Outlook for Austin Real Estate:
Wednesday was a big day in Austin for market analysis, with a couple of major forums discussing what's ahead for Central Texans. The forecast overall for 2008 appears to be "partly sunny" – or "partly cloudy," depending on your outlook – with bright spots summarized below. Central Texas continues to buck national trends in the real estate market, and the Austin Metro Area continues to evolve with new ways to live, work and invest.
Austin Metro Study
4Q 2007 Summary
Eldon Rude with Austin Metro Study kicked things off at the Austin Country Club with his 4th Quarter 2007 analysis of the local real estate market and specifically new home activity, with predictions for the industry in 2008.
Overall, Rude believes that the market has not yet hit bottom and production of new homes this year will absolutely be down from 2007. However, he commended area builders on cutting back production to control inventory, and cited their quick response to market changes as part of the reason why the local real estate market is so much stronger than elsewhere in the country. He predicts a 10% reduction in new home starts in 2008 with slower job growth and less relocation traffic due to the challenges of selling homes in other parts of the country.
On the national front, the 4th Quarter GDP was announced this morning at .6, a stunning slide from 4.9 in the third quarter of 2007. Rude warned attendees to brace themselves for an onslaught of negative economic news from the national press. Nationally, early estimates of job growth for Dec. '07 is at 1.3M, continuing a slow decline in new jobs that began at the end of 2005.
However, Texas continues to buck national trends, and there are several factors in our favor as 2008 picks up steam.
1. Texas leads the nation in job growth in 2007, with double the new jobs of the number two state, Florida. Austin had the highest rate of growth in Texas in 2007 at 3.2%.
2. Austin had the lowest unemployment rate in Texas in Dec. '07, at 3.6%.
3. Housing starts are down nationally and Texas is no exception, but Texas still leads the nation in Single Family building permits. Even so, the Austin Metro area saw closings of 1,000 more new homes than were started in 2007, a strong indicator that area builders are working to manage inventory.
4. Of all the cities tracked by Metro Study across the country, the Austin MLS has the lowest months of supply of homes for sale (at 4.2 months in Dec. '07), making this one of the healthiest markets in the country.
5. Unlike much of the rest of the US, Austin's home values continued to rise through 2007, ending at an average of $251,489.
6. Overall, foreclosure rates in the Austin area remained low in 2007, but there is a spike in Feb. '08 postings that bears watching.
Other trends mentioned in the Metro Study report:
1. In the Austin apartment market, Dec. '07 saw 94% occupancy and average rents of $.96 per square foot, both strong indicators. Approximately 8,000 new units will be delivered in 2008 and the effect of this new inventory bears watching.
2. In the resale market, Rude expects the months of supply of homes for sale to increase in 2008. If the line between and seller's and buyer's market is at about 5-6 months of supply, Rude predicts "we will see Austin move in that direction in 2008."
3. There were two factors in declines in new home starts in some sub-market areas. Sub-prime mortgage problems affected some areas with homes in the lower price ranges, including Pflugerville, Kyle/Buda, Manor and Hutto. Other areas saw a decline in starts due to decreasing lot supply, such as Southern Travis County, Round Rock West and Lake Northwest.
4. Areas with increases in new starts include Cedar Park/Leader West and Central/East Austin (largely fueled by the Mueller redevelopment).
5. In the Attached Market (condominiums), inventory is up in part because these projects take longer to build. Most of this development is in Central Austin, with 1800 units under construction and 344 finished/vacant units in the 4th quarter of '07. Rude said the outlook on the market segment is positive so far, as generally units that are finished are sold and occupied.
5. Months of supply of finished vacant inventory was highest in prices over $750K, at about 5 months.
6. Months of supply of vacant developed lots is highest in Liberty Hill (59 mos.), San Marcos (65 mos.), Hays West (79 mos.), Lockhart (90 mos.), Smithville (106 mos.), and Lake Travis South (108 mos.).
Thanks:
The Independence Report
Jan. 30th, 2008
Kara McGregor, VP Bus. Dev.
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Disclaimer: These reports reflect the views and opinions of the Advisors and are not necessarily the views and opinions of NARREIA.
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