Tag Archives: market news

Austin Real Estate Forecast 2017 (Recapped from Ted Jones)

Dr. Ted Jones is the Economist for Stewart Title. (Twitter Handle is @drTCJ)

He gives a great presentation and holds your attention and packed with a few funnies along the way. This morning I wanted to re-cap some of the things he discussed and presented on regarding the future of Austin’s Economy.

Despite the election, Ted started off with reminding of us two things:

1. Brexit was the first sign that things were already changing and

2. Don’t let yesterday take up too much of today.

No matter the outcome of the election, traditionally speaking, each election year, right before the election, things typically slow down due to market uncertainty–then they pick right back up (again, regardless if there’s a conservative  or dem in the white house, statistics usually demonstrate this).

Let’s start with Millenials (they are an important part of our Economy, especially here in ATX):

Things to Know: The top 3 Markets with Millenials are:

  • Charlotte 30%
  • Houston 17.4%
  • Austin, Tx 16.4%

76 Million Boomers, 83 million Millenials between 19-35 and 91 million Millenials between 16-35.

75% of Millenials polled say they can live without the call function on their cell phones, 76% prefer texting>talking and 19% never check their voice mail. (guilty a lil, right here).

The above statistic is funny to me. I don’t think of myself as a Millenial, but according to the year I was born, I am. But I will say I have traits from the generation before and after me combined.

{Fun fact: 70% of Millenials prefer shopping in store v. online, due to instant gratification/satisfaction. This is why company’s like Amazon are trying to speed delivery, do drone drops etc–Millenials want it NOW.}

HERE is a great little article on best housing markets FOR Millenials.

Now, let’s talk Non-Renewals/Dead on Arrival/Items already going away:

  • Mortgage insurance deductability
  • Mortgage debt forgiveness
  • Residential energy savings
  • Obama care (or some form of it)
  • Wind and Solar tax breaks

Soon to Happen Changes/Items in the works ??:

  • US has the highest corporate tax rate and we are one of the Top Developed Countries
  • Capital Gains tax cut
  • Middle class tax changes (some up and some down)
  • Carried Interest Elimination
  • US Overseas corporate profit repatriation
  • Corporate tax cut (35%–>15%)

{Fun fact: in 2000 Germany corp tax rate was around 42% in 2016 they are now at 15.8%. Did you know that every BMW x3,x4,x5,x6 was made in South Carolina due to the corp tax rate? It is the largest plant and they make BMW for worldwide-read more on that here.}

Things to note: Currently, and for the last several years leisure and hospitality spending is at a rate higher than job growth–which means a steady market, when we see a drop in leisure and spending is when we hit a recession.

Top States with Job Growth:

  • Florida
  • Washington
  • Utah
  • Oregon
  • Nevada
  • Hawaii
  • Idaho
  • South Dakota
  • Georgia
  • California

Now let’s turn to the states at the bottom of this list (decline in job growth) and look at what they all have in common:

  • Alaska
  • Oklahoma
  • North Dakota
  • Wyoming
  • Louisiana
  • Kansas

They are all Oil and Gas based economy (ok maybe not Kansas, but what’s going on in KS…not a lot). Note, Tx isn’t on this list.

Tx is around 1.77% for job growth, we fall in the top half of the list. “This is the best oil turn down Texas has ever seen.” Jones said. And when you look at the greater Austin area: our market survives from: Tech, Education, Healthcare…Which leads me to…

2016 Stock Market Trends:

  • 13% up for Dow Jones Industries
  • 9.5% S&P500
  • 7.5% Nasdaq Composite
  • 45.2% crude oil

Mega Themes for 2017:

  • More Jobs before the election than ever before in History
  • Retail boom is on a 14 yr run
  • Entry level home buyers are returning
  • High end housing is retracting
  • Commercial Sales
  • Inflation potential (ie UPS increased rates 4.9% 12.26.16)
  • 2016 Commercial Sales were at an all time high in Austin Tx, this is different (above average) than the National record, and Austin is only at a 4% vacancy rate.
  • Rent has been increasing about 5% year over year.
  • Oil most likely stay about the same around $60/barrell (saving the average driver about $550/yr)

2017 Positives and Concerns:

  • Return of ARMs and Second rate loans
  • Faltering high end residential sales
  • Retracting commercial sales (Austin a little different)
  • Inflation
  • Midwest Land value increasing
  • Oil sub $60/barrel

Jones also predicted mortgage interest rates ranging from 4.7%-5.3%, but a 5yr ARM starts at 3.5% currently, “people will just have to get creative.”

Toward the end of the presentation we touched base on Property Taxes (and how outrageous they are and heavily based on our education system–another issue itself on how we pay and grade our teachers and schools, but I will digress).

What did I gather overall from attending Ted Jones’ Economic Forecast? In Sum:

  • Austin will be strong and steady this year, especially for those already here with jobs, he predicts Austin, Seattle and San Jose will not have a declining luxury market, however our (the company I work for, Realty Austin) Broker, Jonathan Boatwright differs on this a little, when he was quoted in the Statesman last week (article HERE and he says the numbers don’t lie)
  • Due to affordability in Austin, people will start getting a little more creative with their loans–perhaps 7 and 10yr ARMs (adjustable rate mortgages) for those who know they won’t be in a house for longer than that…these are for savvy, good credit buyers, wanting to get in their price point and save a quarter on the interest rate (the “scary” part is not knowing where rates will be in 7yrs)
  • Job growth is declining here in Austin (not by much, not rapidly, but it is becoming harder for those to find a job relocating here) Went from 5%-2%, so not by much, but slowing
  • We are NOT overbuilding. While it sometimes may seem like we are, we are still at 2.1mo of inventory. A balanced market is at 6mo of inventory and a seller’s market is usually around 4mo. So basically things are still pretty crazy here in Atx.
  • Will there be growth in 2017? Yes.
  • Will the Fed’s interest rate effect our market here in Austin? Not so much (they do correlate, but not impacted directly).

What’s Next? This is where I insert my plug. “If you are thinking of buying an investment property, leasing or selling your current place, buying your first home, selling a home…well get to it–call me.”

As always thanks for reading and I hope you found this re-cap informative!

-Ashley Brinkman

ashleybrinkman@realtyaustin.com-signature