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Economist: Austin will recover faster than the rest of the U.S.

Austin Business Journal - by Jean Kwon ABJ Staff

In the coming year Austin will outperform the rest of the country in job growth and in the health of its housing market, according to Mark Dotzour, chief economist at Texas A&M University's Real Estate Center.

 

Austin will add 8,500 new jobs between now and August 2009, despite a negative job growth across the country, he says. The local housing market will turn around faster than the rest of the country by next summer, Dotzour predicts.

 

In the meantime there will be a marked drop in new construction next year as a result of tightened debt and equity markets, Dotzour says. Still, the credit crunch is starting to thaw, and the pressure on national banks is beginning to move to regional banks including those in Texas. Those banks are tightening the terms on outstanding loans and demanding additional collateral or partial paydowns based on reappraisals. Loans for single family developments will bottom out between now and next summer and some builders will leave the market involuntarily, says Dotzour. By next fall he predicts a turnaround in the market and a renewed uptick in homebuilding.

 

The local demand for apartments is at an all-time low, says Dotzour. There will be demand for about 2,500 units next year, a fraction of the 9,000 to 11,000 units that will come online. He anticipates occupancy will be 90.4 percent and rents will fall to an average of 94 cents-a-foot.

 

The office market will see very little new construction in 2009 and 2010 as a result of the recent credit crunch. But that means when the economy picks up in mid-2009 the region will see the next wave of rent growth, says Dotzour.

 

About 350,000 square feet of office space is likely to be absorbed next year, and 700,000 square feet will come online. Occupancy will be 84.7 percent.

 

Industrial development is seeing the biggest wave of construction in the history of Austin despite a 25 percent increase in construction costs last year, says Dotzour. He predicts ownership will begin to change hands as rents stagnate.

 

Dotzour predicts 250,000 square feet of flex/R&D space will be absorbed and that 400,000 square feet will be completed next year. The warehouse and distribution market will see 2 million square feet come online, and 376,000 square feet of that will be absorbed. Occupancy rate will be 82.4 percent and rents will be down 7 percent.

 

Local downtown retailers like REI, Whole Foods and Anthropologie have fared well but retailers will likely struggle in the coming year. Investor demand in retail is low and institutional investors have broken off deals as a result of being over-allocated in real estate, says Dotzour. The International Council of Shopping Centers predicts store closings in 2008 could reach 5,770 nationwide, the highest number since 2004. Unless gasoline prices return to under $3 a gallon, discretionary consumer spending will languish, Dotzour says.

 

If demand slows for local commercial real estate there could be a decline in construction material costs in the coming months, he adds.

"If this hypothesis doesn't hold water, and oil is still 125 bucks a gallon and steel costs what it does now, then we're in an entirely new era for living in the U.S. where things cost a whole lot more than they used to," says Dotzour.

 

 

Wednesday, May 7, 2008 

Austin recession-proof?

Austin Business Journal 

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Austin was named third on the Forbes.com list of the top 10 "Recession-Proof Cities" in the United States.

To create the list, the magazine looked at the 50 largest U.S. metros, examining key measures, such as unemployment data, non-farm related job growth, median home prices and data from a 2007 report, "U.S. Metro Economies: The Mortgage Crisis" by the U.S. Conference of Mayors.

At number three, Austin was right behind San Antonio, which grabbed the second spot thanks to solid employment figures and affordable home prices that continue to rise.

Oklahoma City took the No. 1 spot because of its strong housing market and solid growth in agriculture, energy and manufacturing.

For its part, Austin was lauded for being a hip town with one of the lowest unemployment rates in the country.

Forbes magazine's list of recession-proof cities also included: Houston, Dallas, Charlotte, N.C., Raleigh, N.C., Salt Lake City, San Jose, Calif. and Seattle.

Forbes says that Texas cities such as San Antonio, Austin, Houston and Dallas-Fort Worth have benefitted from historically lower home prices, land availability and 'little zoning'.

All four Texas cities boast falling unemployment rates, according to Forbes, with Austin dropping from 3.8 percent to 3.6 percent.

Forbes.com

RESIDENTIAL
STRATEGIES
SUBJECT: Activity 4007
FROM: Mark Sprague
RSI Introduces San Antonio Coverage
Current National Housing Market Conditions
After peaking at 1,837,000 units in Jan. ‘06, single-family starts have declined 829K units (-65%) to 829,000 as of Nov. ‘07.
Starts and permits fell 5% in November; lowest production level in over 16 years.
First stage of recovery is working down overhang of housing inventory.
• Unsold spec homes.
• Existing home inventory.
• Regurgitated foreclosures, investor sales.
National Perspective — Builder Pessimism Continues
Housing Market Index remains near record low for past 4 months.
New orders decline as well.
Expectations for sales over next 6 months show slight improvement in January 08.
National Perspective — Economic Outlook
Gross Domestic Product climbs to 4.9% in 3Q07
• But weakening economy has forecasts pointing to much weaker 4h quarter.
Many economists handicapping possibility of recession at 50:50 (or higher)
• Equities market behaves poorly
• Federal Reserve expected to lower fed funds rate 50 basis to 3.75% at 1/30 meeting.
• CPI sees slower growth in Dec.; less inflationary than earlier in 2007— leaves room for Fed.
Concerns are that housing debacle is having a ‘spoiler effect’ on consumer spending.
Local consensus is that Austin downturn would be shallow, short-lived.
NAHB National Outlook — U.S. Single Family Housing Starts
20% decline in starts anticipated in ‘08 (on heels of 25% reduction in ‘07).
Housing sales expected to turn up by mid-year.
Housing starts anticipated to begin recovery by year-end ‘08.
NAHB believes bottom of housing cycle is in view.
• First Half of 2008 likely will continue downward, with modest recovery of starts in Second Half.
• Turmoil likely will continue in mortgage markels.
• We can only count on agency paper (Fannie Mae, Freddie Mac) and FHANA.
Long-term outlook for housing is excellent.
• Especially favorable for Texas and Austin.
Current Austin Market Conditions
+ Builders curb starts as finished housing begins to accumulate,
+ In 2006, builders started 706 more houses than they closed. In 2007, the trend was reversed, with 1,070 more houses closed than started,
Finished vacant housing edged higher in 4Q07, up 379 units to 2,928 units.
• Now represents a higher than desired 2.40 month supply.
But with U/C housing inventory declining 665 units to 3,992 (3.27 mos), evident that much of the inventory will be worked down this Spring.
National press coverage on housing downturn continues to be a challenge.
Affects buyers’ psyche.
Reports of increased traffic in January.
• But builder discounting and give-aways continue to be challenging.
Lot Development increased in 4Q07.
• Timing of some future developments may need to be reviewed in light of slower start pace.
• Lot supply now at 24.6 months,

Market Drivers
+ Job growth rate off slightly toward year end,
+ Handicapping the effects of a national economic stow down.
Austin Housing Vital Signs (1Q07 — 4Q07)
+ $ Vol. Starts (Billions) $3.61
+ Median New Home Price $208,323
+ Annual Starts 13,562
Annual Closings 14,632
+ FV Home Inventory 2,928
+ Month Supply (1) 27,974
Vacant Lots Month Supply (2) 24.8
(I) 2.5 mos. is considered equilibrium (2)24 mos. is considered equilibrium
&QaQhkhpncles In Median Home Price Vacant Lot beveinned inventnrv
2007
Area Annual 4Q05 4006 4Q07
Starts
Austin SW 1,289 $217696 $298,833 $263503

Top Areas for Lot Development
• Pflugerville: 882 (Total lots U/D); City of Austin SW: 852; City of Austin NW: 636; Cedar Park: 457.
+ East Round Rock: 433; SW & West Travis Co: 418; Liberty Hill: 417; Buda: 377; Hutto: 362; Cityof Austin NE: 347.
Austin Apartment Occupancy
+ Average Rent $832
+ Occupancy 93.7%
Townhome Activity
+ TN starts have surged in 2007
• 868 Starts: 503 Closings.
92% are located in the suburbs; represents 6.4% all new home activity.
• FV inventory is too high
• 238 units, up 99 units from 3Q07; 5.7 month supply.
+ VOL inventory is ok for now
• 1,594 lots, 22 mos.
• 1,010 lots U/D (14 month supply).
Austin Forecast: Market Drivers
• Austin CES Employment Survey:
• Annual change Nov ‘06- Nov ‘07: +22,500. 3.05% annual growth rate.
+ Austin Unemployment Trends Nov. ‘07:
• Austin — 3.5%
• Texas—4.1%
• US — 4.8% (Dec.)
+ Austin Resales & Listings:
• Annual Rate 11/07 — 28,410
• Month Supply — 4.05
Final Thoughts: What we learned in 2007
• Infill locations, MPCs hold up in a slower market,
+ True to form, outer ring markets are first to feel a slow-down.
+ Many of the big builders are making Austin decisions based on their corporate balance sheet, not local conditions.
+ Regional independents positioned to pick up market share, but most are still in wait mode.
• Even with a slow-down, A&D lenders are in good shape.
Real estate devaluation is a coastal market issue, not a Texas challenge.
•‘ Realtors and buyers show aggressive behavior in purchase negotiations — consumer needs to be ‘enlightened’.
+ Credit is lighter, but there is still ample capital for good deals.
+ New investment opportunities may be more in the form of finance restructuring than in standard lot development.
+ Austin no longer has a shortage of lots.
For information on becoming part of the quarterly RS1 Housing Activity briefings, please contact Mark Sprague at (512) 329.2800. A clear understanding of this market can be vital to your business growth.

1250 S. CAPITAL OF TEXAS HIGHWAY, BLDG. Ill, SUITE 400, AUSTIN, TX 78746
TELEPHONE 512-329-2800 • FACSIMILE 512-857-0270

Mark Sprague is a very well known residential consultant and developer.

Study: Austin homes prices up 8.6%

Austin Business Journal

§                                 Study: Home prices increase in Texas markets [San Antonio]

§                                 Study: Home prices increased in Texas markets [Dallas]

§                                 Honolulu leads U.S. in home price growth [Honolulu]                                 

§                                  

Home prices in Texas -- especially in Austin -- have defied the overall downward trend seen in other U.S. housing markets, according to a study by First American Loan Performance.

In the Austin market, home prices increased 8.62 percent over the 12-month period ending in October. Other Texas markets included in the study's top 30 statistical areas include Dallas-Fort Worth-Arlington, which increased 3.92 percent; Houston-Sugar Land-Baytown, up 4.52 percent; and San Antonio, with a 7.89 percent increase.

Loan Performance Home Price Index reports 12-month home price changes by the top 30 core-based statistical areas as of October 2007.

Home prices fell in 21 states over the past year, according to the index, which provides monthly home price indices and median sales prices covering 7,451 ZIP codes, 956 core-based statistic areas, and 662 counties in all 50 states and the District of Columbia.

"The real estate market continues to exhibit ongoing declines in a number of key residential property markets," says Damien Weldon, vice president, collateral and prepayment analytics for First American LoanPerformance. "The overall picture continues to be mixed, however."

The LoanPerformance HPI incorporates more than 30 years of repeat sales transactions, representing more than 45 million observations, sourced from the property information database owned by its parent company, First American CoreLogic Inc.

First American LoanPerformance is a subsidiary of First American CoreLogic, and a member of The First American Corp. (NYSE:FAF) family of companies.

On a related note, for the 10th month in a row home prices across the U.S. dropped, according to a different study.

The record 6.7 percent monthly drop in the Standard & Poor's/Case-Shiller home price index was the largest drop since April 1991. The index tracks prices of existing single-family homes in 10 metropolitan areas compared to a year earlier.

A broader index of 20 metro areas fell 6.1 percent. Among the 20 metropolitan areas used in the broader index, 11 posted record monthly declines and all 20 declined in October compared to September.

In the year-over-year comparison, Miami posted the largest decline among the 20 markets with prices -- down 12.4 percent in October compared with the same month last year. Tampa, Fla., was the second-worst performing city with declines of 11.8 percent. Besides those two cities, Phoenix, Detroit, Las Vegas and San Diego also posted double-digit year-over-year declines.

Only three areas included in the study -- Charlotte, N.C., Portland, Ore., and Seattle -- posted year-over-year home price appreciation in October. Charlotte posted the largest gain at 4.3 percent.

Scarbrough Building history

• The Scarbrough Building was Austin's first skyscraper and marked the beginning of Austin's downtown business district.

• It was built for Emerson Monroe Scarbrough, a successful merchant.

• It was designed in the Chicago style by Fort Worth architects Sanguinet and Staats and opened in 1910.

• Bets were taken on whether it, the city's first steel and concrete structure, would stand or fall.

• Art deco elements were added in 1930.

• The second story, which will be home to Google, housed the Scarbroughs department store for years until its closing in 1983.

Sources: Austin History Center, American-Statesman archives

November 5,2007                             

Latest Austin Real Estate Trends

The Real Foreclosure Story in Texas!

A lot of people are nervous about what they are reading in the newspaper and hearing on TV.  But how can you blame them? The media is bombarding people with reports about the housing decline and the sub-prime mortgage mess.   

However, Chief ECONOMIST for the National Mortgage Bankers Association, Doug Duncan decided last week to set the record straight.  In a private conversation, Doug said that people have nothing to worry about in Texas.   

Some of his defenses were...

The foreclosure problem in this country is really a story about 7 states

The biggest foreclosure problem is in Michigan, Ohio and Indiana.  These are predominantly manufacturing states

Since 2001, Michigan has lost 300,000+ jobs

The other 4 states are California, Florida, Arizona and Nevada.  In each of these states there has been significant overbuilding.  25% of the foreclosures in these states are on properties that are held by investors who were speculating

California & Florida have been hit very hard

35% of the homes in the USA do not have a mortgage

98% of the mortgages in the USA are performing

Only 9% of all mortgages are sub-prime

75% of all sub-prime mortgages are performing

In the other 43 states, foreclosures have fallen in 2007 from 2006

Right now, our local inventory levels are half the national average and well-priced homes are selling fast.

You cannot expect this type of factual information to be distributed by the news media channels.  We have to be telling folks this story.   

September 27, 2007

SIZZLE SLOWING, STILL SIMMERING

Austin (Austin American-Statesman) – Although August is typically a top-selling month, existing home sales were down more than 10 percent from a year ago, according to a report by the Austin Board of Realtors.

There were 9,819 homes on the market, 21 percent more than a year ago and a four-year high.

Homes priced below $200,000, which represent more than half of the Central Texas market, experienced the biggest slowdown at 16.7 percent. Sales were also down a significant 7 percent for homes priced from $200,000 to $399,999.

Pending sales in August were down 24 percent from a year earlier.

The year-over-year median home price rose 6 percent to $192,200. The average number of days on the market was 58.

“All we're seeing is a maturing of the market," said Mark Sprague, Austin partner of Residential Strategies, which tracks and forecasts real estate trends. "It's not as great as it was last year, but it's still a great market."

The area’s August unemployment rate was the lowest in six years.

Latest Legislation proposed for Mortage Fraud

Senate Committee on Business and Commerce considered HB 716 by Solomons. Working with the bill author, several coalition partners, and law-enforcement entities, the Texas Association of REALTORS® was able to dramatically alter the bill’s language to more properly address mortgage fraud. HB 716 as passed by the full House contains the following:

Requires state agencies to assist in the investigation and prosecution of mortgage fraud cases

Requires a notice to be given to each loan applicant verifying name, income, and employment, carrying a penalty of two years to life for false or misleading information

Extends the statute of limitations to seven years for money laundering or false statement to obtain property, credit, or a mortgage loan

Creates a Residential Mortgage Fraud Task Force to form a strategic partnership among state, federal, and local law-enforcement agencies to better enable law enforcement and state agencies to take a proactive stance towards tracking and prosecuting mortgage fraud and the perpetrators of mortgage fraud statewide