In “2017 Outlook” I provided links to several viewpoints on the Texas and Austin-area economy and housing market. As I mentioned at the end of that post, last week I attended a presentation by Mark Sprague (Director of Information Capital, Independence Title) to hear his projections.
An important theme of the presentation was “disruptive change,” in the real estate business and throughout our culture and economy. Last November’s presidential election has obviously influenced much in the months since, but rapid technological changes, international political tensions, concerns about the European and Asian economies, worldwide trade, shifts away from traditional retail business models, and changing cultural priorities as millennials take larger roles in all areas of national and international activity all create uncertainties that are largely unprecedented. These changes and uncertainties call for adaptation by individuals, businesses, and governments.
With that backdrop, Sprague described the U.S. economy as healthy, but not robust, with GDP growth in the 2% to 2.5% range. He projected that the housing market will strengthen nationally and regionally. He cautioned that job creation in Austin seems to have slowed somewhat, which could impact demand for housing in Central Texas. He also commented that rising mortgage interest rates could slow sales growth temporarily, but that after a brief psychological adjustment the law of supply and demand will take hold again.
In Austin’s urban core, prices have been pushed upward quickly in recent years, and Sprague predicts moderation in sales and price appreciation there. On the other hand, conveniently located homes priced below $350,000 will continue strong appreciation. As for rentals, he expects apartment prices to continue to rise, and for single family rentals to remain strong. He noted, however, that apartments don’t generally have the long waiting lists that they have had recently, and that as more apartment units come on the market some are beginning to offer new-tenant incentives again.
As I have written before, Austin’s strong real estate market has been driven by real growth in jobs and population, and comparing median income to median home prices, Sprague indicated that our area remains relatively affordable — essentially on par with Miami and Portland, somewhat less affordable than Dallas and Houston, but much better off than Seattle, Washington, Boston, Los Angeles, and New York City.
Finally, Sprague projected that the Austin economy will remain in expansion mode, albeit a little more cautiously than in the past couple of years. This positive outlook was shared recently by another important Austin analyst, Eldon Rude:
Both Eldon Rude and Mark Sprague are also quoted in an article today, with a headline that overstates the downside:
My take: Buckle up. It’s going to be another busy year for the Central Texas housing industry.