January 31, 2018

Job and population growth will drive Austin-area housing market in 2018

Despite growth in global and national economies, experts worry rising interest rates will disrupt market gains

Austin, Texas (January 31, 2018) More than 600 industry professionals attended the Home Builders Association (HBA) of Greater Austin’s 2018 Greater Austin Housing Forecast on Wednesday, January 31, 2018, at the AT&T Conference Center on the University of Texas campus. The annual event is the only comprehensive housing forecast of its kind in the region where industry professionals get insights into what to expect from the market in the year ahead.

Housing and economic experts came together to present their analysis of the factors that are impacting the housing market, including the state of the regional labor market, buyer trends and expectations, population growth, and housing supply growth trends.

Dr. Greg Hallman, senior lecturer of real estate finance at the University of Texas at Austin, pointed toward the strength of our national and global economies as a source of positive growth. “Stock markets here and abroad are reflecting the positive economic outlook with strong gains finishing off last year and into this year,” says Dr. Hallman.

Despite the threat of rising interest rates, Dr. Hallman expects GDP growth to finish off 2018 in the 2 to 3 percent range.

Lindsay Kunkle, vice president at Kantar Futures points out three major trends among consumers, including a demand for flexibility from the companies they do business with, the demand for convenience and “flow” so that they may reduce the amount of “bandwidth” needed to manage their lives and the demise of a shared American experience as consumers retreat into smaller worlds to connect with those they feel more comfortable with.

It’s significant to point out that according to Kunkle, the net worth of 25-34 year olds today is at a 40 to 92 percent deficit from where it was in 1989. It’s these trends that have led to the formation of a variety of services offering flexible solutions – such as shared equity investment services for homebuyers and homeowners.

To conclude the event, once again Eldon Rude, a mainstay of Central Texas’ real estate community and principal of 360° Real Estate Analytics, gave us his projections for the local new home market in 2018. “Major tech companies will continue their drive for growth this year, and Austin has emerged as one of a handful of cities most attractive to the industry for expansion; this will keep tech workers flowing into Austin in 2018. With lot supplies tight and labor shortage issues persisting, builders will be scrambling trying to keep up with demand.,” says Rude.

Rude expects starts to increase in 2018 to roughly 17,000 for the whole greater Austin metro area, an increase of 5 percent over 2017. With reports indicating a minimum of 15,000 starts are needed within Austin’s city limits alone, coupled with just four months-of-supply of active listings for previously-owned homes – sustained home price increases are expected to continue in the area — especially within Austin’s city limits where inventory supply is less than 1.5 months and the median price of a home has risen to an all time high of $362,000.

“Housing affordability will continue to be a challenge for the Greater Austin market for the foreseeable future,” says 2018 HBA President Lee Whitaker of Pacesetter Homes. “Working together with our elected officials to find flexible solutions for today’s homebuyer who are more than ever before, constrained by a limited economic capacity, will be key to our region’s ability to deliver housing that residents can afford,” says Whitaker.