Central Texas has seen unprecedented demand in most real estate industry sectors since the recession, local housing market expert Eldon Rude said at a forecast event Wednesday. But the region’s rising home prices could slow population growth in the Austin area, as people and companies choose to remain or locate in cities where home prices are lower.
Rude made his remarks about the local economy to nearly 700 business people and state and local officials gathered for the Real Estate Council of Austin’s mid-year economic forecast event, and in interviews with the American-Statesman. Anika Khan, a director and senior economist with Wells Fargo in Charlotte, N.C., spoke on the national economic outlook at the event.
“We (in Austin) are in a really, really fortunate place in time,” said Rude, principal of 360 Real Estate Analytics, an Austin-based consulting firm. “Things are very good.”
Drawn by Austin’s job growth, “a lot of people are moving to Austin, and they’ve got to live somewhere,” Rude said.
Annual job growth has topped 20,000 since late 2010, and exceeded 30,000 for the past two years, Rude said. “That’s phenomenal.”
Central Texas’ strong economic growth has spurred an influx of newcomers seeking opportunity — an estimated 110 a day are moving to Central Texas, according to U.S. Census Bureau counts. And that has spurred “tremendous demand” for houses and apartments. Some 17,700 apartments are now under construction in 76 projects, according to local real estate consulting firm Capitol Market Research, and housing starts have climbed to a pace of about 10,000 a year, up from a trough during the most recent recession of 6,000 and the pre-recession peak of 16,000 to 17,000, Rude said.
And forecasts show the region’s population growth is expected to grow more than 3 percent annually from 2013 to 2020, which will continue to fuel demand for housing, Rude said.
However, Rude said the region faces challenges, including transportation woes and escalating housing prices, that could slow the growth of the last few years. Those concerns could prompt people and companies to re-think a move to Austin in favor of cities that are also enjoying low unemployment and job growth — but which have lower home prices. Those cities include Dallas, Phoenix, Ariz., Raleigh, N.C., Las Vegas, Orlando and Atlanta.
“Relative to those cities, we have significantly higher home prices,” Rude said. The median price of an Austin-area home has risen 28 percent since June 2009, and the average sales price is up 23 percent since then.
“I don’t like to see price increases that steep, because it plays into affordability,” Rude said.
As the economies strengthen in those other rebounding metros, “we may see fewer of those people moving to Austin” in the next couple of years, Rude said. Cost of living, traffic congestion and other concerns also could lead companies to choose somewhere other than Austin to relocate their businesses.
Rude said the Austin area is four years into its current upcycle. As for when the good times may stop rolling — inevitably there will be another downcycle — Rude thinks it will likely be due to “some event outside of Austin.”
“But I don’t see anything on the horizon that would make that happen,” he said.
Khan said that nationally, the economy has been in recovery for more than five years — albeit a slow one — and noted that the longest economic expansion lasted 10 years.
She said Wells Fargo’s forecast calls for the nation’s economic growth to start picking up a bit more, moving forward. And when the Federal Reserve moves to raise interest rates — which most forecasters think will happen in 2015 — “it means we’re seeing economic growth pick up and overall we’re moving in the right direction,” Khan said.