Austin area’s housing forecast: Continued growth ahead

Another healthy year is in store for Central Texas housing market, with a local industry expert forecasting that builders will start more homes this year than last and that home-price appreciation will slow somewhat — welcome news in a region facing a growing affordability issue.

Those were among the predictions Eldon Rude made Tuesday at a 2015 housing forecast event at the Austin Renaissance Hotel hosted by the Home Builders Association of Greater Austin.

Rude said the Austin area housing market chalked up another robust year in 2014, mainly due to continued strong job and population growth. And current indicators point to another strong year for 2015, said Rude, principal of 360 Real Estate Analytics, an Austin consulting firm.

Rude said he expects builders to start construction on 12,000 to 12,500 new homes this year, a 10 percent increase over 2014. In its year-end report, housing market consulting firm Metrostudy said builders started work on 10,749 new homes in the Austin area last year, 14 percent more than in 2013.

This year, there will be more growth in the $250,000-and-below price range, as some easing in mortgage-lending standards allows more first-time and entry-level buyers to enter the market, Rude said.

According to the Austin Board of Realtors, 52 percent of the pre-owned homes sold from January through November last year — 13,358 of the 25,532 sales — were priced below $250,000.

Rude said there should be only minimal growth this year in the $300,000 to $700,000 price range that many builders have been focusing on.

In the market in general, Rude said, home price appreciation will ease from the sharp increases seen during the past several years. But he doesn’t expect the pace to slow significantly.

Both median and average prices in the region have jumped 20 percent to 30 percent over the past three years as demand for housing has outstripped supply.

Despite the rapid escalation, Rude said, the Austin region isn’t on a housing bubble, noting that supply and demand forces are driving prices higher, not the speculative homebuying that markets such as California and Florida saw during the last decade.

Ken Perlman, a senior vice president based in San Diego with John Burns Real Estate Consulting, said monthly mortgage payments in the Austin area for a typical homeowner soared 26 percent from July 2012 through December 2013. He said 11 percent of that increase is due to home price appreciation, while interest rate increases account for 15 percent.

Perlman said it will become an increasingly tougher battle for builders to raise prices, despite the rising costs of land, labor and materials.

“In order for builders to maintain volume, they’re not going to be able to push prices as quickly as they have been,” Perlman said. “We think going forward it’s really prudent to consider more modest rates of home price appreciation. You can only push prices so much before buyers start pushing back,” leading to slower sales.

Perlman said his firm’s forecast calls for new-home prices in the Austin area to rise 1.2 percent this year, and by 1 percent to 2 percent a year through 2018.

The Austin market has had “a really good run,” Perlman said, but now “the message here is slow, steady growth.”

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