. They basically smush all the data together into a single number. That means that all of Chicago’s low end houses get lumped in with the high end homes and they all have equal affect on the median price. It’s apples and oranges. More importantly, what you can buy in Chicago at the median price may not be comparable to what you can buy in Austin at the median price. So let me get specific with some real examples and you’ll soon see that the affordability gap is much worse (or better if you live in Chicago) than you think.
In Chicago’s Ukrainian Village here is what about $1 MM buys you: 2057 W Erie sold back in August for $1.035 MM. It is 4450 sq ft with 4 bedrooms, 3 full baths, and 2 half baths. It was built in 2008, has high ceilings, and has Sub Zero and Wolf (or is it Viking?) appliances. One of the things really important to my wife is that you can walk 5 minutes and get to the grocery store or numerous restaurants and bars. You can hop on a bus and get to the Magnificent Mile in about 20 minutes or drive anywhere downtown in about 15 minutes if traffic is not too bad. And the neighborhood feels pretty upscale.
Now, compare that to this one home we saw in Austin, which seemed to be a typical value. It is near city center (kind of like Ukrainian Village in Chicago) and recently closed at $950K: 1820 Spillman St. With 4 bedrooms and 3 bathrooms it’s only 2606 sq ft and I can assure you the photographs are way better than the reality of this place. It’s basically one of those small 1960s ranches with really low ceilings where they tacked on a second floor in the back of the house. The main photos are actually of the back of the house. You have to go towards the end of the sequence to see the front of the house, which is pretty darn boring.
Although the kitchen and addition are more modern the rest of the house is pretty sad and most of the floor is polished concrete with cracks in it. If I recall correctly the laundry room had a curtain in place of a door because otherwise the washer and dryer wouldn’t fit. The appliances are mid-grade stainless steel. Look carefully at the family room photos and you’ll see that the ceiling is dark blue with pinhole lights to create a starry night effect.
As for the neighborhood…it’s actually a similar income demographic to Ukrainian Village but it had the feel of one of those neighborhoods where the front lawns are littered with cars up on cinder blocks. I don’t think I actually saw this but my brain keeps filling it in. And a 5 minute walk only gets you in front of another house just like yours. This is in fact the way most of the residential areas of Austin are – more like a suburb than a vibrant urban community. (Personally, I’m a suburb kinda guy but my wife is not.)
You can definitely find better values in Austin than this home but that would put you further out from city center and even those homes fall short of what Chicago has to offer. You can get high ceilings and the larger square footage but the finishes are more like what Chicago left behind 10 years ago – very traditional, milled cabinetry and mid-grade stainless steel appliances.
Other than the crime and the income tax and the high sales tax and the potholes and the weather and the traffic Chicago is really a pretty good place to live. I can only hope that the oil bust eventually depresses home prices in Austin.
Gary Lucido is the President of Lucid Realty, the Chicago area’s full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider’s view of the seamy underbelly of the real estate industry, or you just think he’s the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.