Thinking of this kind of "expansion" using an analogy like a balloon does a disservice. When you get to large enough or small enough distances then our intuition often falls down completely.

In this case it's entirely possible for the topology of space to change such that it takes longer to travel from one point to another over time. If you consider a trip from point A to point B in topology A, and then topology A expands during the trip from point A to point B such that new distance is created, then the "distance" you have to travel to get to B is changing because at each moment along the trip you're at a different point.

If you think about it this way, the universe can be both expanding because it takes progressively longer to get from point A to point B, and it can also not be expanding into some "outer" area because there's nothing other than the universe.

It may make more sense to stop thinking in terms of distance and start thinking in terms of time. In that case, when you think of "expansion" what you're really describing is that at a constant speed, the closer you get to B, the more time it takes you to advance toward B. And if you change direction mid-trip to go to C, the "expansion" means that the amount of time required to reach C also increases as time elapses.

It's hard to say what's causing that expansion, but we can measure it by its effects on light traveling the same distance.