This year is expected to be another strong one for the Central Texas housing market.
That was the forecast local expert Eldon Rude delivered to about 700 industry professionals at an annual housing outlook event at the JW Marriott in downtown Austin sponsored by Home Builders Association of Greater Austin and the Austin Board of Realtors.
“What an amazing run we’ve had the last four or five or six years,” Rude said. “We’ve had a strong start to the year and I don’t think that will change. The bottom line is we’re going to have a good year, both in the new-home and resale markets.”
Rude is principal of 360 Real Estate Analytics, an Austin-based consulting firm. For almost 17 years prior, he was director of the Central Texas region for Metrostudy, which tracks the housing market nationally and locally.
Rude said all but one of the builders he has surveyed had higher sales last year than the previous year, and the one who didn’t had run out of lots.
Although the region’s job growth has slowed to an annual rate of about 2 percent (19,500 jobs) in late 2016 from a rate of over 4 percent (about 40,000 jobs) for several years prior, “I don’t think that will dent demand for housing,” Rude said. He said pent-up demand coupled with strong consumer confidence should keep the market healthy.
“We’re at confidence levels we haven’t seen since 2003, 2004, 2005,” Rude said. “Job growth is the engine that drives housing demand and consumer confidence is the gasoline.”
Any impact on the market from rising mortgage interest rates will be tied to both how much they go up, and how quickly, said Rude.
“Although interest rates are always an important factor for homebuyers, history has shown that if the job market is good, wages are increasing and home prices are going up, people will continue to purchase homes. It’s all about confidence.”
This week, the Austin Board of Realtors said the median home-sale price in the Austin-area hit a calendar-year record of $284,000, up 7.2 percent over 2016’s median.
Rude predicts builders this year will start construction on 14,000 to 14,500 homes — or 5 percent to 8 percent more than last year’s level. He thinks most of the growth will be in the lower price ranges, below $300,000, but projects another strong year for the higher-price points as well — over $750,000 — due to consumer confidence in the national economy.
With a continued low supply of available houses compared to demand, home prices are expected to keep rising this year, Rude said. He said the region has had a housing supply of less than four months for more than four years. Experts consider a supply of 6.5 months to indicate a balanced market, tipped in favor of neither buyers or sellers.
Another speaker, economist Greg Hallman, forecasted “continued healthy job growth and real estate in Austin and Texas, where we are on a serious roll.”
Hallman, senior lecturer of real estate finance at the University of Texas at Austinexas has seen a 25 percent rise in employment since 2006 compared to its nearest competitor, New York, where job growth has been just over 10 percent during that time.
Nationally, the U.S. economy “is in very good shape,” Hallman said, based on the usual metrics to gauge its performance, including GDP growth, employment, wage growth and consumer confidence.
“I expect continued growth in the near-term for the U.S. and Texas,” he said.
However, Hallman said “all bets are off” for his positive outlook if incoming President Donald Trump’s policy proposals are enacted.
“There’s plenty of uncertainty from the new administration’s plans regarding tax policy, international trade and government spending,” Hallman said. “If the new president starts a trade war with protectionist tariffs on foreign goods, other countries will almost surely retaliate and we’ll all get hurt in the end. Let’s hope that doesn’t happen.”
Austin-area home starts
On Thursday, Metrostudy released its fourth-quarter and annual starts total for 2016 for the Austin-area.
Builders started construction on 14,462 houses last year, up 24.5 percent from 2015, Metrostudy reported.
During the last three months of the year, builders started work on 3,794 homes, a 39.1 percent jump compared with the final quarter of 2015.
Nearly half — 46 percent — of the quarterly starts were priced between $200,000 and $300,000, with the biggest increases coming along the Texas 130 corridor and down into Kyle and Buda, Metrostudy said.
The latest figures aren’t record-breakers, noted Vaike O’Grady, Austin regional director for Metrostudy. “But you’d have to go back to (before the last recession) to see starts levels above 14,000,” she said.
The annual peak was in the third quarter of 2006, when Metrostudy’s ground crews counted 17,164 starts during the 12 months that ended in September 2006.