recenter.tamu.edu Dr. James P. Gaines Research Economist Real Estate Center at Texas A&M University
Area Market Reports RECENTER.TAMU.EDU Tierra Grande Economic Review Videos, Audios & Presentations Data, Data 2 & More Data
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
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 2013-14 4
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 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0-1.0-2.0-3.0-4.0-5.0-6.0-7.0-8.0-9.0-10.0 1.1 8.0 0.3 2.4-1.3 2.7-1.1 1.4 3.5 2.1 2.0 0.1 1.7 3.4 6.7 3.7 3.3 3.0 2.7 2.6 The average rate of growth is 3.3% per quarter since 1947 4.2 1.8 3.2 2.1 5.1 1.6 0.1 2.7 4 th Quarter expected to be around 3%-3.3% 0.5 3.6 3.0 1.7-1.8 1.3-3.7-8.9-6.7-0.7 1.7 3.8 3.9 3.8 2.5 2.3 0.4 1.8 1.3 Source: Bureau of Economic Analysis 5
Recovery May Take a While 6
-19-18 -17-16 -15-14 -13-12 -11-10 -9-8 -7-6 -5-4 -3-2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 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 2008 10.64 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
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 800,000 780,000 760,000 740,000 720,000 700,000 680,000 660,000 640,000 620,000 600,000 Source: Texas Workforce Commission; Real Estate Center at Texas A&M 8
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
Major Hurdles for 2011 and 2012 1. 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
The Law of Unintended Consequences
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 130 120 110 100 90 80 70 60 50 40 30 20 10 7 cycles since 1967: Avg. during recession = 72 Avg. during an expansion = 102 Jul-07, 111.9 Expansion Recession Feb-09, 25.3 Source: The Conference Board (1985=100)
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 135 130 125 120 115 110 105 100 95 90 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
Fastest Growing States, 2000-2010 2000 Population* 2010 Population Numerical Change 2000-2010 Percent Change 2000-2010 United States 281,424,602 308,745,538 27,323,632 9.7% Texas 20,851,820 25,145,561 4,293,741 20.6% California 33,871,648 37,253,956 3,382,308 10.0% Florida 15,982,378 18,801,310 2,818,932 17.6% Georgia 8,186,453 9,687,653 1,501,200 18.3% North Carolina 8,049,313 9,535,483 1,486,170 18.5% Arizona 5,130,632 6,392,017 1,261,385 24.6% Virginia 7,078,515 8,001,024 922,509 13.0% Washington 5,894,121 6,724,540 830,419 14.1% Colorado 4,301,261 5,029,196 727,935 16.9% Nevada 1,998,257 2,700,551 702,294 35.1% Tennessee 5,689,283 6,346,105 656,822 11.5% Source: 2010 U.S. Census Bureau 14
Change in Total Population by Legend co48_d00 County, 2000 to 2010 'PROJECTIONS X$'.totpopch0010-3,200-0 1-10,000 10,001-50,000 50,001-100,000 100,001-700,000 Source: Texas State Demographer s Office, U.S. Census Bureau 2000 and 2010 Census Counts 15
Texas Is An Urban State MSA 2010 Population (millions) Percent of Total State Population Austin 1.72 6.8% Dallas-Ft. Worth 6.37 25.3% Houston 5.95 23.7% San Antonio 2.14 8.5% Total 4 MSAs 16.2 64.3% Total All MSAs 21.7 86.5% Texas 25.1 100.0% Source: U.S. Census Bureau 16
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
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 (725-950) 4.4% New York 625 (525-725) 3.2% New Jersey 550 (425-650) 6.3% Illinois 525 (425-625) 4.1% Georgia 425 (300-550) 4.4% Arizona 400 (275-500) 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
Texas Population 1910-2010 45,000,000 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 5,000,000 0 3,896,542 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 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2015 2020 2025 2030 Sources: U.S. Census Bureau, Texas State Demographer 2008 Projections (average of 2000-2007 and 100% 1990-2000 immigration scenarios) 19
3,500,000 3,000,000 Austin MSA Population Bastrop, Caldwell, Hays, Travis & Williamson Counties 469.7% increase since 1960 37.3% increase since 2000 2,638,667 3,030,478 2,500,000 2,292,737 2,000,000 1,500,000 1,249,763 1,716,289 1,000,000 500,000 214,603 301,261 585,051 846,227 Average 46,653 people per year 2000-2010 0 1940 1950 1960 1970 1980 1990 2000 2010 2015 2020 2025 2030 Source: U.S. Census Bureau; Texas State Demographer s Office 2000-2007 Projection 20
21 Texas Age Distribution 2005-2030 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 550,000 600,000 650,000 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85+ Age Boomers 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 550,000 600,000 650,000 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85+ Age Boomers 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 550,000 600,000 650,000 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85+ Age 2020 Boomers 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 550,000 600,000 650,000 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85+ Age 2030 Boomers 2005 2010
Silent/ Greatest Baby Boom Baby Bust (Gen X) Millions Echo Boom (Gen Y) Millennials (Gen I) Texas Population Groups 2011 9 8 30% 7.8 7 6 21.8% 5.6 23% 6.0 5 4 3 9.3% 2.4 15.9% 4.1 2 1 0 Age 1909-1945 1946-1964 1965-1976 1977-1995 1996-2010 66+ 47-65 35-46 16-34 0-15 Source: U.S. Census Bureau; 2009 National Population Projections (Supplemental) 22
Baby Boom Baby Bust (Gen X) Echo Boom (Gen Y) Millennials (Gen I) millions Austin Population Groups 2011 600,000 31.8% 544,728 500,000 400,000 21.4% 367,246 17.6% 21.6% 369,343 300,000 301,519 200,000 100,000 0 Age 7.6% 129,700 Silent/Greatest 1909-1945 1946-1964 1965-1976 1977-1995 1996-2010 66+ 47-65 35-46 16-34 0-15 Source: U.S. Census Bureau; 2009 National Population Projections (Supplemental)
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, 4Q2010 24
Housing Markets are Changing 25
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) 70.0 69.0 US Homeownership Rate Current rate is same as 1Q1998 68.0 67.0 66.0 65.0 64.0 63.0 62.0 1970s Baby Boomers enter market; homeownership grows 1995-2005 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
1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 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 3Q2010 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-100 27
Size of US Households 2010 Texas 30.3 31.3 24.2 14.1 Source: NAHB Economics and Housing Policy Group, The New Home in 2015, December 2010 28
Types of US Households 1960 53 million HHs 2010 ~115 million HHs 2010 Texas 50.6 24.3 19.3 5.3 Source: NAHB Economics and Housing Policy Group, The New Home in 2015, December 2010 29
Housing Must Recuperate to Lead a General Economic Recovery
Our Crack Economic and Housing Forecasting Team 31
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
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 170,000 160,000 150,000 140,000 130,000 120,000 110,000 100,000 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
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 1980-1989 3.55 million 1990-1999 4.7 million 2000-2007 7.1 million 2008-2010 5.5 million New Sales (right axis) 1,000 800 600 400 200 0 Sources: US Census Bureau, NAR, SAAR 34
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 1,050 850 650 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
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
The overhang of shadow inventory is killing the housing and CRE markets 37
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012p Annual Texas Home Sales 310,000 $310,000 290,000 Sales Avg Price Md Price 292,805 275,584 $290,000 270,000 266,842 $270,000 250,000 241,020 $250,000 230,000 210,000 190,000 201,528 196,401 188,738 184,056 216,147 232,381 215,000 213,334 208,000 203,610 $230,000 $210,000 $190,000 170,000 170,638 $170,000 150,000 138,123 146,395 $150,000 130,000 122,134 116,604 121,823 $130,000 110,000 107,107 100,04799,619 $110,000 90,000 $90,000 70,000 $70,000 50,000 $50,000 Source: Real Estate Center at Texas A&M University
1980 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 2011e 2012p Texas Home Sales per 1,000 Households Units 45 40 35 30 25 20 15 Average 1980-1997 = 16.7 Average 1980-2011 = 21.5 Reverting to between 1997 and 1998 level 18.4 18.1 18.7 18.2 15.8 15.8 16.3 15.6 14.2 14.9 15.6 16.5 16.9 16.1 14.9 13.0 20.2 21.0 26.226.6 25.425.5 24.0 28.3 30.9 33.4 36.1 33.4 27.6 25.0 23.1 23.3 23.6 10 5 0 Source: US Census Bureau, Real Estate Center at Texas A&M
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 2Q2011 16 14 12 10 Judicial Foreclosure States Non-Judicial Foreclosure States 8 6 4 2 US 4.43 Texas 1.87 0 Source: Mortgage Bankers Association, National Delinquency Survey 40
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 & 90+ 7.0 6.0 Days Delinquent & Foreclosures Started Seriously Delinquent loans jumped from 2.3% to 6.0% between 2Q2008 4Q2009 5.0 Since then SD s have fallen to 4.7% 4.0 Seriously Delinquent 3.0 2.0 90+ Days Delinquent 1.0 0.0 Foreclosures Started Source: Mortgage Bankers Association, National Delinquency Survey 41
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e 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 96,200 100,900 112,100 119,400 130,100 127,700 124,500 136,800 152,000 147,300 146,900 147,600 148,800 145,800 143,100 $60,000 $50,000 Source: Real Estate Center at Texas A&M University 42
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
1980 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 2011e Texas SF Building Permits 180,000 160,000 140,000 120,000 100,000 1984 82% of 1983 peak 1985 66% of 1983 peak 1986 57% of 1983 peak 1987 43% of 1983 peak 1988 35% of 1983 peak 103,252 2006 98% of 2005 peak 2007 72% of 2005 peak 2008 49% of 2005 peak 2009 41% of 2005 peak 2010 41% of 2005 peak 2011 40% of 2005 peak 111,915 108,782 99,912 101,928 122,913 151,384 137,493 166,203 163,032 120,366 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
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e Austin Annual Home Sales 35,000 30,000 2010 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
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 1,100 900 2011 2009 2010 2008 Similar percentage changes in same months at US and Texas level as well 700 Source: Real Estate Center at Texas A&M University 46
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 1,000 750 500 Current sales running about same as 2003-2004 levels Source: Real Estate Center at Texas A&M University 47
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Austin Median Home Prices 200,000 190,000 180,000 170,000 160,000 150,000 140,000 130,000 120,000 110,000 100,000 90,000 80,000 70,000 60,000 50,000 73,000 76,400 2011 modest 1.0% increase 83,700 100,500 96,000 91,600 117,900 112,600 108,700 126,600 144,500 154,500 154,800 154,100 150,600 161,300 172,200 188,200 189,400 191,200 186,000 184,200 Source: Real Estate Center at Texas A&M University 48
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
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 2010 7 6 5 4 3 2 1 Generally strong market based on balanced S & D Currently 4.6 months inventory 0 Source: Real Estate Center at Texas A&M University 50
$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 800 700 Sales YTD DOM 480 420 600 500 400 300 200 100 Under $170,000 strong market with <= 90 days on market 360 300 240 180 120 60 0 0 Source: ABOR, May 2011, Real Estate Center at Texas A&M University 51
1980 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 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 1000 18,000 16,000 Annual Permits left scale 17,615 17,346 Monthly Permits right scale 900 800 14,000 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 6,350 700 600 500 400 300 200 100 0 0 Source: U. S. Census Bureau, Real Estate Center 52
1980 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 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 1,000 800 10,000 8,000 6,000 4,000 2,000 0 4,909 4,782 2,862 8,970 5,954 1,000 305 2,084 996 8 0 220 6,484 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 2,049 600 400 200 0 Source: US Census Bureau, Real Estate Center at Texas A&M University 53
Conclusions 2011 ended generally positive Major business, investment and political decisions postponed until after the 2012 election. Sluggish growth into the first quarter of 2013. 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
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
Albert Einstein If we knew what we were doing, it wouldn't be called research, would it?
recenter.tamu.edu Dr. James P. Gaines Research Economist Real Estate Center at Texas A&M University