Forecast: Local housing market poised for big things in 2014

The momentum in Central Texas’ housing market is expected to carry over into 2014, a local real estate expert said at a forecast event Wednesday.

Speaking to 500 real estate professionals at the annual event, veteran housing market analyst Eldon Rude said the Austin area’s hot 2013 housing market yielded more than 30,000 single-family home sales, the highest volume since 2007. In addition, Central Texas municipalities issued nearly 9,000 single-family building permits, the most since 2008.

Rude said it’s difficult to find a negative in the local housing market, even though it’s part of his job to do so.

“It is a magical time for our industry,” said Rude, principal of 360° Real Estate Analytics, an Austin-based real estate information and consulting firm. “The economic growth and prosperity in Texas and our region is drawing peple here.”

Rude was the lead speaker and moderator of the event at the Hyatt Austin. Hosted by the Home Builders Association of Greater Austin and the Austin Board of Realtors, other panelists were Carlos Rubinstein, chairman of the Texas Water Development Board and Greg Hallman, principal at the McCombs School of Business at the University of Texas at Austin. Echoing Rude, Rubinstein and Hallman said they expect the region to continue to create jobs at a high rate in 2014, and Austin’s housing demand to continue as a result.

Housing is an important link in the local economy, creating direct construction jobs and indirect ripple effects as those workers and homeowners spend on goods and services.

Rude said the Austin area added 22,500 jobs from November 2012 through November 2013, a 2.7 percent rate. Experts predict the region will add an estimated 30,000 jobs a year over the next two years.

From 2000 to 2013, the Austin metro’s population grew to 1.8 million people from 1.2 million. Since 2006 alone, the ranks have swelled by more than 340,000 people, a 3.2 percent annual growth rate, Rude said.

But that latest wave of “significant population growth” came during several years that saw a significant drop in new home construction as builders locally and nationally pulled in their horns during the recession. That led to the current shortage of housing, and only in the past couple of years have builders ramped up production as they attempt to catch up to demand, Rude said.

Last year, builders started construction on nearly 9,400 homes. This year, Rude predicts the starts pace will be in the 10,000 to 11,000 range.

The supply-and-demand imbalance has caused the region’s supply of existing homes to sink to its lowest level since 2000, and continues to push home prices higher. In the Austin metro, prices rose 10.1 percent in the 12 months that ended in September 2013. During that same period, house prices rose 7.1 percent in Texas and 8.5 percent across the U.S.

The supply-and-demand gap also has served to strengthen rents and occupancies in the local apartment market, where more than 17,700 apartments were under construction at the end of September, including about 4,500 — 25 percent — in central Austin and downtown, Rude said.

As the Austin area continues to grow, Rude sounded a note of caution.

“If the region’s increasing traffic issues, rapidly rising home prices and ongoing drought continue, these factors may at some point begin to lessen the luster of living and doing business in the Austin region.”

Ahead of Wednesday’s forecast event, local real estate attorney David Armbrust said that “most builders and developers feel that the Central Texas market will remain strong in 2014 and will continue to outperform other areas in the nation,” while noting that “traffic patterns and congestion will have a significantly greater and noticeable influence on the residential market as people try to manage their commutes.”

“If Central Texas was a stock, I would rate it as a strong ‘buy,’” Armbrust said.

Ryan Jackson, vice president of sales and marketing for Streetman Homes, said this week that the locally owned homebuilder expects “a very robust housing market in 2014.” He said 2013 sales were up 52 percent from 2012, and January “has already started off hot.”

“There is already a lot of demand out there from all the jobs Austin is creating, plus the sheer number of people moving here every day,” Jackson said. “You add the fact that interest rates are said to be going up considerably this year and the result is very strong demand for homes.”

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