There have been some encouraging signs in Austin/Central Texas residential real estate recently (see Signs of Austin-area market progress and Demand for new homes may be picking up …). Since building permits indicate builders’ and developers’ confidence or lack thereof, this brief summary of permitting activity offers some interesting insights.
To keep this simple, and to avoid getting bogged down in month-to-month variations, I focused on cumulative, year-to-date, permits issued in 2010 and so far in 2011.
This year, new permits for single family homes continue to lag last year — about 5% through May:
Permits are still being issued, and the cumulative total is not falling any farther behind as 2011 progresses, but there is no sign of a surge in confidence in this sector. It’s also worth noting that the number of single family building permits in the past few years is WAY off the pre-recession peak — down 65% since 2006:
It is a fact that Austin and Central Texas were largely shielded from the effects of the housing downturn in 2007. Total home sales have certainly declined, but values have held up well and even continued to appreciate. That was due to a much lower rate of mortgage foreclosures than in most major cities, and because home builders pulled back in the face of weak demand, allowing private home sellers a less competitive environment.
The market for small investment properties — duplexes, triplexes, and fourplexes — is barely breathing:
Yes, that’s just 29 permits issued so far this year — just 1/5 of the YTD total at this time in 2010. Certainly weak, but not necessarily — or exclusively — driven down by the current recession. The last real surge in 2-4 Family permitting was in 1981 to 1984.
As I have commented several times in recent months, the housing sector that is really showing the confidence that should result from Austin’s continuing growth in jobs and population is the apartment market. Permitting activity so far this year bears that out:
So far in 2011 (January through May), new multifamily permits have totaled 94% of the entire 12-month number from 2010!
I don’t expect the 2-to-4 Family sector to make any significant recovery, but the surge in new apartment-building projects is very encouraging, and it is a signal that we can expect renewed confidence in new Single Family home construction — beginning later this year, then gaining real traction as we move toward Spring and Summer of 2012.