Experts: 2016 will be good year for Central Texas housing market


Another strong year is in store for the Austin housing market, as the region enters its seventh year of positive trends in its real estate market and overall economy.

That was the forecast Wednesday by Eldon Rude, a veteran housing market expert who is principal of 360 Real Estate Analytics, an Austin-based consulting firm. Rude spoke at an annual housing forecast event sponsored by the Home Builders Association of Greater Austin and the Austin Board of Realtors.

“It’s virtually impossible to be negative when talking about the Austin market,” Rude told more than 600 industry professionals at the event, which was held at the JW Marriott in downtown Austin. “It’s going to be a good year.”

That’s not to say there could be some headwinds, Rude said, such as global and U.S. challenges, uncertainty about the impact of falling oil prices on the local and Texas economy and whether a bubble might be forming in technology, a key sector of the local economy.

But Rude predicted 2016 will be another robust year for the region’s housing market, buoyed by the expected continuation of strong job and population growth.

Austin economist Brian Kelsey, who also spoke at the event, said the Austin economy is projected to add 31,590 jobs this year, a 3.1 percent growth rate.

With the region having surpassed 2 million in population last year, Rude said demand for new homes is not going to be a problem.

“We’ve got all the demand we can use,” Rude said.

Rather, the key issues for builders will be whether they can add enough of the right kind of supply in the locations people want to be in, and that appeal to a new wave of consumers, including millennials with changing preferences, Rude said.

Builders also will face challenges constructing homes in more moderate price ranges, even as costs for land, labor and materials continue to escalate.

While those costs are contributing to the region’s higher home prices, the main factor behind the sharp increases is the fact that the supply of available housing has lagged demand for more than three years now, Rude said.

In November, the median home-sales price for a previously owned home was $270,000, a 10.2 percent increase year-over-year, according to the Austin Board of Realtors.

“Because prices have gone up so much, we have effectively removed a group of prospective buyers from being able to buy a home,” Rude said, noting how the share of buyers in the $100,000 to $160,000 price range has dwindled from more than 25 percent of the market in 2010 to just under 10 percent currently.

Because of those challenges, Rude thinks the Austin metro will see only about a 5 percent increase in homebuilding this year, or just over 12,000 starts when compared to the estimated 11,500 homes builders started construction on last year.

Rude said his forecast last year — that builders would start up to 12,500 homes — fell short because “we priced people out of the market.”

In an interview Tuesday, Rude said: “The reality is that builders can’t provide enough (centrally located) housing, with all the features many of the new buyers want, at prices they can afford. They don’t want the house they grew up in. They don’t want to fight traffic, they want to be closer in, and they want different features in their house, but they can only afford so much.”

While the sharp home price increases have been alarming to longtime Austinites, Rude said, the increases are consistent with rent spikes in home prices in metros that are considered peer cities to Austin, such as Denver, Nashville, Raleigh and Atlanta, as well as other major Texas markets, including Houston, San Antonio and Dallas-Fort Worth.


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