Dr. James P. Gaines Chief Economist recenter.tamu.edu
U.S. Outlook Uncertain impact of Tax Cut and Jobs Act Slow GDP growth new norm 8 years avg. 2.2%; 2017 ~2.3%; 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 1.5% - 2%; Unemployment rate ~4.0% 2
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018p Texas and U.S. Economic Growth Annual Percent Change in Real GDP 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% Texas US 6.2% 6.2% 5.7% 5.1% 4.8% 4.9% 4.5% 4.7% 4.5% 4.1% 4.1% 3.9% 3.8% 3.6% 3.7% 3.6% 3.3% 3.3% 2.8% 2.6% 2.7% 2.6% 2.5% 2.6% 2.9% 2.8% 2.3% 2.2% 2.3% 1.8% 1.8% 1.5% 1.6% 1.7% 1.5% 1.0% 0.8% 0.6% 0.4% -0.3% -0.6% -2.8% Sources: BEA; Real Estate Center at Texas A&M University 3
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 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Thousands of Jobs, SA Monthly Change in Total Nonfarm Employment 600 400 200 0-200 -400-600 Six-month moving average -800-1,000 Average of ~197,000 jobs per month since October 2010 Sources: BLS; Haver Analytics; Real Estate Center at Texas A&M University
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Inflation Remains Relatively Low 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% Consumer Price Index for All Urban Consumers: All Items; Y/Y % change in index -3.0% Source: BLS 5
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Consumer Confidence Index 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 Harvey hit Texas hard Texas U.S. Source: The Conference Board (1985=100); Haver Analytics 6
Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 NFIB Small Business Optimism Index (Overall Index SA 1986 = 100) 110 108 106 104 102 100 98 96 94 92 90 88 86 84 Source: National Federation of Independent Businesses; based on ten survey indicators
Interest Rate % Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Source: Federal Reserve Board; FHLMC; Haver Analytics; Real Estate Center at Texas A&M University 30-Year FMR and the Federal Funds Rate Upper Target 14.0 13.0 12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Fed Funds Rate 30-YR FMR Impact on LT rates not as strong
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Expected Interest Rate on a 30-Year, Fixed-Rate Mortgage in 2018 7.0 6.5 6.0 30-Year FRM rate is projected to rise in 2018 by 25bp to 100bp with Fed increasing Fed Funds rate at least 75 bp 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 Apr-10 5.10 +100bp +50bp 5.5 5.0 4.5 +25bp 4.0 3.5 3.0 3.0 Source: FHLMC; Real Estate Center at Texas A&M University 9
Texas Economy 2017 Recovery Year A Very Good Year 2018: Probably Better 10
Texas Economic Outlook: 2018 Better Than 2017 Employment: +2.5% - 3.0%; Energy & Manufacturing, Healthcare, Business & Professional Services; Leisure & Hospitality GDP: 4.1% 2018 from 3.6% 2017 Energy sector downturn mostly over; oil prices $55 - $60/bl.+ Population expansion continues but at slower pace 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 economic growth in 2018; impact on property values in affected counties & neighborhoods ongoing 11
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018p Texas Annual Jobs 14,000,000 13,000,000 12,000,000 11,000,000 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 2011-2017 +1,933,250 jobs; average 276,193/year; +2.5% 8,291,400 8,058,700 7,786,100 7,515,100 7,125,700 7,204,600 7,301,200 9,461,200 9,543,900 9,446,400 9,189,400 8,973,700 8,642,700 9,527,700 9,400,700 10,098,300 9,771,800 10,642,400 10,428,200 10,341,100 10,374,500 11,241,200 10,914,400 10,604,200 2012 +2.9% +310,200 2013 +3.0% +326,800 2014 +3.1% +352,700 2015 +2.4% +275,800 2016 +1.3% +158,700 2017e +2.3% +306,900 2018P +2.8% +344,600 12,652,470 12,307,850 12,028,400 11,869,700 11,593,900 Sources: Texas Workforce Commission, Real Estate Center at Texas A&M University 12
1/7/2000 3/31/2000 6/23/2000 9/15/2000 12/8/2000 3/2/2001 5/25/2001 8/17/2001 11/9/2001 2/1/2002 4/26/2002 7/19/2002 10/11/2002 1/3/2003 3/28/2003 6/20/2003 9/12/2003 12/5/2003 2/27/2004 5/21/2004 8/13/2004 11/5/2004 1/28/2005 4/22/2005 7/15/2005 10/7/2005 12/30/2005 3/24/2006 6/16/2006 9/8/2006 12/1/2006 2/23/2007 5/18/2007 8/10/2007 11/2/2007 1/25/2008 4/18/2008 7/11/2008 10/3/2008 12/26/2008 3/20/2009 6/12/2009 9/4/2009 11/25/2009 2/19/2010 5/14/2010 8/6/2010 10/29/2010 1/21/2011 4/15/2011 7/8/2011 9/30/2011 12/22/2011 3/16/2012 6/8/2012 8/31/2012 11/21/2012 2/15/2013 5/10/2013 8/2/2013 10/25/2013 1/17/2014 4/11/2014 7/3/2014 9/26/2014 12/19/2014 3/13/2015 6/5/2015 8/28/2015 11/20/2015 2/12/2016 5/6/2016 7/29/2016 10/21/2016 1/13/2017 4/7/2017 6/30/2017 9/22/2017 12/15/2017 3/9/2018 6/1/2018 Weekly Active Texas Rig Count & Price of WTI 1,000 950 900 850 800 750 700 650 600 550 500 450 400 350 300 250 200 150 100 Rig Count (left) Rig Count up 280, +162% since May 2016 11/21/2014, 906 6/27/2014, $106.69 WTI $/bl. (right) 2/12/2016, $28.14 5/20/2016, 173 $180 $170 $160 $150 $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 Source: Baker Hughes; EIA; RE Center at Texas A&M University 13
Austin Economy
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Austin Monthly Jobs 1,100,000 1,050,000 1,000,000 950,000 900,000 850,000 800,000 750,000 700,000 Sources: Texas Workforce Commission, Real Estate Center at Texas A&M University 15
Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Annual Employment Growth Rates 6.0 5.0 4.0 3.0 2.0 1.0 0.0-1.0-2.0-3.0-4.0-5.0-6.0 US Austin Texas Source: BLS, Real Estate Center at Texas A&M University 16
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 17 Austin Annual Jobs 1,100,000 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 2015 + 4.3% 2016 + 3.8% 2017 ~2.5% 461,000 430,800 408,800 396,100 492,000 575,500 549,800 524,900 610,500 684,000 685,300 669,200 645,900 663,900 704,700 679,000 736,400 811,900 791,000 772,100 774,300 785,600 844,400 884,000 922,900 962,900 1,025,000 999,800 300,000 Sources: Texas Workforce Commission, Real Estate Center at Texas A&M University 17
Austin Employment Change Industry December 2016 December 2017 Change % Change Total Nonfarm 1,018,800 1,048,800 30,000 2.9% Wholesale Trade 49,300 54,000 4,700 9.5% Transportation, Warehousing, and Utilities 18,600 19,700 1,100 5.9% Leisure and Hospitality 123,200 129,700 6,500 5.3% Mining, Logging and Construction 60,300 63,300 3,000 5.0% Education and Health Services 118,600 123,400 4,800 4.0% Other Services 44,700 46,300 1,600 3.6% Manufacturing 56,300 58,300 2,000 3.6% Professional and Business Services 171,100 175,500 4,400 2.6% Government 181,200 183,400 2,200 1.2% Financial Activities 57,700 58,400 700 1.2% Retail Trade 108,900 108,800-100 -0.1% Information 28,900 28,000-900 -3.1% Sources: Texas Workforce Commission NSA; Real Estate Center at Texas A&M University
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Austin & Texas Business-Cycle Indexes Monthly, Seasonally Adjusted, 10/1980=100 950 900 850 800 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 Austin Texas Source: Federal Reserve Bank of Dallas 19
Austin Retail Sales $1,500 $2,500 $3,500 $4,500 $5,500 $6,500 $7,500 $8,500 $9,500 $10,500 $11,500 1Q1978 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 1Q2013 1Q2014 1Q2015 1Q2016 1Q2017 1Q2018 Millions of Dollars 20
Texas Demographics 21
Estimated Population Change, Texas Counties, 2010 to 2016 El Paso Hudspeth -2,010-0 1-1,000 1,001-20,000 20,001-100,000 100,001-497,469 Dallam Sherman OchiltreeLipscomb Hansford Hutchinson Hartley Moore RobertsHemphill Oldham Potter Carson Gray Wheeler Deaf Smith Randall DonleyCollingsworth Armstrong Parmer Castro Briscoe HallChildress Swisher Hardeman Bailey Lamb Hale Floyd Wilbarger Motley Cottle Foard Wichita Clay Lamar Crosby King Knox Baylor Archer Cooke GraysonFannin Red River CochranHockley Dickens Montague Bowie Lubbock Delta Kent Jack Titus Yoakum Terry Lynn Garza Haskell Young Wise Denton Collin Hunt Hopkins MorrisCass Stonewall Throckmorton Franklin Rockwall Rains Gaines Scurry Fisher Jones Parker Tarrant Dallas Wood Marion Upshur DawsonBorden Stephens Shackelford Palo Pinto KaufmanVan Zandt GreggHarrison Hood Smith Andrews Martin Eastland Johnson Mitchell Ellis Nolan Taylor Erath Panola Howard Callahan Somervell Henderson Rusk Navarro Hill Loving Glasscock Ector Comanche Winkler Midland Coke Bosque Shelby Sterling AndersonCherokee RunnelsColemanBrown Hamilton Freestone Nacogdoches Culberson Ward Mills McLennanLimestone Crane San AugustineSabine Reeves Upton Reagan Tom Green Coryell Irion Leon Houston Angelina Concho Falls San SabaLampasas Trinity McCulloch Bell RobertsonMadison Schleicher Burnet Polk Tyler Jeff Davis Pecos Menard Milam Walker Jasper Newton Crockett Mason Llano Williamson Brazos Grimes San Jacinto Sutton Kimble Burleson Hardin Gillespie Travis Lee Montgomery Terrell Blanco Washington Orange Presidio Liberty Edwards Kerr Hays Bastrop Waller Kendall Jefferson Val Verde Fayette Austin Harris Brewster Real Comal Caldwell Chambers Bandera Guadalupe Colorado Fort Bend Bexar Gonzales Kinney Uvalde Medina Lavaca Galveston Wharton Brazoria Wilson DeWitt Jackson Zavala Frio Atascosa Karnes Victoria Matagorda Maverick Goliad McMullen Dimmit Bee Calhoun La Salle Live Oak Refugio Webb San Patricio Aransas Jim Wells Duval Nueces Kleberg Zapata Brooks Jim Hogg Kenedy 96 counties lost population over the 6 year period. Starr Willacy Hidalgo Cameron Source: U.S. Census Bureau, 2016 Vintage Population Estimates; Texas State Demographer s Office 22
Median Household Income, Texas counties, 2011-2015 Dallam Hartley Oldham Hansford Lipscomb Sherman Ochiltree Moore Roberts Hutchinson Hemphill Potter Carson Gray Wheeler tl_2010_48_county10 MedHHInc15 $22,741.00 - $35,000.00 $35,000.01 - $45,000.00 $45,000.01 - $55,000.00 $55,000.01 - $65,000.00 $65,000.01 - $89,152.00 tl_2010_48_county10 El Paso Hudspeth Randall Collingsworth Deaf Smith Armstrong Donley Swisher Parmer Hall Childress Castro Briscoe Hardeman Lamb Motley Cottle Floyd Wilbarger Bailey Hale Foard Wichita Montague Lubbock Dickens Grayson Cochran Clay Lamar Red Crosby King Knox Baylor Archer Cooke Fannin Hockley River Bowie Stonewall Throckmorton Delta Franklin Yoakum Terry Lynn Garza Haskell Young Jack Wise Denton Collin Kent Hunt Hopkins Titus Cass Borden Shackelford Morris Palo Rockwall Rains Wood Gaines Dawson Scurry Fisher Jones Parker Stephens Tarrant Pinto Dallas Van Upshur Marion Howard Kaufman Harrison Nolan Hood Taylor Johnson Zandt Ellis Smith Eastland Gregg Andrews Martin Mitchell Erath Callahan Somervell Henderson Rusk Winkler Midland Sterling Coke Runnels Comanche Hill Navarro Cherokee Panola Loving Ector Bosque Anderson Shelby Glasscock Coleman Brown Hamilton McLennan Freestone Ward Nacogdoches Upton Culberson Crane Reagan Tom Concho Mills Coryell Irion Limestone Leon Houston San Augustine Reeves Green McCulloch San Lampasas Falls Angelina Sabine Saba Bell Robertson Trinity Schleicher Burnet Jasper Milam Pecos Menard Mason Madison Crockett Polk Jeff Davis Llano Brazos Walker Tyler Williamson Newton Sutton Kimble Blanco BurlesonGrimes San Jacinto Gillespie Travis Lee Washington Montgomery Hardin Terrell Presidio Kendall Hays Bastrop Orange Val Verde Edwards Kerr Waller Liberty Fayette Brewster Real Austin Harris Bandera Comal Caldwell Guadalupe Colorado Chambers Jefferson Kinney Uvalde Medina Bexar Gonzales Fort Bend Lavaca Galveston Wilson Wharton DeWitt Brazoria Maverick Karnes Jackson Zavala Frio Atascosa Matagorda Goliad Victoria La Calhoun Dimmit Live Refugio Salle Bee Oak McMullen San Aransas Jim Wells Patricio Webb Zapata Duval Nueces Kleberg Jim Brooks Hogg Kenedy Starr Willacy Hidalgo Cameron Source: U.S. Census Bureau, American Community Survey, 2011-2015 5-Year Sample; Texas State Demographer s Office 23
Alternative Projections Texas Population 1910-2050 60,000,000 50,000,000 40,000,000 From 1970 to 2010 (40 years), Texas added 13.9 million people 54,369,297 47,386,428 2000-2010 Scenario 2010-2015 Scenario 60,000,000 50,000,000 40,000,000 30,000,000 25,145,561 40,502,749 30,000,000 20,000,000 50% 2000-2010 Scenario 20,000,000 10,000,000 From 2010 to 2050 (40 years), Texas will add between 22 and 30 million people 10,000,000 0 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2015 2020 2025 2030 2035 2040 2045 2050 0 Sources: U.S. Census Bureau, Texas State Demographer 2014 Projections (2000-2010 Scenario) 24
Projected Legend Population Change, Texas tl_2010_48_county10 Counties, 2010-2050 F6-6,200-0 1-2,000 2,001-10,000 10,001-100,000 100,001-1,000,000 1,000,001-3,480,000 Source: Texas State Data Center 2012 Population Projections. 2000-2010 Migration Scenario 25
Austin MSA Population Bastrop, Caldwell, Hays, Travis & Williamson Counties 6,000,000 5,000,000 2010-2050 3,460,651; 202% increase 86,500/year average 5,176,940 4,000,000 3,960,317 3,000,000 3,035,547 2,306,857 2,000,000 1,716,289 1,249,763 1,000,000 585,051 301,261 0 1960 1970 1980 1990 2000 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: U.S. Census Bureau; Texas State Demographer s Office 2014 Projection; 2000-2010 Scenario 26
Williamson County Population 2,500,000 2,000,000 2010-2050 1,554,279; 368% increase 38,850/year average 1,976,958 1,500,000 1,380,749 1,000,000 500,000 422,679 633,783 940,542 37,305 0 1970 1980 1990 2000 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: U.S. Census Bureau; Texas State Demographer s Office 2014 Projection; 2000-2010 Scenario 27
Hays County Population 900,000 800,000 700,000 2010-2050 667,000; 425% increase 16,675/year average increase 824,070 600,000 556,982 500,000 400,000 372,120 300,000 246,119 200,000 157,107 100,000 27,642 0 1970 1980 1990 2000 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: U.S. Census Bureau; Texas State Demographer s Office 2014 Projection; 2000-2010 Scenario 28
Housing Market 29
Macro Housing Issues 1. Demographics: generational life cycles; shifting tastes, preferences, attitudes & desires 2. Affordability: the main challenge for the next several years (decades?); income growth vs. price changes 3. Capital Flows & Lending Requirements: equity requirements; interest rates and monetary/fiscal policies 4. Infrastructure: transportation, education, utilities 5. Development: Design, Density, Resources and Processes 6. Regulatory: lending; environmental; land use controls Federal State Local
2018 Housing Market 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
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018p Annual Texas Home Sales 370,000 350,000 330,000 310,000 290,000 270,000 250,000 230,000 210,000 190,000 170,000 150,000 130,000 110,000 90,000 70,000 50,000 Since 2011 Sales + 58% Average Price + 42% Median Price + 52% 2018p sales +6-7% Prices +4% 126,525 120,749 126,279 110,830 103,344 102,789 177,179 151,861 142,940 Sales Avg Price Md Price 209,438 204,084 195,568 191,189 224,215 286,778 277,649 250,380 304,762 241,666 247,090 221,768 211,640 213,396 309,518 296,828 287,235 323,607 336,502 358,375 $370,000 $350,000 $330,000 $310,000 $290,000 $270,000 $250,000 $230,000 $210,000 $190,000 $170,000 $150,000 $130,000 $110,000 $90,000 $70,000 $50,000 Source: TAR Data Relevance Program; Real Estate Center at Texas A&M University 32
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018p Texas SF Building Permits 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 1990-2016 average 95,529/year 46,209 38,233 2015 +2.3% 2016 +1.0% 2017e +10.4% 2018p +9% 59,543 69,964 70,452 70,421 83,132 82,228 122,913 111,915 108,782 99,912 101,928 137,493 151,384 166,203 163,032 120,366 81,107 68,230 68,170 67,254 81,926 115,262 105,448 103,045 106,511 93,478 125,636 20,000 0 Source: US Census Bureau; NAHB; Real Estate Center at Texas A&M
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e Texas SF Building Permits per 1,000 New Households 2,300 2,100 1,900 1,700 1,500 1,300 2008-2016, added 1.33 million HHs. Would have built 1.1 million SF homes at average/year; actually built 776k. About 315,000 units short. 1,339 1,191 1,550 2,018 1995-2015 average 820/year 1,242 1,100 900 700 739 645 580528 689 851 719 648 585592 714699 809 970 888 894 646 602 679 668 619 731 688 745 500 300 401 316 347 398 435 435 455 324 100 Source: US Census Bureau, Real Estate Center at Texas A&M 34
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018p Texas MF Building Permits 80,000 70,000 1995-2016 average 45,444/year 69,995 67,319 60,000 50,000 40,000 30,000 32,237 34,684 35,720 43,794 56,918 44,716 32,620 42,409 43,081 44,431 39,796 38,427 53,894 58,542 49,897 32,260 56,406 56,644 59,342 56,854 55,149 20,000 10,000 8,962 10,298 9,514 15,545 17,375 21,504 0 Source: US Census Bureau, Real Estate Center at Texas A&M
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 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Texas Residential Construction Leading and Coincident Indexes Jan 2000=100 180 160 140 Coincident Index Total Housing Permits (12-MMA) 180 160 140 120 120 100 100 80 60 Leading Index 80 60 40 40 Source: Real Estate Center at Texas A&M University 36
The Austin Housing Market 37
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018p Austin Annual Home Sales 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 7,068 7,4858,389 9,784 10,41811,291 12,40612,253 15,338 17,845 18,321 18,095 18,41419,469 22,193 26,448 29,767 27,571 22,068 20,999 20,407 19,547 25,209 33,907 32,711 31,435 29,97130,164 37,637 Source: ABOR; Real Estate Center at Texas A&M University
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 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Austin Months Inventory 8 7 Average since 1990 5.1 months 6 5 4 3 2 1 0 Source: ABOR: Real Estate Center at Texas A&M University 39
Austin 2017 Sales and EoY Months Inventory by Price Sales 8,000 6,000 4,000 2,000 0 75 180 830 3,803 6,964 5,595 7,310 3,829 3,514 933 869 $0 - $69,999 $70,000 - $99,999 $100,000 - $149,999 $150,000 - $199,999 $200,000 - $249,999 $250,000 - $299,999 $300,000 - $399,999 $400,000 - $499,999 $500,000 - $749,999 $750,000 - $999,999 $1,000,000 + MOI 0.0 2.0 4.0 6.0 8.0 1.3 0.7 1.0 0.8 1.2 2.0 2.5 2.5 2.8 3.7 7.1 Source: BCS Regional Association of REALTORS ; Real Estate Center at Texas A&M University 40
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018p Austin Median Home Prices $330,000 $310,000 $290,000 $270,000 $250,000 $230,000 $210,000 $190,000 $170,000 $150,000 $130,000 $110,000 $90,000 $70,000 $50,000 2015 +8%; 2016 +7.7%; 2017 +5.4% 2018p +5.5% 125,888 117,207 107,884 111,819 72,252 75,865 82,929 90,949 95,158 100,025 220,000 203,000 187,319 189,900 183,292 185,150 189,356 171,272 160,701 149,611 153,545 153,836 153,198 143,550 240,000 260,000 280,000 295,000 311,225 Source: ABOR; Real Estate Center at Texas A&M University 41
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 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Austin Monthly Median Home Price 12-Month Moving Average $325,000 $300,000 $275,000 $250,000 $225,000 $200,000 $175,000 $150,000 Average Annual Appreciation ~ 5% $125,000 $100,000 Source: Real Estate Center at Texas A&M University 42
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Austin Monthly Average Home Price per Square Foot for Resale Homes $200 $190 $180 $170 $160 $150 $140 $130 $120 $110 $100 $90 $80 $70 $60 Austin Md Price/sf Tx MdPr/sf Source: ABOR; TAR Data Relevance Project; Real Estate Center at Texas A&M University 43
Austin Sales by Price Distribution Percent Distribution Price Range 2011 2012 2013 2014 2015 2016 2017 $0 - $69,999 4.5 2.9 1.7 0.9 0.6 0.4 0.2 $70,000 - $99,999 6.5 5.3 3.3 1.9 1.1 0.8 0.5 67% 35% $100,000 - $149,999 21.6 19.5 15.9 11.0 6.5 3.7 2.5 $150,000 - $199,999 20.9 21.3 22.2 22.1 19.5 15.3 11.2 $200,000 - $249,999 13.0 13.9 15.2 17.0 18.6 19.5 20.5 $250,000 - $299,999 10.0 10.3 10.9 12.2 14.3 15.7 16.5 $300,000 - $399,999 11.0 11.9 13.6 15.5 17.4 19.8 21.6 32% $400,000 - $499,999 5.1 6.3 7.5 8.2 9.2 10.4 11.3 63% $500,000 - $749,999 4.6 5.5 6.0 7.5 8.4 9.6 10.4 $750,000 - $999,999 1.5 1.6 1.8 1.8 2.2 2.6 2.8 $1,000,000 + 1.3 1.4 1.8 1.9 2.2 2.2 2.6 Source: ABOR; TAR Data Relevance Project; Real Estate Center at Texas A&M University
2011 2012 2013 2014 2015 2016 2017 Williamson Co. Annual Home Sales 12,000 11,500 11,000 10,500 10,000 9,500 9,000 8,500 8,000 7,500 7,000 6,500 6,000 5,500 5,000 2011-2017 +76% +24% 7,752 +23% 6,297 10,542 10,247 9,576 9,682 +6% +3% +1% Current Months Inventory 2.1 11,068 +5% Source: ABOR; TAR Data Relevance Project; Real Estate Center at Texas A&M University
2011 2012 2013 2014 2015 2016 2017 Williamson Co. Median Home Price $280,000 $270,000 $260,000 $250,000 $240,000 $230,000 $220,000 $210,000 $200,000 $190,000 $180,000 $170,000 $160,000 $150,000 $172,270 $181,000 +5% 2011-2016 +49% $221,000 $200,000 +11% +11% $241,000 +9% $257,500 +7% $273,500 +6% Source: ABOR; TAR Data Relevance Project; Real Estate Center at Texas A&M University
2011 2012 2013 Source: Four Rivers AoR; TAR Data Relevance Project; Real Estate Center at Texas A&M University 2014 2015 2016 2017 Hays Co. Annual Home Sales 5,000 4,500 2011-2017 +98% Current Months Inventory 2.9 4,000 3,500 3,000 2,500 2,000 1,500 1,798 2,173 +21% 2,797 +29% 3,089 +10% 3,230 +5% 3,391 +5% 3,560 +5% 1,000 500
2011 2012 2013 Source: Four Rivers AoR; TAR Data Relevance Project; Real Estate Center at Texas A&M University 2014 2015 2016 2017 Hays Co. Median Home Price $270,000 $260,000 $250,000 $240,000 $230,000 $220,000 $210,000 2011-2017 +57% $205,874 $229,000 +11% $239,650 +5% $255,990 +7% $200,000 $190,000 $180,000 $170,000 $160,000 $163,000 $178,000 +9% $192,700 +8% +7% $150,000
1Q2001 1Q2002 1Q2003 1Q2004 1Q2005 1Q2006 1Q2007 1Q2008 1Q2009 1Q2010 1Q2011 1Q2012 1Q2013 1Q2014 1Q2015 1Q2016 1Q2017 1Q2018 Industrial Warehouse Rent Rates (Triple-Net Asking Rent Overall) $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 Austin DFW Houston San Antonio 9 8 7 6 5 4 $3.00 3 Source: CoStar and NAI REOC; Real Estate Center at Texas A&M University
1Q2001 1Q2002 1Q2003 1Q2004 1Q2005 1Q2006 1Q2007 1Q2008 1Q2009 1Q2010 1Q2011 1Q2012 1Q2013 1Q2014 1Q2015 1Q2016 1Q2017 1Q2018 Retail Rent Rates (Triple-Net Asking Rent Overall) $22.00 $20.00 Austin DFW Houston San Antonio 22 20 $18.00 18 $16.00 16 $14.00 14 $12.00 12 $10.00 10 Source: CoStar and NAI REOC; Real Estate Center at Texas A&M University
1Q2001 1Q2002 1Q2003 1Q2004 1Q2005 1Q2006 1Q2007 1Q2008 1Q2009 1Q2010 1Q2011 1Q2012 1Q2013 1Q2014 1Q2015 1Q2016 1Q2017 1Q2018 Overall Office Rent Rates (Gross Asking Rates) $28.00 $26.00 Austin DFW Houston San Antonio 28 26 $24.00 24 $22.00 22 $20.00 20 $18.00 18 $16.00 16 $14.00 14 Source: CoStar and NAI REOC; Real Estate Center at Texas A&M University
Dr. James P. Gaines Chief Economist recenter.tamu.edu