Rent vs Buy in Austin
Market Overview
Austin’s median home price of $450K and condos at $380K offer a moderate entry point among major tech markets. Appreciation has averaged 3.8% annually over the past five years, though this follows a post-pandemic correction from the 15%+ surge years. The absence of state income tax is a headline draw, but property taxes of 1.8–2.2% on assessed value create carrying costs that surprise many first-time buyers.
Texas Property Tax Dynamics
On a $450K home at 2.0%, annual property tax is $9,000 ($750/mo). This is roughly $4,000–$5,000/yr more than a comparable home would generate in effective property taxes in most coastal markets with sub-1.2% rates. The tradeoff: no state income tax means higher earners keep more of their paycheck, but this benefit is capitalized into home prices, partially negating the savings.
Break-Even Analysis
Run through the engine at this report's stated basis (6.1% rate, 3.8% appreciation, 20% down, 8% selling costs, a 7% return for the renter and the $2,000 2BR rent as the comparable), there is no break-even at all inside thirty years. At a price-to-rent ratio of 18.8 the carrying cost plus the forgone growth on a $90,000 down payment outrun what equity and appreciation add, permanently. That is an answer rather than a missing number, and it is the honest headline for this market today. Against the cheaper $1,600 1BR rent — a price-to-rent ratio of 23.4 — the gap is wider still. The moderate entry price means smaller down payments ($90K at 20%) and therefore smaller opportunity costs than the coastal markets. But 2% property tax on a fully reassessed value is a heavy annual drag, and reassessments in appreciating neighbourhoods make it heavier. At 3.8% appreciation the equity simply does not build fast enough to overtake an invested down payment plus the monthly cost gap. The three lines in the seven- and ten-year tables below are engine output at that basis: buyer equity is the projected home value less the loan balance less the cost of selling in that year; the renter portfolio is the buyer's entire upfront cash — down payment plus closing costs, less the renter's own move costs — invested at 7% and then fed or drained every month by the difference between the two paths' costs; and transaction and carrying costs are every dollar that never became equity, meaning closing costs, interest, property tax, insurance, maintenance and the exit fee combined.
SALT Cap Irrelevance
Because Texas has no state income tax, total SALT deductions are limited to property taxes alone. At $9,000/yr on a median home, most Austin buyers were already below the old $10,000 cap. The increase to $40,000 provides no additional benefit. This is a meaningful difference from NYC or San Francisco, where the SALT increase directly shortens break-even.
7-Year Scenario Comparison
10-Year Scenario Comparison
Sensitivity Analysis
Local Risk Factors
Frequently Asked Questions
- U.S. Census Bureau. American Community Survey, Austin-Round Rock MSA.[census.gov ↗]
- Zillow Research. Austin ZHVI and ZORI Data, accessed Jan 2026.[zillow.com/research ↗]
- Travis County Appraisal District. Property Tax Rates and Exemptions.[traviscad.org ↗]
- Texas Comptroller of Public Accounts. Property Tax Rates by County.[comptroller.texas.gov ↗]
- Federal Housing Finance Agency. House Price Index, Austin MSA.[fhfa.gov ↗]
- Austin Board of Realtors (Unlock MLS). Monthly Housing Market Statistics.[unlockmls.com ↗]
- Federal Reserve Bank of St. Louis. FRED: Mortgage Rates and CPI.[fred.stlouisfed.org ↗]