Earlier this week I took a quick look back at real estate in 2016. (See 2016 in Review.) Today’s post is a compilation of some of the best thought available about what 2017 holds.
First, let’s consider the larger Texas economy. This summary from the Federal Reserve Bank of Dallas is an important starting point:
Among many details, you’ll see in that report that statewide job growth in 2017 is expected to be stronger than 2015 and 2016, with strength in the services sector counterbalancing difficult volatility in the oil and gas industry. Services now account for more than 60% of all private sector economic activity in the state. Unemployment in Texas ended 2016 at 4.6%, compared to 4.7% for the entire United States.
Energy remains an important part of the Texas economy, but 2016 was a disappointing year. On the other hand, Texas’ manufacturing sector has weathered the most recent “oil bust” much better than it did the recession in 2008 and 2009.
Local economist and analyst Angelos Angelou points out some challenges for Austin:
Key findings from his report include:
- Austin’s economy is still growing at more than 3 percent per year
- Fluctuations in unemployment rates have been in fractions of a percent, which Angelou called “statistically insignificant.” The rate has mostly stayed under 3 percent recently, creating a tight labor market that makes hiring difficult for businesses
- Austin’s median home price has climbed to $280,000, with the average price at $345,000
- The housing market’s equilibrium point is the creation of 15,000 new units per year, but the city currently averages 13,000 new units per year
- The Austin metro area now exceeds 2 million people and is on pace to reach 4 million by 2040
Following the report, Austin Mayor Steve Adler commented that, “increasing housing supply, preserving workforce housing, adding middle-class jobs and studying possibilities for a long-term, ambitious transit system are among his policy priorities for 2017.” All deserve attention, and are important for Austin to grow in a healthy way.
Last December, a group of corporate executives and a university economics professor painted an encouraging picture of the Austin-area economy:
There is some concern about job outsourcing overseas, loss of local manufacturing jobs, and a decline in oil and gas-related tax revenues flowing into the state government, but Austin’s strengths — entrepreneurship, an educated workforce, and availability of angel and venture capital funding — are alive and well, needing diversity in employment and leadership, but cause for confidence going into 2017.
At the end of that article, a real estate executive comments on Texas real estate, discussing the truth of our supply-constrained market, particularly in the mid-range segment.
This summary from The Real Estate Center at Texas A&M University notes that the Dallas Fed’s Texas Leading Index points toward modest growth in the state’s economy, and offers a high-level view of the near-term future of real estate in the state — a positive view:
This additional article from The Real Estate Center narrows the focus:
In 2016 in Review I mentioned that listing inventory in the Austin area remains very low. The same is true statewide, with an 3.6 months’ supply — lower than the national average of 4.3 months, and much lower than the 6 to 6.5 months that most analysts consider “balanced.” Demand will remain strong, if somewhat moderated from 2016, but home prices in Texas have risen consistently since 2011 and should continue to do so this year.
Finally, a prominent Austin market watcher and analyst Eldon Rude is optimistic for this year, and economist Greg Hallman predicts continued job growth and a healthy real estate market:
Job growth continues, but has slowed a bit, which will allow increased housing starts and resale listing activity to help to keep up with demand somewhat.
My observations of the market lead me to agree that we’ll remain a very fast-paced real estate market in 2017, perhaps somewhat calmer than the past few years. Short supply and upward price pressure will continue, and it will be important to educate prospective buyers and sellers about hyper-local conditions in their specific areas of interest. There can be significant differences from one neighborhood to another and from one market segment (size, age, price) to another — differences that a real estate professional who is in the market every day should be able to discuss. I will write more about some of that market variation in a separate post.
I will also write more about local and regional economics and real estate. I am scheduled to attend Mark Sprague’s latest economic forecast on March 9, and I will follow up with a summary here. (Mark serves as Director of Information Capital for Independence Title.)