Property Lines is a column by Curbed senior reporter Patrick Sisson that spotlights real estate trends and hot housing markets across the country. Comments, tips, and suggestions on where Property Lines should head next are welcome at patrick@curbed.com .

Austin’s ongoing tech boom has been good to Kevin Burns. An Urban Land Institute member and CEO of Urbanspace, a boutique real estate firm with exclusive sales rights for many of the city’s high-end high-rises, Burns has sold units in many of the city’s most expensive apartments and condos. With Google, Apple, and Facebook, among a lineup of tech and oil companies, all opening or expanding their offices in the Texas capital, the broker foresees no shortage of wealthy clients.

“We’re the closest thing you can get to California without state income tax,” he says.

But even though Austin benefits from a concentration of tech firms and talent, Burns’s wealthy clients are not all tech employees. Take the Independent, the new downtown luxury residential project nicknamed the Jenga Tower, set to open with record-setting condo prices ranging from the high $600,000s to over $3 million. Burns has found that interest in pre-sales for the Independent covers both a wide price range and a wide demographic range, including young families and empty nesters.

“Now, those buying condos downtown look like a Benetton commercial,” he says. “It feels like we have residents from newborn to 80, all who have said, ‘To hell with the suburbs.’”

A new rush for high-end rentals

The growing number of luxury rentals—and more importantly, luxury renters—in Austin exemplifies a trend in cities across the nation: the bifurcating housing market. While many indicators suggest a slowing housing market in general, and the production of affordable housing still lags well behind the nation’s unmet need for millions more low-cost units, in many cases, luxury condos and homes, especially in dense downtown districts, continue to be a popular investment.

“If you’re a high-end renter in Texas, there’s more or less a choice for every type of lifestyle you may want, and that hasn’t always been the case”

Since the end of the Recession, growth in multifamily development has outpaced growth in the construction of single-family homes, according to Igor Popov, chief economist at Apartment List, in part to meet the demand for upscale urban living. Even in Texas cities where sprawl has traditionally been the winning formula for growth—Dallas, Houston, and San Antonio, in addition to Austin—there are increasingly more high-end condos and apartments built in an increasing number of neighborhoods, options that simply weren’t widely available a decade ago.

“If you’re a high-end renter in Texas, there’s more or less a choice for every type of lifestyle you may want, and that hasn’t always been the case,” Popov says.

Downtown Dallas won’t become Manhattan anytime soon. But the growth in high-income renters in the state, defined as those making more than $100,000 a year, has been significant, according to Apartment List data, above and beyond the 48 percent growth seen in this segment nationally. Over the last decade, as the Texan economy has continued to expand, the percentage of wealthier renters has skyrocketed in Texas cities: by 142 percent in Austin, 91 percent in Dallas, 73 percent in San Antonio, and 59 percent in Houston. Last year, Dallas was third in per-capita spending on multifamily construction, behind just Denver and Seattle.

This has led to a growing inventory of high-end rentals and condos. In the Dallas-Fort Worth area, nearly a dozen new buildings in the pipeline will add 4,000-plus units of super-luxury living.

In recent years, the housing market has mirrored the economy at large, with a widening gap between high-income earners and everyone else. A November 2018 study by Trulia found that the share of single-family homes sporting seven-figure values on the listings site had grown 7.6 percent over the past year alone. The same study found the number of U.S. households earning six figures or more grew 48 percent since 2008.

This small but lucrative segment of the market—just 1.6 percent of the housing stock in Texas is over $1 million dollars—has been responsible for a growing percentage of Texas metro real estate transactions. According to Joshua Roberson, senior data analyst at the Real Estate Center at Texas A&M University, luxury home sales continued to grow last year, though not as robustly as they did in 2017. In Austin, sales of homes worth $1 million or above grew 23 percent in 2017 and 13 percent last year. In Dallas, the same segment grew 24 percent in 2017 and 4 percent last year. Houston saw growth hit 11 and 7 percent, while San Antonio has seen robust increases both years, 22 and 21 percent.

In just the last two years, according to Dallas Business Journal, 3,716 homes costing more than $1 million have sold in North Texas, an increase of 27.6 percent. And in Austin, the Barton Creek neighborhood became the first in Texas to have a median home value of more than $1 million ($1,021,760, to be exact, per Trulia).

The condo market has shown similar growth. All four cities have seen condo values outpace the national average. Austin saw a 12 percent growth in value and a 46.8 percent growth in inventory in 2018; in Dallas, those figures were 13.9 percent and 59.7 percent, respectively.

“There’s a changing demographic, it’s not just Houstonians and Texans living here, and they want a more walkable lifestyle.”

Houston and San Antonio, both slow to build high-end housing during the recovery, have started to catch up. According to Chaille Ralph, president of Houston’s Heritage Texas Properties, the city’s high-end market has finally caught up to pent-up demand. The $750,000-plus market for condos grew 13 percent last year, after growing 15 percent the year before, and higher-priced buildings are springing up in the Inner Loop, River Oaks, and Upper Kirby neighborhoods, with names such as the Midtown, the Revere, and the Giorgetti. The Preston, a forthcoming 46-story tower with a wine room and pet spa, just broke ground downtown.

“I don’t think this is a boom,” says Ralph. “Houston has just become a much more diversified city. There’s a changing demographic, it’s not just Houstonians and Texans living here, and they want a more walkable lifestyle.”

San Antonio, one of the fastest-growing cities in the nation, has also seen explosive growth in the luxury market. As the bicultural city known the for the Alamo and River Walk continues to rope in more businesses, such as USAA, it’s also seeing increasing demand, especially on the higher end.

“San Antonio was late to the party of people moving back to the center city,” says Stephen Yndo, of SOJO Urban Development. “But once it starts, it tends to feed upon itself. Our downtown office market is now starting to take off; those two combined are going to make the difference. As San Antonio broadens its economy, it’s behaving more and more like other Texas markets.”

Yndo’s company has seen brisk sales of condos priced between $500,000 and the mid-$800,000s, very high-end for San Antonio. The $116 million Arts Residences, a much-hyped condominium project connected to a new Thompson Hotel, has sold briskly.

Luxury development’s fate in a downturn

Roberson says there’s already been a sales slowdown across Texas markets this year due to the oil price hiccup, a rising mortgage rate, and anxiety over the national and international economy. Popov agrees, noting that some economists have adopted a pessimistic “winter is coming” perspective around the fate of all this new construction.

“During a recession, you can’t unbuild,” he says. “Will that create a glut on the supply side?”

Candy Evans, a Dallas real estate writer who runs a local site called CandysDirt.com, says the naysayers, including the author of a recent Wall Street Journal piece identifying Dallas real estate as a “canary in the coal mine,” are overtly negative.

“The north part of the Metroplex [the Dallas-Fort Worth area] is where you have open land and crappy developments having a tough time selling,” says Evans. “Our city was built on cheap land, and that land is simply getting more scarce.”

While markets may shift, changing fundamentals in Texas and nationally are harder to discount. With the number of Americans who rent rising and growing demand for new urban real estate growing, downtown seems poised to remain a high-end destination for years to come.