recenter.tamu.edu Dr. James P. Gaines Research Economist Real Estate Center at Texas A&M University

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1 recenter.tamu.edu Dr. James P. Gaines Research Economist Real Estate Center at Texas A&M University

2 Area Market Reports RECENTER.TAMU.EDU Tierra Grande Economic Review Videos, Audios & Presentations Data, Data 2 & More Data

3 Bentley's First Law of Economics: The only thing more dangerous than an economist is an amateur economist! Bentley's Second Law of Economics : "The only thing more dangerous than an amateur economist is a professional economist." Remember: Amateurs built the Ark Professionals built the Titanic 3

4 Economy is Trying to Recover, but Slow Going Great Recession Officially Declared Over Employment Texas twice rate of US growth Retail Sales and Consumption GDP Unsustainable Government deficits Corporate Earnings Housing Projections for the next couple of years indicate substantive growth doesn t occur until

5 1Q2000 2Q2000 3Q2000 4Q2000 1Q2001 2Q2001 3Q2001 4Q2001 1Q2002 2Q2002 3Q2002 4Q2002 1Q2003 2Q2003 3Q2003 4Q2003 1Q2004 2Q2004 3Q2004 4Q2004 1Q2005 2Q2005 3Q2005 4Q2005 1Q2006 2Q2006 3Q2006 4Q2006 1Q2007 2Q2007 3Q2007 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 4Q2009 1Q2010 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 3Q2011 Percent Growth in Real GDP The average rate of growth is 3.3% per quarter since th Quarter expected to be around 3%-3.3% Source: Bureau of Economic Analysis 5

6 Recovery May Take a While 6

7 Percent Job Losses Relative to Peak Texas, Dallas, Austin, San Antonio and Houston Employment Recovery 1.0% 0.0% Percent Job Losses From Peak Peak: Texas August million; San Antonio -1.0% -2.0% -3.0% -4.0% Austin Texas Dallas Houston -5.0% -6.0% Months Aligned at maximum job losses Source: Texas Workforce Commission; Real Estate Center at Texas A&M 7

8 Jan-00 Jun-00 Nov-00 Apr-01 Sep-01 Feb-02 Jul-02 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Austin Jobs 800, , , , , , , , , , ,000 Source: Texas Workforce Commission; Real Estate Center at Texas A&M 8

9 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 Annual Employment Growth Rates for 8% US, Texas and Austin 6% 4% 2% Austin Texas 0% -2% -4% -6% US Need at least 3% job growth, minimum, to help housing market recover Source: BLS, Real Estate Center at Texas A&M University 9

10 Major Hurdles for 2011 and Tepid growth in private sector: jobs and spending 2. Government budget balancing all levels 3. Credit contraction continues business, consumer credit, mortgages 4. Flush banking system of bad loans and foreclosed properties 5. UNCERTAINTY & Lack of CONFIDENCE 10

11 The Law of Unintended Consequences

12 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Consumer Confidence Index cycles since 1967: Avg. during recession = 72 Avg. during an expansion = 102 Jul-07, Expansion Recession Feb-09, 25.3 Source: The Conference Board (1985=100)

13 Jan-97 Jun-97 Nov-97 Apr-98 Sep-98 Feb-99 Jul-99 Dec-99 May-00 Oct-00 Mar-01 Aug-01 Jan-02 Jun-02 Nov-02 Apr-03 Sep-03 Feb-04 Jul-04 Dec-04 May-05 Oct-05 Mar-06 Aug-06 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Texas Leading Economic Index Composite of 8 economic factors: Texas Value of the Dollar U.S. Leading Index Real oil prices Well permits Initial claims for unemployment insurance Texas Stock Index Help-wanted advertising Average weekly hours worked in manufacturing Source: Dallas Federal Reserve 13

14 Fastest Growing States, Population* 2010 Population Numerical Change Percent Change United States 281,424, ,745,538 27,323, % Texas 20,851,820 25,145,561 4,293, % California 33,871,648 37,253,956 3,382, % Florida 15,982,378 18,801,310 2,818, % Georgia 8,186,453 9,687,653 1,501, % North Carolina 8,049,313 9,535,483 1,486, % Arizona 5,130,632 6,392,017 1,261, % Virginia 7,078,515 8,001, , % Washington 5,894,121 6,724, , % Colorado 4,301,261 5,029, , % Nevada 1,998,257 2,700, , % Tennessee 5,689,283 6,346, , % Source: 2010 U.S. Census Bureau 14

15 Change in Total Population by Legend co48_d00 County, 2000 to 2010 'PROJECTIONS X$'.totpopch0010-3, ,000 10,001-50,000 50, , , ,000 Source: Texas State Demographer s Office, U.S. Census Bureau 2000 and 2010 Census Counts 15

16 Texas Is An Urban State MSA 2010 Population (millions) Percent of Total State Population Austin % Dallas-Ft. Worth % Houston % San Antonio % Total 4 MSAs % Total All MSAs % Texas % Source: U.S. Census Bureau 16

17 Texas Urban Triangle In 2007, 15.3 million people, about 90% of the total population in the area, lived in the four principal metro areas in the triangle By 2040, 33.7 million people will live in the four principal metro areas in the triangle, a 120% increase 17

18 States with Largest Unauthorized Immigrant Populations, 2010 State Estimate (thousands) Range Percent of 2010 Pop California 2,550 (2,350-2,750) 6.8% Texas 1,650 (1,450-1,850) 6.5% Florida 825 ( ) 4.4% New York 625 ( ) 3.2% New Jersey 550 ( ) 6.3% Illinois 525 ( ) 4.1% Georgia 425 ( ) 4.4% Arizona 400 ( ) 6.3% Sources: Texas State Demographer s Office; Pew Hispanic Center estimates based on residual methodology applied to March Supplements to the Current Population Survey (February 1, 2011) 18

19 Texas Population ,000,000 40,000,000 35,000,000 30,000,000 25,000,000 From 1970 to 2010 (40 years), Texas added 13.9 million people a rate of 349,000 per year or 955 people per day 25,145,561 39,200,000 20,000,000 15,000,000 10,000,000 5,000, ,896,542 11,196,730 From 2010 to 2030 (20 years), Texas will add another 14 million people a rate of 703,000 per year or 1,925 people per day Sources: U.S. Census Bureau, Texas State Demographer 2008 Projections (average of and 100% immigration scenarios) 19

20 3,500,000 3,000,000 Austin MSA Population Bastrop, Caldwell, Hays, Travis & Williamson Counties 469.7% increase since % increase since ,638,667 3,030,478 2,500,000 2,292,737 2,000,000 1,500,000 1,249,763 1,716,289 1,000, , , , , ,227 Average 46,653 people per year Source: U.S. Census Bureau; Texas State Demographer s Office Projection 20

21 21 Texas Age Distribution , , , , , , , , , , , , , Age Boomers 0 50, , , , , , , , , , , , , Age Boomers 0 50, , , , , , , , , , , , , Age 2020 Boomers 0 50, , , , , , , , , , , , , Age 2030 Boomers

22 Silent/ Greatest Baby Boom Baby Bust (Gen X) Millions Echo Boom (Gen Y) Millennials (Gen I) Texas Population Groups % % % % % Age Source: U.S. Census Bureau; 2009 National Population Projections (Supplemental) 22

23 Baby Boom Baby Bust (Gen X) Echo Boom (Gen Y) Millennials (Gen I) millions Austin Population Groups , % 544, , , % 367, % 21.6% 369, , , , ,000 0 Age 7.6% 129,700 Silent/Greatest Source: U.S. Census Bureau; 2009 National Population Projections (Supplemental)

24 Boomers Own - Gen Y Rents 18% 3% 51% Boomers 28% Own Outright Mortgage Rent Other 26% 2% 9% 64% Gen X Own Outright Mortgage Rent Gen Y Other 1% Silent/Greatest 12% 51% 9% 27% Own Outright Mortgage Rent Other 22% 14% 63% Own Outright Mortgage Rent Other Source: FNMA National Housing Survey, 4Q

25 Housing Markets are Changing 25

26 2Q1971 2Q1972 2Q1973 2Q1974 2Q1975 2Q1976 2Q1977 2Q1978 2Q1979 2Q1980 2Q1981 2Q1982 2Q1983 2Q1984 2Q1985 2Q1986 2Q1987 2Q1988 2Q1989 2Q1990 2Q1991 2Q1992 2Q1993 2Q1994 2Q1995 2Q1996 2Q1997 2Q1998 2Q1999 2Q2000 2Q2001 2Q2002 2Q2003 2Q2004 2Q2005 2Q2006 2Q2007 2Q2008 2Q2009 2Q2010 2Q2011 2Q2012 (Percent) US Homeownership Rate Current rate is same as 1Q s Baby Boomers enter market; homeownership grows Low interest rates and new mortgage products; Homeownership explodes from 64.1% to 69.1% Source: US Census Bureau; FHLMC (4-quarter moving average homeownership rate) 26

27 Q2010 Billions $ Lost Wealth: Households Equity in Real $14,000 $12,000 Estate $6.7 trillion or 49% in lost real estate equity $13,139 $10,000 $8,000 $6,000 $6,672 $4,000 $2,000 $0 Source: Federal Reserve, Flow of Funds, B

28 Size of US Households 2010 Texas Source: NAHB Economics and Housing Policy Group, The New Home in 2015, December

29 Types of US Households million HHs 2010 ~115 million HHs 2010 Texas Source: NAHB Economics and Housing Policy Group, The New Home in 2015, December

30 Housing Must Recuperate to Lead a General Economic Recovery

31 Our Crack Economic and Housing Forecasting Team 31

32 Current Housing Issues Government stimulus efforts prolonged market recovery Low Demand - High Supply = Weak Home Values FNMA/FHLMC resolution Lenders in difficulty: punished for making RE loans; CRE and other bad loans have not be cleared; definition of QRM Renting regarded as viable option to buying First-time buyers financially unable to buy FHA essentially a subprime lender 32

33 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Monthly Foreclosure Filings 170, , , , , , , ,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 US Texas Source: RealtyTrac, Inc. Data include Notices of Trustee Sales plus Notices of Foreclosure Sale 33

34 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 (Existing 000s) 8,000 New and Existing SF Home Sales U.S. (New 000s) 1,600 7,000 6,000 Existing SF sales are down 38% from 2005 peak Existing Sales (left axis) 1,400 1,200 5,000 4,000 3,000 2,000 1,000 0 New SF sales are down 77% from 2005 peak Annual Average Total Sales million million million million New Sales (right axis) 1, Sources: US Census Bureau, NAR, SAAR 34

35 Jan 1990 Jul 1990 Jan 1991 Jul 1991 Jan 1992 Jul 1992 Jan 1993 Jul 1993 Jan 1994 Jul 1994 Jan 1995 Jul 1995 Jan 1996 Jul 1996 Jan 1997 Jul 1997 Jan 1998 Jul 1998 Jan 1999 Jul 1999 Jan 2000 Jul 2000 Jan 2001 Jul 2001 Jan 2002 Jul 2002 Jan 2003 Jul 2003 Jan 2004 Jul 2004 Jan 2005 Jul 2005 Jan 2006 Jul 2006 Jan 2007 Jul 2007 Jan 2008 Jul 2008 Jan 2009 Jul 2009 Jan 2010 Jul 2010 Jan 2011 Jul 2011 Jan 2012 US Total Housing Starts T h o u s a n d s o f U n i t s a t A n n u a l R a t e 2,450 2,250 2,050 1,850 1,650 1,450 1,250 1, Total Units & 12-Month Moving Average Starts down 70% from Jan 06 peak Monthly Units 12-Month Moving Avg. 450 Source: US Census Bureau, Real Estate Center at Texas A&M

36 1Q1992 3Q1992 1Q1993 3Q1993 1Q1994 3Q1994 1Q1995 3Q1995 1Q1996 3Q1996 1Q1997 3Q1997 1Q1998 3Q1998 1Q1999 3Q1999 1Q2000 3Q2000 1Q2001 3Q2001 1Q2002 3Q2002 1Q2003 3Q2003 1Q2004 3Q2004 1Q2005 3Q2005 1Q2006 3Q2006 1Q2007 3Q2007 1Q2008 3Q2008 1Q2009 3Q2009 1Q2010 3Q2010 1Q2011 U.S. Home Price Percent Change 20.0% 15.0% Y/Y Percent Change in Quarterly Estimates CoreLogic HPI 10.0% 5.0% FHLMC CMHPI 0.0% -5.0% FHFA Repeat Sales Index NAR Median Price -10.0% -15.0% -20.0% Case Shiller Comp 20 NSA Sources: NAR, FHFA PO Index, Case Shiller, FHLMC; CoreLogic 36

37 The overhang of shadow inventory is killing the housing and CRE markets 37

38 p Annual Texas Home Sales 310,000 $310, ,000 Sales Avg Price Md Price 292, ,584 $290, , ,842 $270, , ,020 $250, , , , , , , , , , , , , ,610 $230,000 $210,000 $190, , ,638 $170, , , ,395 $150, , , , ,823 $130, , , ,04799,619 $110,000 90,000 $90,000 70,000 $70,000 50,000 $50,000 Source: Real Estate Center at Texas A&M University

39 e 2012p Texas Home Sales per 1,000 Households Units Average = 16.7 Average = 21.5 Reverting to between 1997 and 1998 level Source: US Census Bureau, Real Estate Center at Texas A&M

40 Florida Nevada New Jersey Illinois Maine New York Ohio Indiana Connecticut US Rhode Island Hawaii Arizona Delaware South Carolina Kentucky New Mexico Oregon Maryland Louisiana California Wisconsin Vermont Michigan Pennsylvania Georgia Mississippi Oklahoma Idaho Massachusetts Washington DC Iowa North Carolina Minnesota Tennessee Utah New Hampshire Kansas Arkansas Colorado West Virginia Alabama Missouri Virginia Montana Texas South Dakota Nebraska Wyoming North Dakota Alaska Percent of Loans in Foreclosure End of 2Q Judicial Foreclosure States Non-Judicial Foreclosure States US 4.43 Texas Source: Mortgage Bankers Association, National Delinquency Survey 40

41 1Q1979 1Q1980 1Q1981 1Q1982 1Q1983 1Q1984 1Q1985 1Q1986 1Q1987 1Q1988 1Q1989 1Q1990 1Q1991 1Q1992 1Q1993 1Q1994 1Q1995 1Q1996 1Q1997 1Q1998 1Q1999 1Q2000 1Q2001 1Q2002 1Q2003 1Q2004 1Q2005 1Q2006 1Q2007 1Q2008 1Q2009 1Q2010 1Q2011 1Q2012 Percent of Texas Mortgages Seriously & Days Delinquent & Foreclosures Started Seriously Delinquent loans jumped from 2.3% to 6.0% between 2Q2008 4Q Since then SD s have fallen to 4.7% 4.0 Seriously Delinquent Days Delinquent Foreclosures Started Source: Mortgage Bankers Association, National Delinquency Survey 41

42 e 2012p Texas Median Home Prices $160,000 $150,000 $140,000 $130,000 $120,000 $110,000 $100,000 $90,000 $80,000 $70,000 81,600 80,000 78,200 75,200 71,200 68,50068,100 90,600 86,400 96, , , , , , , , , , , , , , ,100 $60,000 $50,000 Source: Real Estate Center at Texas A&M University 42

43 Texas Metropolitan Home Prices 12-Month Moving Average $70,000 $80,000 $90,000 $100,000 $110,000 $120,000 $130,000 $140,000 $150,000 $160,000 $170,000 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Dallas 43 $70,000 $80,000 $90,000 $100,000 $110,000 $120,000 $130,000 $140,000 $150,000 $160,000 $170,000 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Houston $100,000 $110,000 $120,000 $130,000 $140,000 $150,000 $160,000 $170,000 $180,000 $190,000 $200,000 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Austin $70,000 $80,000 $90,000 $100,000 $110,000 $120,000 $130,000 $140,000 $150,000 $160,000 $170,000 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 San Antonio Source: Real Estate Center at Texas A&M University

44 e Texas SF Building Permits 180, , , , , % of 1983 peak % of 1983 peak % of 1983 peak % of 1983 peak % of 1983 peak 103, % of 2005 peak % of 2005 peak % of 2005 peak % of 2005 peak % of 2005 peak % of 2005 peak 111, ,782 99, , , , , , , ,366 80,000 60,000 67,870 66,161 78,714 84,565 67,964 59,143 59,543 70,452 69,964 70,421 83,132 82,228 81,107 68,170 68,230 66,900 40,000 46,209 43,975 36,658 35,908 38,233 20,000 0 Source: US Census Bureau, Real Estate Center at Texas A&M 44

45 e Austin Annual Home Sales 35,000 30, down 4.2% ~ 2003 level 2011 up nearly 7% 26,905 30,284 28,048 25,000 20,000 18,135 18,621 18,392 18,716 19,793 22,567 22,440 20,747 19,872 21,212 15,000 10,000 6,426 7,159 7,581 8,503 12,59712,439 11,459 10,571 9,926 15,583 5,000 0 Source: Real Estate Center at Texas A&M University

46 2,500 The Impact of the Tax Credit on 2009 & 2010 Monthly Sales in Austin 2,300 2,100 1,900 1,700 1,500 1,300 1, Similar percentage changes in same months at US and Texas level as well 700 Source: Real Estate Center at Texas A&M University 46

47 Jan-91 Jul-91 Jan-92 Jul-92 Jan-93 Jul-93 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Austin Monthly Home Sales 12-Month Moving Average 3,000 2,750 2,500 2,250 2,000 1,750 1,500 1,250 Sales Bubble Tax Credit Bubble 1, Current sales running about same as levels Source: Real Estate Center at Texas A&M University 47

48 Austin Median Home Prices 200, , , , , , , , , , ,000 90,000 80,000 70,000 60,000 50,000 73,000 76, modest 1.0% increase 83, ,500 96,000 91, , , , , , , , , , , , , , , , ,200 Source: Real Estate Center at Texas A&M University 48

49 Jan-99 Jun-99 Nov-99 Apr-00 Sep-00 Feb-01 Jul-01 Dec-01 May-02 Oct-02 Mar-03 Aug-03 Jan-04 Jun-04 Nov-04 Apr-05 Sep-05 Feb-06 Jul-06 Dec-06 May-07 Oct-07 Mar-08 Aug-08 Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 Austin Median Home Prices 12-Month Moving Average $220,000 $200,000 Median home prices now exceed peak October 2008 level $180,000 $160,000 $140,000 $120,000 $100,000 Source: Real Estate Center at Texas A&M University 49

50 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 8 Austin Months Inventory of Homes For Sale Total listings down 18.7% November 2011 vs. November Generally strong market based on balanced S & D Currently 4.6 months inventory 0 Source: Real Estate Center at Texas A&M University 50

51 $1 to $19,999 $20,000 to $29,999 $30,000 to $39,999 $40,000 to $49,999 $50,000 to $59,999 $60,000 to $69,999 $70,000 to $79,999 $80,000 to $89,999 $90,000 to $99,999 $100,000 to $109,999 $110,000 to $119,999 $120,000 to $129,999 $130,000 to $139,999 $140,000 to $149,999 $150,000 to $159,999 $160,000 to $169,999 $170,000 to $179,999 $180,000 to $189,999 $190,000 to $199,999 $200,000 to $249,999 $250,000 to $299,999 $300,000 to $399,999 $400,000 to $499,999 $500,000 to $599,999 $600,000 to $699,999 $700,000 to $799,999 $800,000 to $899,999 $900,000 to $999,999 $1,000,000 and more YTD Sales by Price and Days on Market Sales YTD DOM Under $170,000 strong market with <= 90 days on market Source: ABOR, May 2011, Real Estate Center at Texas A&M University 51

52 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Austin SF Building Permits 20, ,000 16,000 Annual Permits left scale 17,615 17,346 Monthly Permits right scale ,000 12,000 10,000 8,000 6,000 4,000 2,000 4,643 4,277 3,464 8,715 7,567 5,496 5,134 4,641 2,994 2,426 2,050 1,910 1,916 7,435 6,369 6,250 10,095 11,704 12,116 10,805 11,072 8,456 13,045 9,115 14,309 12,120 7,710 6,678 6,200 6, Source: U. S. Census Bureau, Real Estate Center 52

53 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Austin Multi-Family Building Permits 18,000 1,200 16,000 14,000 12,000 16,161 11,950 Annual Permits left scale Monthly Permits right scale 1, ,000 8,000 6,000 4,000 2, ,909 4,782 2,862 8,970 5,954 1, , ,484 6,133 5,128 4,403 4,720 8,345 8,064 7,849 5,570 5,261 3,106 2,499 7,399 6,902 3,812 6,856 2,290 2, Source: US Census Bureau, Real Estate Center at Texas A&M University 53

54 Conclusions 2011 ended generally positive Major business, investment and political decisions postponed until after the 2012 election. Sluggish growth into the first quarter of Interest rates stay low through 2013, at least. U.S. housing market will remain steady with no major movement San Antonio housing market should show some modest improvement but no major upgrade

55 Reasons for Optimism Relentless population growth in Texas Texas job growth double the national rate Austin continues to grow in jobs & pop Four years of pent up demand Retiring Moving to a new location Buying a house Expanding a business Relocating a business to Texas 55

56 Albert Einstein If we knew what we were doing, it wouldn't be called research, would it?

57 recenter.tamu.edu Dr. James P. Gaines Research Economist Real Estate Center at Texas A&M University