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Another Strong Economic Outlook For 2017

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The start of a new year is a time for reflection on the successes and challenges of the prior year and focusing forward to the goals ahead for the year.  In recent weeks, two important annual economic forecasts for Central Texas were presented in Austin. The Homebuilder’s Association of Greater Austin (HBA) with the Austin Board of Realtors (ABoR) and AngelouEconomics with Austin Business Journal both presented economic forecasts for the Austin area.

Some highlights from the two events are below, with more information found in the links to the full presentations.

The HBA of Austin and ABoR event featured 3 speakers. Some of the key points from their presentations include:

Dr. Greg Hallman, Senior Lecturer of Real Estate: The University of Texas – Austin. Full Presentation

  • Employment growth in Texas much higher than the Nation, with 25% increase since 2006;
  • Austin average increase of approximately 40,000 jobs annually since 2006, with an unemployment rate of 3.5%;
  • Applying traditional economic indicators, the United States and especially Texas are in very good shape for continued employment growth.

Colleen Sharp, VP and Associate Head of Insights Integration: Kantar Futures. Full Presentation

  • The impact that digital technology has on consumers’ ability to connect and communicate, fuels the need of convenience and lifestyle utility in homes and communities;
  • Blurring of defined assumptions provides an opportunity to leverage growth by targeting emerging consumer groups;
  • Increased consumer desire for belonging is key for homebuilders to build community and create spaces and experiences that link the desire for individuality with belonging.

Eldon Rude, Principal: 360° Real Estate Analytics. Full Presentation

  • Housing starts in 2017 expected to increase 5-8% from prior year, still short of demand;
  • Lack of active listings in MLS and low new home starts will continue to put upward pressure on home prices throughout the market;
  • In the rental market, Austin-wide average rent of $1.41/sf reflects a 5%+ increase in the last 12 months, 12% increase in the past 24 months.

AngelouEconomics and the Austin Business Journal presented their forecast in digital format, for the first time in 33 years. Some key takeaways follow. Full Presentation.

  • More than 100,000 new residents will arrive in Austin metro area in the next two years, raising the total population close to 2.2 million by year end 2018;
  • The population and economy will continue to grow while slowing slightly, allowing housing and labor markets to catch up – 2.6 times more housing sales than starts in 2016;
  • Key indicators continue showing strong economic growth:

Population Growth +3.2% –  Employment Growth +3.3% –  Retail Growth +9.2% – Business Growth +3.6% –  Average Wage +2.9% –  Unemployment +0.2% – Housing Starts +16.8%

  • Housing Inventory and Affordability: Inventory Crisis
    • Building permits back to pre-crisis level
    • Housing starts have been short for the last 9 years
    • Should be building 15,000 homes/yr to keep up
  • Economic Drivers: The Tech Sector
    • Tech employment increased 28% since 2011
    • Tech represents over 22% of total employment growth since 2011
    • Average salary for industry exceeds $84,000/yr
  • Economic Drivers: The Festival Economy
    • Annual Impact – COTA: $1 Billion, SXSW: $320 Million, ACL Festival: $220 Million;
    • Tourism also provides huge boost in the economy without long term effects of population growth, such as housing affordability and sustained congestion.
  • Central Texas Regional Challenges:
    • Traffic – Austin 7th worst traffic nationally
    • Affordable Rental and Single Family Homes – low inventory and low housing starts impact affordability
    • Job growth and Quality – keep pace with cost of living
    • Commercial Real Estate Affordability – high rent puts pressure on wages

 

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