By Riki Markowitz
At this year’s Home Builders Association 2018 Housing Forecast there was a lot of good news for Central Texas real estate professionals. Some of the main highlights from the annual event include continued growth of home prices, historically low unemployment and an on-going population boom.
Also noteworthy was recognition of Austin’s response to the area’s year-over-year growth and resulting need for housing. In the coming year, starts are expected to increase to about 17,000 throughout the metro area, which is a 5 percent increase over 2017.
Greg Hallman, a senior lecturer and faculty director at the Real Estate Finance Investment Center, McCombs School of Business at the University of Texas at Austin, said it “warms his heart” to see that as demand for housing goes up, the city is responding. For an idea of what happens when a city ignores its housing shortage, just look to San Francisco where the median square foot costs more than $1,000. In the Austin metro area, it’s about $150 per square foot and just over $200 within Austin’s city limits.
At the annual breakfast conference, attended by more than 600 industry professionals at the AT&T Conference Center at the University of Texas, three housing and economic experts presented their analysis of trends, supply and growth in the housing and labor markets across the country. Eldon Rude, principal at 360º Real Estate Analytics, tracks U.S. employment trends. He said that major tech companies are continuing their drive for growth this year and that Austin has “emerged as one of a handful of cities most attractive to the industry for expansion.” Rude also points out that the unemployment rate here is historically low at just 2.7 percent, making the Austin metro area very attractive to a high-earning workforce that will inevitably convert to 2018 homebuyers.
This isn’t just speculation. Some of the largest tech companies in the world— Facebook and Google, for example—are expanding and have already signed leases for enormous amounts of office space and entire buildings around town. Additionally, companies with headquarters in Austin—HomeAway, Indeed.com, and Parsley Energy—have also signed leases for a combined million-plus square feet of office space. Specifically, Parsley will be occupying an entire 31-story downtown skyscraper and Indeed.com is moving into an 11-story tower at the Domain.
While homebuyer numbers may look fantastic on the surface, to actually connect with this population it’s crucial to understand what motivates them and, as consumers, how they operate in the world. Lindsay Kunkle, vice president at Kantar Futures, identified three major trends among likely homebuyers: they anticipate change, they’re inundated with brand marketing and they’re prone to retreating into small and intimate social and professional bubbles. Kunkle sums up her analysis this way: “In a world of changes, the mandate for business is to channel the forces of disruption or risk being disrupted.” And to reduce what Kunkle calls “brandwidth” overload, consumers are looking for convenience and “flow” so they can better manage their lives.
How does that translate for the REALTOR? It starts with courage in the face of change. In other words, an openness to adopting new technologies and tools, awareness of new and more convenient ways of doing things and the ability to spot trends early.
Kunkle goes on to say that today’s consumers are savvy and adaptive in their thinking and beliefs. They expect the same from us.
Senior lecturer of real estate finance at the University of Texas at Austin, Dr. Greg Hallman reported on sources of positive growth in the U.S. and global economies. Thanks to the lower corporate tax rate, Hallman anticipates very strong employment growth. Then, on the other hand, interest rates are set to rise, which makes economists feel uncertain.
Rude provided a more micro view of the numbers. The Greater Austin area only has a four-month supply of active listings for previously owned homes and inventory supply within Austin’s city limits is less than 1.5 months. Median home prices have risen to an all time high of $362,000, a number expected to increase since builders are forecasted to deliver just 17,000 new homes in the whole five county area. With 15,000 needed in the city of Austin alone, this is a far cry from what is needed to put a halt on rising prices. Lee Whitaker, president of the Home Builders Association (HBA) and vice president of Pacesetter Homes, says, “housing affordability will continue to be a challenge for the foreseeable future.”
Ultimately, Rude, Hallman and Kunkle were very optimistic about 2018, despite some lingering worries — specifically, interest rates and housing affordability. Rude says that at some point, “there will be a shock to the system,” but ended his presentation on this simple nugget of wisdom: “Planning is easier than forecasting.” RL