Janice R. Andrews
Austin, Texas, used to be a rising star known for its booming music and tech industries. Now, it’s a warning sign of what can happen when demand grows faster than supply. The city became very famous very quickly during the pandemic because of its low state taxes, the growth of the tech industry, and the large number of new residents. But new information suggests that the “boomtown” bubble may have burst, causing house prices to drop and planes to cut back on services.
Population Growth and Too Much Building
A report from TheStreet says that Austin’s population has grown from 1.6 million in 2013 to 2.3 million in 2023. A lot of young professionals and tech workers moved to the city from expensive states like California. Some big tech companies, like Oracle and Tesla, moved their offices to Austin, making it even more of a tech hub. Because of this increase, a lot of new homes were built as builders rushed to meet the rising demand.
Demand, on the other hand, hasn’t lived up to hopes. The real estate market has slowed down because of rising mortgage rates and worries about the effects of climate change. In the year before May 2024, home prices in Austin dropped 3.5%. This was the biggest drop in the top 100 U.S. areas. Housing prices have dropped sharply because there are a lot of homes for sale and not many people want to buy them.
Airlines Pulling Out
As Austin became more popular, airlines jumped at the chance to add new flights, making the city a growing tourism spot. American Airlines was one of the first airlines to grow. In 2021, it added 24 new local and foreign routes. Its plans for a 15,000-square-foot Admirals Club at Austin-Bergstrom International Airport (AUS) showed its support for the state capital of Texas even more. At its height, some experts in the field thought Austin might become an important place for American Airlines.
But the airline’s plans to grow in Austin have quickly been turned around. American Airlines cut 21 routes in 2023. Some of these routes went to famous places like Las Vegas and New Orleans. The airline then cut even more flights in July, and now it has revealed that starting in November 2024, it will no longer fly to Boston, Nashville, Raleigh-Durham, and Orange County, California. By January 2025, American will have closed almost all of its lines that were used during the pandemic.
It’s not just American that’s cutting back. Virgin Atlantic ended its service from London to Austin at the beginning of 2023 because there wasn’t much demand in the tech industry. Spirit Airlines also got rid of its direct flight between Austin, Texas, and Monterrey, Mexico, in September 2023.
Worries About the Economy Loom
The fact that planes are leaving and home prices are falling are signs that the city is having a hard time keeping up its boomtown status. During the pandemic, Austin grew because of the growth of the tech industry and the low cost of living compared to other big cities. But things like high mortgage rates, worries about overbuilding, and lower-than-expected demand from businesses are now slowing down the market.
Airlines and homeowners are rethinking Austin’s future, which means that the once-bustling boomtown has to get used to much slower growth.
