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1/31/2018
1
The Home Builders Association of Greater Austin2018 Housing Forecast
THE AUSTIN ECONOMY
1/31/2018
2
0% 5% 10% 15% 20% 25% 30% 35%
NYCChicago
PhiladelphiaLos Angeles
San DiegoPhonenix
AtlantaDenver
NashvilleRaleighSeattle
PortlandBoston
San FranciscoSan JoseHouston
DFWSan Antonio
Austin
TOTAL CHANGE IN NON-AG EMPLOYMENT: NOV. 2007 TO NOV. 2017(Pre-Recession to Current)
Austin, Major Texas Markets, Selected U.S. MSA’s
Source: BLS
The Big Read: Boom and bust - How tech hubs are killing Middle America (New Zealand Herald)
0% 5% 10% 15% 20% 25% 30% 35%
NYCChicago
PhiladelphiaLos Angeles
San DiegoPhonenix
AtlantaDenver
NashvilleRaleighSeattle
PortlandBoston
San FranciscoSan JoseHouston
DFWSan Antonio
Austin
TOTAL CHANGE IN NON-AG EMPLOYMENT: NOV. 2007 TO NOV. 2017(Pre-Recession to Current)
Austin, Major Texas Markets, Selected U.S. MSA’s
Source: BLS
Austin Average Annual Job Growth the Last 10 Years = 3.3% (27,300 Jobs Per Year)
1/31/2018
3
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
1940 1950 1960 1970 1980 1990 2000 2010 2018 2020 2030 2040 2050
Source: Census Bureau/City of Austin
THE AUSTIN METROPOLITAN STATISTICAL AREA (MSA)Trend in Population Growth & Forecast
Annual Growth Rate in Population (Actual)1980-1990 = 3.8% Per Year (26,118 per year)
1990-2000 = 4% Per Year (40,353 per year)
2000-2010 = 3.2% Per Year (46,652 per year)
2010-2018 = 2.9% Per Year (54,984 per year)
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
1940 1950 1960 1970 1980 1990 2000 2010 2018 2020 2030 2040 2050
Source: Census Bureau/City of Austin
THE AUSTIN Metropolitan Statistical AreaTrend in Population Growth & Forecast
Forecast2018-2030 = 3% Per Year
(75,638 Persons Per Year)
1/31/2018
4
THE AUSTIN ECONOMYTrend in Annual Job Growth/Loss & Unemployment Rate
Ann. Job Growth/Loss
Unemp.Rate
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
0%
1%
2%
3%
4%
5%
6%
7%
8%
Dec
-97
Apr
-98
Aug
-98
Dec
-98
Apr
-99
Aug
-99
Dec
-99
Apr
-00
Aug
-00
Dec
-00
Apr
-01
Aug
-01
Dec
-01
Apr
-02
Aug
-02
Dec
-02
Apr
-03
Aug
-03
Dec
-03
Apr
-04
Aug
-04
Dec
-04
Apr
-05
Aug
-05
Dec
-05
Apr
-06
Aug
-06
Dec
-06
Apr
-07
Aug
-07
Dec
-07
Apr
-08
Aug
-08
Dec
-08
Apr
-09
Aug
-09
Dec
-09
Apr
-10
Aug
-10
Dec
-10
Apr
-11
Aug
-11
Dec
-11
Apr
-12
Aug
-12
Dec
-12
Apr
-13
Aug
-13
Dec
-13
Apr
-14
Aug
-14
Dec
-14
Apr
-15
Aug
-15
Dec
-15
Apr
-16
Aug
-16
Dec
-16
Apr
-17
Aug
-17
Dec
-17
Unemployment Rate Annual Job Growth/Loss
Source: TWC
Job Growth Dec. ‘16 to Dec. ’17 = 30,000 Jobs (3%)Dec. ‘17 Unemployment Rate = 2.7%
THE AUSTIN ECONOMYTrend in Annual Job Growth/Loss
Source: TWC & Federal Reserve Bank of Dallas
TWC Dec. ‘16 to Dec. ‘17 = 30,000 (2.7%)FED Dec. ‘16 to Dec. ’17 = 25,160 (3.6%)
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
Dec
-97
May
-98
Oct
-98
Mar
-99
Aug
-99
Jan-
00Ju
n-00
Nov
-00
Apr
-01
Sep-
01Fe
b-0
2Ju
l-02
Dec
-02
May
-03
Oct
-03
Mar
-04
Aug
-04
Jan-
05Ju
n-05
Nov
-05
Apr
-06
Sep-
06Fe
b-0
7Ju
l-07
Dec
-07
May
-08
Oct
-08
Mar
-09
Aug
-09
Jan-
10Ju
n-10
Nov
-10
Apr
-11
Sep-
11Fe
b-1
2Ju
l-12
Dec
-12
May
-13
Oct
-13
Mar
-14
Aug
-14
Jan-
15Ju
n-15
Nov
-15
Apr
-16
Sep-
16Fe
b-1
7Ju
l-17
Dec
-17
FED Job Growth Figures TWC Job Growth Figures
Annual JobGrowth/Loss
Annual JobGrowth/Loss
1/31/2018
5
AUSTIN AND SELECTED TECH CENTERSTrend in Percent Annual Job Growth/Loss
-8%-7%-6%-5%-4%-3%-2%-1%0%1%2%3%4%5%6%
Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17
Austin Denver San Fran San Jose Seattle Nashville Phoenix Raleigh Atlanta Portland
Source: BLS
Ann. % Change
Major Lease Transaction Last 18 MonthsFacebook: 231,000 SF Lease (3rd & Shoal)
Google: 300,000 SF Lease (500 W. 2nd)
Indeed.com: 310,000 SF Lease (Domain Tower)
HomeAway: 315,000 SF Lease (Domain 11)
Parsley Energy: 302,000 SF Lease (300 Colorado)
1/31/2018
6
$5 Billion Investment 50,000 Employees $100,000 Average Salary
HQ2
Amazon in Seattle/Tacoma MSA
Population: 3.8 million
Employment: 2 million
Employees: 40,000 (5,000 in 2010)
Office Space: 8.1 million square feet
(more than Seattle’s next 40
largest employers…combined!)
Expected to occupy additional 4 million square
feet in the next 5 years
1/31/2018
7
THE AUSTIN APARTMENT MARKET
+43,000 Apartments Added Last 5 YearsNew Completions Last 4 Quarters = 8,757 Units
3Q17 Under Construction = 18,202 Units
1/31/2018
8
THE AUSTIN APARTMENT MARKETOccupancy & Rental Rate Trends
3Q17 City-Wide Avg. Rent = $1.41/SF3Q17 City-Wide Avg. Occ. = 92.4%
$0.75
$0.85
$0.95
$1.05
$1.15
$1.25
$1.35
$1.45
$1.55
80%
82%
84%
86%
88%
90%
92%
94%
96%
98%
100%Occupancy Rate Avg. City-Wide Rent
Source: Austin Investor Interests
Avg. Occupancy Rent
Average Rents +47% since 2010
The Resale Market
1/31/2018
9
THE AUSTIN RESALE MARKETMonths of Supply of Listings & Average Sales Price
(SF, TH and Condo)Sales Price MOS of
Inventory
Source: Texas A&M Real Estate Center
0
1
2
3
4
5
6
7
8
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Average Sales PriceMonths of Inventory
33,907 Closings Last 12 Mos. (+2.6%)Avg. Sales Price $367,197 (+5%)
Median Sales Price $307,500 (+7%)
MOS of Listings Has Been <4 MOS for 65 Months
78702
78704NEW CONSTRUCTION
1/31/2018
10
78702/East Austin (excluding large condo projects)
Last 12 Months Median Sales Price =$505,000Last 12 Months Average Sales Price =$515,740Active Listings (new const.) = 16 Sales Last 12 MOS = 132MOS Active Listings = 1.5 MOS
26% of sales in the last 12 months <1,000 square feetSource: MLS (Jan. 2018)
78704/Central South (excluding large condo projects)
Last 12 Months Median Sales Price =$732,500Last 12 Months Average Sales Price =$799,421Active Listings (new const.) = 65 Sales Last 12 MOS = 138MOS Active Listings = 5.7 MOSSource: MLS
(Jan. 2018)
1/31/2018
11
THE HIGH-END MARKET
THE AUSTIN HIGH-END MARKET (NEW & RESALE)Active Listings, MOS & Sales Last 12 MOS +$750,000
Source: MLS
4.05.3
9.211.2
18.420.5
0
5
10
15
20
25
0
100
200
300
400
500
600
700
800
900
1,000
$750K-$1Mil. $1Mil.-$1.5Mil $1.5Mil.-$2Mil $2Mil.-$2.5Mil $2.5Mil.-$3Mil +$3Mil.
Active Listings Sales Last 12 Months
Jan ‘18 Overall MOS of Active Listings +$750,000 = 5.9 MOS(Down from 7.1 MOS in January 2017)
MOS Active ListingsSales/
ListingsMOS Active
ListingsJan. ‘175.4
Jan. ‘175.8
Jan. '1710.6
Jan. '1711.6
Jan. ‘1725.6
Jan. ‘1735.1
1/31/2018
12
THE AUSTIN HIGH-END MARKET (NEW CONSTRUCTION)Active Listings, MOS & Sales Last 12 MOS +$750,000
Source: MLS
Jan. ‘18 Overall MOS of Active Listings +$750,000 = 5.7 MOS(Down from 9.7 MOS in January 2017)
MOS Active Listings
4.8 5.8 5.3 6.08.0
26.4
0
5
10
15
20
25
30
0
25
50
75
100
125
150
$750K-$1Mil. $1Mil.-$1.5Mil $1.5Mil.-$2Mil $2Mil.-$2.5Mil $2.5Mil.-$3Mil +$3Mil.
Active Listings Sales Last 12 Months
Jan. '1710.4
Jan. ‘175.7
Jan. '1710.6
Jan. '1716.5
Jan. ‘1724
Jan. ‘1716
MOS ActiveListings
Sales/Listings
A Recap of 2017-An Exceptional Year-First Time Leads the Way-Margin Pressure in Move-Up-Labor Issues-Spec Strategies-Consolidation & Mandate to Grow
1/31/2018
13
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
DJ U.S. Home Const. Total Return Index DJ U.S. Home Const. Index
Major Stock Exchanges 2017 Performance
DOW: +25%S&P: +19%NASDAQ: +28%
THE U.S. HOME BUILDER EQUITY MARKETSDow Jones Indexes Tracking Home Building Industry
Source: Dow Jones
Index
Both Indexes Up+57% in 2017
• The Land & Finished Lot Market• Push for lot supply to build <$300,000 (land or finished lots)
• More 30’, 35’, 40’ & 45’ lots• Higher lot prices• Sub-Market expansion• Squeeze placed on smaller builders
• Continued Labor Issues…Impacts Costs & Cycle Times• Increased spec building
• Competition Level Intensifies…Margin Pressure
• The Result…The Market Grows in 2018
MAJOR THEMES IN NEW HOME MARKET IN 2018
1/31/2018
14
Manor
Southeast
Southwest
Del Valle
Where Can We Grow?
THE AUSTIN MSA NEW HOME MARKET2018 Starts Forecast
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Source: Federal Reserve Bank of St. Louis
?
1/31/2018
15
What About Home Prices & Affordability?
THE AUSTIN RESALE MARKETAverage and Median Price Trend (SF, TH and Condo)
Source: Texas A&M Real Estate Center
Dec. 2017 Average Price: $367,197 (+5.7% in the last 12 mos.)Dec. 2017 Median Price: $307,500 (+7.3% in the last 12 mos.)
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Avg. Annual Sales PriceMedian Price
Average +38% last 5 yearMedian + 45% last 5 years
1/31/2018
16
Source: FHFA
Annual Home Price Change Trend: 3Q97 to 3Q17Major Texas Markets
-10%
-5%
0%
5%
10%
15%
20%
-10%
-5%
0%
5%
10%
15%
20%
3Q97
1Q98
3Q98
1Q99
3Q99
1Q00
3Q00
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
Austin Dallas San Antonio HoustonAnnual Price
ChangeAnnual Price
Change
Annual Home Price Change Trend: 2Q97 to 3Q17Selected Tech Markets
Source: FHFA
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Austin San Jose San Francisco Portland Seattle Annual Price Change
Annual Price Change
1/31/2018
17
MEDIAN SINGLE FAMILY HOME PRICE TRENDSelected Cities 2011 – 3Q17
Source: National Assoc. of Realtors
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
Austin DFW Houston San Antonio Atlanta Denver Nashville Raleigh Portland Boston Seattle
2011 2012 2013 2014 2015 2016 3Q17
What About Rising Mortgage Interest Rates
1/31/2018
18
Growth in the Global & U.S Tech Sector
Austin’s Tech Companies Grow
Austin’s Tech Companies Must Hire More People
Job Growth Breeds Strong Consumer Confidence
Strong Consumer Confidence Sells Homes
1/31/2018
19
THE AUSTIN MSA NEW HOME MARKET2018 Starts Forecast
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Federal Reserve Bank of St. Louis & 360 Real Estate Analytics
But Eldon, this can’t last forever…
1/31/2018
20
THE AUSTIN ECONOMY-JOB CREATIONAnnual Trend in Job Growth/Loss (Dec. ‘79 to Dec. ‘17)
(greyed areas represent U.S. recessions)
Source: TWC
Annual Job Growth
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
THE AUSTIN ECONOMY-JOB CREATIONAnnual Trend in Job Growth/Loss (Dec. ‘79 to Dec. ‘17)
(greyed areas represent U.S. recessions)
Source: TWC
Annual Job Growth
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
Bottom Line…Planning is much easier than forecasting…
1/31/2018
21
The Home Builders Association of Greater Austin2018 Housing Forecast
Copy of my presentation: [email protected]
For further information, contact:Eldon Rude, Principal360° Real Estate Analytics512‐796‐[email protected]