Austin Market Update. January 2015

Transcription

1 Austin Market Update January 2015

2 Topics 1. Do we have a Housing Bubble? Are Austin homes overpriced? 2. Housing Inventory? Improving or getting worse? 3. Austin Job Growth 4. Austin Economy through Impact of Oil Price Drop 6. Water! A Texas issue

3 Are Austin Homes Overpriced? Have we entered a home price bubble?

4 Are Austin Homes Overpriced? Have we entered a home price bubble? October 1, 2014 Trulia Report: Trulia's most recent research, which tabulates fundamental values based on supply, demand and realistic expectations about the future, indicates that Austin is the most overvalued residential real estate market in the country nearly20percentmorethanwhatitshouldbe. The more prices are overvalued relative to fundamentals, the closer we are to a housing bubble and the bigger the risk of a price crash, said Trulia Chief Economist Jed Kolko. Trulia cited the most recent data released by the Austin Board of Realtors, which indicates that the median value of a single family jumped 11 percent from August 2013 to August of this year. The average price of a single family home is $311,414.

5 Source: Most overvalued Bubble Watch - October Trulia Report

6 Source: US Census quickfacts

7 Questions to Consider What causes a housing bubble? Easy credit Do we have easy credit now? Do we have unqualified buyers who should not be purchasing a home? Speculation Do we have excessive or unhealthy investor activity? Are builders overbuilding? Big economic swings Do we have economic peaks and valleys? Has Austin had uneven growth (since the tech bust)? Stagnant job growth What has been the pattern of job growth since the tech bust? Lax urban planning controls Is it easy to overbuild in Austin? Constrained supply and high demand Do we have limited inventory? YES! Has that caused a bubble? Not really. Not yet. But

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9 Did Austin have a price bubble before the recession?

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11 More Questions to Consider Impact of being in Texas? Robust economy, even with drop in price of oil Impact of State restrictions on Home Equity Loans? Greatly limits abuse of home appreciation Trend of companies moving to Texas? High number of companies moving to Texas and Austin Affordability? Must look at total cost of living not just housing. Look at demographics, job growth, Austin desirability, education levels and persons per household. BioTechand Job Growth Impact of Medical School

12 Austin is the 2nd-best real estate market in the country! A better measure of what will drive home prices: The overall economic fundamentals as reported in the ULI study on what is impacting the long term investment in US Cities. Report highlights important real estate issues for cities: Infrastructure: Roads, water, energy, schools are a given The 18-Hour City Comes of Age cities that provide the work/live/play culture will thrive The Changing Age Game impact of the Millennials! Tight Labor Markets The coming labor shortage -jobs are chasing the knowledge worker Disruptive Influence of Technology work from home, resist relocation, shared office spaces Source: 2014 ULI Survey of 1,400 real estate developers, fund managers, property companies, lenders and brokers - Emerging Trends in Real Estate 2015

13 Source: 2014 ULI Survey of 1,400 real estate developers, fund managers, property companies, lenders and brokers - Emerging Trends in Real Estate 2015

14 Source - Emerging Trends in Real Estate 2015

15 2015 US Population by Age Millennials 14 to 33 Gen X 34 to 50 Boomers 51 to 69 Austin 24.6% Dallas 21.2% Houston 21.8% LA 23.5% Source - Emerging Trends in Real Estate 2015

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17 Austin Real Estate - what s next

18 Housing Inventory Shortage Any end in sight? Source: Texas A&M Real Estate Center

19 Austin Job Growth Rate

20 Austin Long Term Economic Growth US$ Billions

21 Average WTC : $95 $1.2 trillion ripple effect on the U.S. economy, including 9.3 million jobs October ,200 Texans were on oil and gas payrolls October ,200 on payroll when Oil was $60 Lost Tax Revenue to the State of Texas for 2015: 2 Billion Sources: Perryman Group and Texas Alliance of Energy Producers January 5, 2015: $50.04

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23 Texas Water 1. Recognize the problem We need new water sources, desalination plants, water pipelines, off-channel reservoirs, water reuse/recapture systems and aquifer storage and recovery Aquifer storage and recovery (ASR) refers to storing surface water in natural underground aquifers during times of excess and pumping it out during times of scarcity. San Antonio has the country s third largest ASR facility. At the height of the drought, the Twin Oaks ASR facility supplied about 20 percent of San Antonio s demand. Source: Texas Water Report State Comptroller

24 Texas Water 2. It can get worse The 1950s drought was 6 years. Texas tree ring studies show several 20 and 30 year droughts over the last 500 years. At least one 10 year drought every 100 years. And Texas is growing by 20% per decade. We will grow to 45,000,000 in the next 35 to 40 years. We need to plan for more than a 2 to 4 year drought! Source: Texas Water Report State Comptroller

25 Texas Water 3. Water and Power are connected Texas has 250 power plants that are all heavily dependent on water for cooling. We came close in 2011 to shutting down power plants because of the lack of surface water. Plants draw 43% of our surface water (but only use 3% because the water is returned to the surface supply). Source: Texas Water Report State Comptroller

26 Texas Water 4. Conservation 30% to 40% of our expensively treated drinkable water is used to irrigate turf grass. Expand the use of xeriscaping, rainwater capture and reuse and other residential/commercial conservation measures. New home construction should have rewards amd incentives to conserve water. High use commercial users (ie: manufacturing, chip production, etc) should have special rewards and incentives to conserve water Source: Texas Water Report State Comptroller

27 World s largest inland desalination plant: produces 27.5 million gallons of fresh water per day Source: Texas Water Report State Comptroller

28 Questions?