Economic Outlook: 2018

Hello 2018! Things are looking pretty good!

At the end of each year (or beginning of new year) I attend some awesome Economic Forecasting presentations. The projections are often on a National and Local level, with a focus in the real estate sector.

I take notes during the presentation and like to share what I have learned with you, so below will be some highlights, and a few graphs from the slides.

In December I attended the Austin Chamber of Commerce Economic Forecast (Thanks April Downey of Independence Title for allowing me to be your guest!) The Speaker was Mark Vitner.

Below are some bullets that I jotted down, forgive the randomness, but take it all in, please (and if you’d like the presentation, happy to send over, I know my charts aren’t very large).

  • Not in Bubble, demand is still here
  • Growth (GDP) has picked up, 38% in tech, 30% in energy, in Tx oil has held us back some
  • Dramatic slow down of policy changes, which has helped biz boom/growth
  • Fed is expected to raise rates a few times in 2018
  • Post financial crisis seems to be ending
  • Still predicting strong growth, yet affordability desired is disappearing
  • Hurricane while it hurt us, actually improved the labor market (Persistence of so many workers outs the traditional labor forces has been one of the factors depressing wage and salary growth)
  • First 5mo of Trump Admin-fewest number of policies of any administration (fun fact)
  • Price discovery has decresed therefore inflation has been trstrained, which could be long lasting
  • Stock market looking strong and steady
  • Growth in Global banking reserves is boosting the Global markets
  • Locally: Seattle, NV, CO, AZ, NY booming-more than 3%. Tx was 2.9% (due to oil) Tech is at Forefront
  • Fastest growing MSAs: San Jose, San Fran, Raleigh, ATX, Seattle
    • San Antonio actually the top in Tx for growth
    • 440k people/yr in Tx population growth

  • ATX Stats:
    • Growth a nod above the National pace
    • Healthcare and Education a bright spot for us Austinites
    • Employment up across all sectors yet ironically a decline in Tech Sector
    • Home price appreciation acceleration above the National average
    • Slowing in SF and Silicon Valley (but more experienced markets)
    • Home prices till surging in Denver and ATX

Then last week, James Gaines the Chief Economist at the TAMU Real Estate center gave us a great presentation with a few predictions as well, pretty much aligning with the above–

2018 Housing Market Predictions:

• Mortgage Rates: Probably up ~0.5%+/- by year-end

• Household Formations: ~1.25 million+; millennial demand grows, but constrained by debt, income, prices, savings

• Sales volume slower but price growth

• Increased first-timers, millennials more active

• Prices pushed up from low inventory & high demand ~4.5%

• Rental Market: loosening, low vacancies from greater inventory, higher rents

• Single-family Rental: organized SF rental market with institutional owners competing with entry buyers

• Home Construction: possible slow down in volume; significant cost increases in labor, materials, land

• Affordability: prices and rents increasing faster than incomes – definite constraint on market

 

Texas Outlook:

• 2018 better than 2017: energy, healthcare, business & professional services up; Harvey relatively minor to state

• National economic expansion most positive factor for 2018

• Energy sector downturn impacts mostly over; oil prices approaching $60/bl.+

• Texas job growth picking up, expect ~2.3% or more • Population expansion continues

• Local Growth Issues becoming more pressing, causing greater strain on state and local resources and causing some cost impacts on local housing

• Rebound from Harvey will contribute to some misleading economic growth in 2018; impact on property values in affected counties & neighborhoods

U.S Outlook:

• Uncertain impact of “Tax Cut and Jobs Act”

• Slow GDP growth “new norm” – 8 years avg. 2.2%; 2017 ~2.7%; 2018 ~3%

• Interest rates likely to rise…maybe! • Inflation 2% – 2.5%

• Industrial production and manufacturing positive but little help on employment

• Housing improving, not fully recovered

• Jobs expand <2%; unemployment rate ~4.0%

If you have some questions on what the tax implications are with the new reform happening–Here is a good article summing it up!

I hope you found that information helpful (and optimistic). I know my 2018 is already off to a great start, (pretty rare for me to be this busy this time of year) but I am definitely not complaining! Thank you for your business and trust in this crazy market!

If you are thinking of making a move in real estate (buying, selling, purchasing an investment) happy to chat further, you can find some past (happy) client testimonials HERE.

Cheers to 2018!

~Ashley Brinkman, Realty Austin, Broker Associate