The Austin Board of Realtors® welcomed Dr. James P. Gaines, a research economist, from Texas A&M University Real Estate Center to the Palmer Events Center on October 15th to discuss the Texas economy and give a real estate market update.
Although I was unable to attend this event, I did obtain Dr. Gaines’ presentation and thought you might be interested to review his findings.
As we have seen in the past few years, Texas and the Austin Housing Markets have continued to lead the country’s real estate market. There have been record highs for the last five years in Texas for median home prices and 2014 has seen a 5% increase in home sales, which makes it the second best year ever recorded.
The four reasons Dr. Gaines gave for the Texas economy doing better than other states are job gains, housing prices, general business growth and population growth.
I thought it was interesting to note that Texas has added 14 million people in the last 40 years and is expected to add another 30 million people in the next 40 years. Dr. Gaines claimed that with this exponential growth Dallas/Fort Worth, Houston and Austin populations will explode.
Obviously, the overall real estate market reflects the economic health of any area and Dr. Gaines gave his economic outlook for Texas, which included:
- Downside risk is a national (global) recession, but even then, Texas may do better than most other states IF energy is strong
- Energy sector subject to global actions – not as robust
- High tech and business services fueling job growth
- Job growth expected to stay relatively strong
- Population expansion continues to fuel growth
- Local growth issues becoming more pressing, causing greater strain on state and local resources
- Local non-residential construction strong
Additionally, he mentioned that even though the past 20 years has seen a housing roller coaster due to monetary policy, political directives and capital market manipulation which then caused a boom-bust-boom scenario; Dr. Gaines believes that housing market is “returning” to fundamentals. These include:
- Household formations
- Affordability: Interest rates and financing
Dr. Gaines said his top housing issues are:
- Sustainable price increases and Affordability
- Mortgage interest rates
- Construction & labor costs
- Lot inventory for new construction
- Mortgage market changes: loan limits; variable qualifying; closing costs
- Higher “other” costs: taxes, insurance
- Stronger rental market
- Return to fundamentals: employment/income, household formations, affordability.
Dr. Gaines gave his Texas housing outlook, which included:
- Percentage slowdown from past two years
- Emphasis in new construction on high-end price range
- Entry-level new homes difficult to finance; Gen-Y buyers most affected
- Labor and lot inventory shortage across the state
- Urban-central and suburban markets both strong
- National and local regulations and controls becoming more stringent
- Non-residential construction leads nation
- Future Issues: flood insurance; affordability; EPA regulations on upland wetlands; local growth management efforts
Overall, the Austin and Texas economies are better than most and continue to have considerable potential. However, there will always be pros and cons to exceptional growth. Additionally, it would do us well to remember that there can be major changes due to unforeseen challenges and uncontrollable situations.
“It’s tough to make predictions, especially about the future.” Yogi Berra
Keep in mind that each of us has an opportunity to have our voice heard by the privilege of casting our vote. So, don’t forget to either vote early (ends October 31st) or vote on Election Day, which is November 4th!
If you or someone you know is interested in buying or selling real estate in the Austin area, please contact Mary Lynne Gibbs at 512.431.2403 or firstname.lastname@example.org. It would be an honor to earn your business!