2nd Annual Austin Economic Forecast – Notes & Commentary

January 31, 2010 at 2:15 pm 1 comment

Home Builders Assoc of Greater Austin and the Austin Board of Realtors:  1.13.10

I attended the Austin real estate economic summit (of sorts) and took notes as fast as I could.  The 2-second summary:  “things are getting less worse.”

The 20-second bullet version:

  • If you’re the type of person who likes to buy at the bottom, we’re at the bottom.
  • The best performing areas of the country:   #1 in 2000 – Austin / Central TX, #1 in 2009 – Austin / Central TX
  • Job growth is key.
  • We are setting the stage for a potential lot shortage in Austin within the next few years.
  • 2009 – TX had the largest number of single-family permits than any other state times 2.
  • US home pricing has turned the corner just in the last quarter of 2009; we need to clear the remaining inventory, then prices can begin to go back up.
  • TX = Stability … over time, this will play into consumer confidence.
  • Austin MLS stats:
    • 9/09 – 11/09 … first up-tick in total closing in 3 years. 
    • We have probably seen the low point as far as overall closings.
    • Austin supply (active for-sale) did not go up in 2009, so prices held.
    • Overall market is in great shape with <6 months inventory.
  • New home starts vs. closings:  we have cleared excess inventory the last 3 years and are poised very well for recovery.
  • Downtown Austin:  hundreds of units available vs. thousands in FL; keep perspective.

For those of you who have a few minutes or the 20-second version left you wanting more, I offer my notes with a little commentary:

Steve Zbranick, Custom Homes – 2010 “Master Builder of the Year”

Over the last 10 yrs, a lot of well-intentioned people were getting into real estate.  Many of them are now out.  When you try real estate long enough, real estate eventually tries you.  [I would think this concept applies to more than a few professions, right?]

Why a hurricane in NOLA affects building in Austin … no roofers, no drywall in central TX.

Custom builders … no spec homes in 2 years; production builders … not as many spec homes; this equals less competition.

There has not been a better time in Austin in 5 years to start a custom build.  [This has to do with available supply, available people, CoA inspector & permit response time, not yet a lot shortage.]  As soon as the production builders wake up, then all the resources will go to them.   We shifted from delay and limited supply to availability and when we start to shift back to delay and limited supply, prices will go up.  It is basic supply & demand, folks.  As soon as this switches, it will cost 20% more to build the same house and we’ll have to educate the appraisers.

If you’re the type of person who likes to buy at the bottom, we’re at the bottom.

Pike Powers, Economic Development:  Fulbright & Jaworski, “Recovering Lawyer and Politician”, The Significance of Economic Development

The best performing areas of the country:  #1 in 2000 – Austin / Central TX, #1 in 2009 – Austin / Central TX

CA is insolvent and ungovernable.

[Note: I was pleasantly surprised that right off the bat in his “econ dev” speech, he’s talking green, talking green as an important key in our next econ growth phase.  Is this because his job is solely to attract business to TX and they’re going after “green” companies or is it more than that?  It would be un-pc to not talk green but he set it out as his foundation.  Interesting.]

The future will be greener.  Consumer trends are green; housing is just on the cusp, on the rise.  Focus on energy use, carbon imprint, water use, solid waste.  [Where is the green low-lying fruit in your life:  energy audit, duct sealing, insulation, a more efficient car, less laundry, farmers market?]

Blessed to be in TX; we are a HUGE market.

Cannot emphasize enough the importance of the emerging technology fund; it is changing the world. 

John Hockenyos, TX Perspectives:  Economist, Trends and Directions for 2010:  Making sense of what is going on

Things that are improving:  the stock market, productivity, consumer activity (a little), energy GDP is growing (although still relatively weak).  Bottom likely was summer 2009.  Austin is strong, but not immune.

Parenthetically, we need job growth; the one sector of the recovery that is not yet showing its face.  Job growth optimism:  IT, weaker dollar because exports are more attractive, health insurance finance debate [did Mass senate race this week 1.22.10 change that?].

“Nobody knows what anything is really worth.”  We’ll have another six months or so figuring this out, resetting of value, especially on the commercial side.  [Note: how does this apply to the top-of-the-market homes that you know are worth high dollar but no comps to support it?  How to lead a price increase in a given neighborhood … takes a cash buyer or a high down-payment and a buyer who’s perceived value is ahead of the current comparable market … “yes, this we believe this house is worth $500k as there is absolutely nothing that can touch it in value, features and quality on the market but show me a comparable.”]

Job growth is turning positive end of 2010.  Recovery is u-shaped, not v-shaped.

TX consumer confidence follows the national trend but at a higher level.

We are setting the stage for a potential lot shortage in Austin within the next few years.

Hotel revenues in Austin are solid; as an indicator of Austin optimism and solidity, approximately 50% greater than ‘02/’03.

Conclusions:

  • GDP positive for 2010 but recovery not until 2nd half
  • Interest rates unlikely to change significantly until recovery is firmly in place
  • Austin job growth 2010 flat but positive 2011

3 is the magic number for recovery: 

  1. Institutions – research, employers, the intellectual engine, the historical capacity
  2. People – exceptionally desirable place to live and work, the consistent thread of “you should have been here when …”
  3. Infrastructure – transportation, energy, environment

Eldon Rude, MetroStudy:   Housing Starts Here:  Tracking the New Home Market

With decisions in our business and your real estate investments as we move forward, the data is vital to being able to successfully move forward, the benchmarks that pave our way.  In the Jan 2010 National Championship game, within 5 minutes, everything changed … have to adjust to what is about to happen … this applies in our businesses and marketplace  You have to be nimble and quick, ready to react.

Impact of real estate … consumer confidence and job growth.  They have to feel better (in mass) about those decisions.

Direct impact on buying cars and houses … it’s “getting less worse.”  We’ll get there but it’s going to take a little while (again, u-shaped, not v-shaped).

2009 – TX had the largest number of single-family permits than any other state times 2.

US home pricing has turned the corner just in the last quarter of 2009; we need to clear the remaining inventory, then prices can begin to go back up (this is the big FL, NV, AZ et al issue).

TX = Stability … over time, this will play into consumer confidence.

Austin MLS critical stats:

  • 9/09 – 11/09 … first up-tick in total closing in 3 years. 
  • We have probably seen the low point as far as overall closings.
  • Austin supply (active for-sale) did not go up in 2009, so prices held.
  • Overall market is in great shape with <6 months inventory.
  • 2010 may tick up inventory but starting at a very good place.
  • Just a marginal decline in pricing, not significant; we’re in great shape

MetroStudy – every 90 days they survey new construction lots and inventory.  Starts and Inventory:  the main market indicators.  The tech wreck of ’07 created an inventory build-up; we had to work through the excess inventory in ’08 (because building was so strong in ’05 and ’06).  New home starts vs. closings:  we have cleared excess inventory the last 3 years and are poised very well for recovery.

“The Attached Market” – condos and downtown:

  • A few dropped their prices and it cleared the inventory.
  • The Spring is the only major DT project selling units.
  • Under construction:  W, The Austonian, Four Seasons
  • We’re talking a few hundred units; FL is thousands of units.
  • Condos in east and south Austin are challenged at this point but these prices may come down.

Overall new home inventory:

  • 14-year low at 3,500 units
  • Right now, loans for lot development are very difficult [note:  this needs to change to get developers back in the market; had someone call me the other day about selling a lot in east Austin and I told him if he did not NEED to sell, he should wait, lots are not selling in east Austin right now … ie:  no developer money right now unless it’s cash]
  • When you start a house, you reduce lot supply; current lot absorption

Austin foreclosures 2009:  postings up 61%, sales down 24%; banks are finding ways not to foreclose or they are not selling and they repost.

Of the top 20 MSA appreciation in US, 9 are in TX (Austin #20 at .9%).

NV, AZ, FL, Mich, CA – highest negative equity in the country.

Austin new inventory one of the lowest in the country = stability

2010 Forecast

  • Jobs – is that over this year?  Moves us into recovery
  • Consumer confidence – should build this year
  • Tax credit – how much momentum remains?  It probably brought low-end buyers into the market, and is now impacting upper income levels.
  • Direction of interest rates
  • Underwriting criteria – when does that loosen?
  • Lot availability?
  • Builders ability to finance construction / access to capital

Do we have demand to close 7,500 units this year?  That would be an improvement in demand but we need starts because inventory is down (ie. builders need access to capital as soon as things start to turn) … so more production later this year.  This is good news (or could be) … we’re optimistic.

© Julie Nelson and The Nelson Project at Keller Williams Reatly, 2008-2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Julie Nelson and The Nelson Project at Keller Williams Realty with appropriate and specific direction to the original content.

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Entry filed under: Austin. Tags: , , , .

$6500 Tax Credit for Repeat Buyers: Are you eligible? Garage Conversions, part 2

1 Comment Add your own

  • 1. Jan Hill  |  February 1, 2010 at 12:38 am

    Julie great job recapping the “state of our City” …we are blessed to live in Austin!

    Reply

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© Julie Nelson and The Nelson Project at Keller Williams Reatly, 2016-2020. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Julie Nelson and The Nelson Project at Keller Williams Realty with appropriate and specific direction to the original content.

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