This morning Joe and I attended the 2012 Housing Forecast. This is a special event where industry analysts discuss the trends of 2011 and forecast where the housing market is headed in this coming year.
Speakers of the event included Eldon Rude Director of the Austin Market for Metrostudy, Dr. Greg Hallman The University of Texas’ McCombs School of Business and Austin’s favorite weatherman, Jim Spencer KXAN.
From these leading analysts we learned about local and national conditions and how everything from the National GDP (gross domestic product) to the weather affects our local real estate.
New Home Sales Forecasted to Increase in Austin Area
It has been no secret, and the media has repeatedly reported that Texas overall and the Austin market has been insulated from nation’s overall depreciation and economic hard times. Coupled with the news that jobs are being created in Texas, that is perhaps a big part in why it is forecasted that 22,222 additional households will be moving to the Austin area each year until 2020.
What does that number translate to? Well, to pick apart the tons of data we were presented with today, it means that Austin will need anywhere from 11,111 to 13,333 more newly-built homes each year to accommodate for this tremendous population growth.
Remember just a few years ago when everyone was worried that the home builders were over-building? We were all right to worry then. But, now the data shows that Austin is seeing a steadily increasing demand for new homes because builders are saying ‘no more building more than what we are selling’. In fact, the Austin market is seeing the number of new home sales (closings) exceed the amount of new home starts (construction). This divergence in statistical trend lines is what is signaling the builders to increase inventory.
Because of the rate people are moving here and because we no longer have an overabundance of new homes, the analysts are predicting a 5% increase in new home builds in 2012. In 2011, the Leander ISD area led the number of new home starts by taking 22% of the market. Homes in the Austin ISD area took 10% of the new-home-starts pie.
If you are curious about what price range most new home sales are in, it is the $200,000 – $300,000 range. More importantly, I found it interesting to hear that there is plenty of supply and demand in the markets below that price range, but restricted lender guidelines have made it increasingly difficult for buyers in this market to qualify for loans, so the inventory has not been turning over.
Austin Rental Rates Seeing Highest Increase in 25 Years
Going back to the 22,222 people estimated that are moving to the Greater Austin Area, the data from the meeting today estimated that about half of them are renting when they get here. Some rent for long periods of time; some rent for a year so that they can get a feel of where they’d like to live in the Austin area. This huge supply of renters has undoubtedly already caused the costs of rentals to go up. So much so, that we’ve seen the most significant increase in apartment occupancy and rents in 25 years. We agree with this assessment, since almost all of our leasing clients are facing stiff competition when trying to rent homes, and the top rental properties in Austin usually get multiple applications on the first day on market.
These increases in rent will make current renters ponder if it is now time to buy, which will eventually send another surge into the resale and new home market this next year.
What Do The Numbers Really Mean?
So what did the third quarter of 2011 bring Austin? As of November, we had 4.6 months of inventory – meaning we are currently in neither a buyer’s market nor a seller’s market, but a ‘normal’ healthy market. Moreover, Austin had a 1.6% annual price increase reported this quarter.
How the Weather Affects the Austin Market
Jim Spencer of KXAN spoke to us about the weather forecasts. I learned from him that we have tree-ring weather data that dates back to 1550, and this is the worst drought ever seen besides the drought of 1789. We always recover from droughts – it can take a decade, or a surprise tropical system could end the drought overnight. The biggest take away I have for my clients is that, especially with this drought, be sure you are watering your foundation evenly. I cannot stress that enough! By regularly watering your home’s foundation you are taking the right steps toward warding off pricey foundation repairs.
How is the Texas Housing Market Comparing to the Nation?
When you look at the graphs, states like California, Arizona, Nevada and Florida had soared to the top of the graph lines with significant appreciation followed by huge dips down for depreciation; Texas stayed relatively stable and in the middle of the graphs, experiencing no huge swings in either direction.
This further proves that we cannot be compared to the national news.
Additional Stats & Highlights From Today’s Housing Market Meeting
- Overall, the job market looks healthier, though it may take a while to fill the 5 million job loss void that still exists from the 7.5 million jobs that were lost in 2010. The nation is predicted to gain 200,000 jobs/month. Although this is a step in the right direction, it is a slow rate to fill the loss of those 5 million jobs.
- Corporations are making money, though focusing spending on capital goods and not labor. The nation needs more labor to really make a comeback. Banks also have less REO and are open to more real estate deals.
- Nationally, consumers are still worried about jobs and housing and are de-levering, meaning paying off debt instead of buying new things.
- Our national GDP is back to pre-recession levels! Government support should be stepping in for the lack of consumer spending, but we are not seeing that happen.
- The takeaway – the economy has less of a capital problem, and more of a consumer confidence problem.
If you’d like for me to send you more detailed information on the 2012 Housing Forecast , or to find out how the recent statistics affect your selling or buying market, contact us today!