The Austin metro area’s economy has been the nation’s top performer through the recession and the recovery, according to a new study by The Brookings Institution.
The four major Texas Triangle metropolitan areas, consisting of Austin, Houston, Dallas-Fort Worth and San Antonio topped the list in that order. The report used data compiled through the first quarter of 2013.
The Washington, D.C.-based policy institute ranked the nation’s metro areas and compared changes in jobs, unemployment, gross product output and home prices for each area through three time periods: the recession, the following recovery and the period combining both. The Austin area’s economy ranked seventh nationally during the recession, third during the recovery and first in the period that combines both the recession and the recovery.
Other cities on the top 10 list include Oklahoma City; San Jose, Calif; Provo, Utah and Omaha, Neb.
Austin’s job creation, gross product output, housing prices and unemployment far outstripped the national average both during the recession and the subsequent recovery. More detailed information on the metro area’s economy is available on the Brookings website.
The recovery figures are often touted by local economic development officials, who note that Austin fared much better relative to the rest of the nation in the most recent recession than it did during the previous technology bust.
So far this year, the housing market has been hampered by negative factors such as weather, higher mortgage rates and prices, shortage of properties for sale and tight lending practices. Even so, the housing market continues to grow. The outlook for 2014 is good — not only for residential but for the real estate industry as a whole.
Regarding residential properties, experts predict smaller price increases this year. Their best guess is that prices will be up but not as much as last year. Some surveys show consumers expect to pay 3 percent more each year for the next ten years. In other words, home prices will likely increase less than mortgage rates, indicating that the consumption motive to purchase a house is stronger than the investment one. Also, the futures markets have home price increases at 5 percent annually. Experts see a continued buyer preference for rentals because household formation has been slowed by unemployment.
The effect institutional investors have on home price increases is comparable to the homebuyer tax credit. Any long-run, permanent effects they have are unclear. Institutional investors are perceived as having a temporary effect on home prices. Purchasing decisions are made based on profit and return; single-family homes do not represent the same cost structure as apartment buildings to maintain and service. As home prices and interest rates increase, profitability decreases for institutional investors. Given this, the long-run market potential for 1.7 to 1.8 million housing starts per year is still years away.
For the commercial sector, private nonresidential construction has picked up since the recession ended. While commercial builders saw a strong decline during the recession, construction has begun to pick up again. Experts see growth throughout the private, nonresidential construction sectors.
Retail construction remains muted because of a lack of growth in consumer spending and an increase in consumer preference for online purchases.
In contrast, hotel construction has picked up largely because of a boost in corporate profits, which has fueled business travel. Hotel construction is particularly cyclical, and it closely follows the pattern of real gross domestic growth and corporate profits.
The outlook for industrial construction growth remains uncertain. Institutional construction has seen a volatile recovery after a 2013 decline precipitated by a lack of funding at the federal, state and local government levels.
After a muted 2013, office construction has picked up, driven by employment growth in the energy and technology sectors. More jobs means more demand for office space in regions with a strong energy-technology presence.
Workplace density is increasing and will have an impact in future building construction. In 2010, the average space per office worker globally was approximately 225 square feet. By 2013, 64 percent of global corporations were at 150 square feet or less space. By 2018, it is expected that 52.3 percent of global corporations will be at 100 square feet or less. That’s because the most effective way for companies to lower costs is to increase density.
Real estate sector analysts have expressed concerns about the shortages in the supply of skilled labor to build houses, and commercial and office buildings. The shortage is said to have been caused by an older construction labor force, a movement to other industries, less immigration labor and a generational problem in training and recruiting young workers.
As long as the economy continues generating slow job growth, the real estate sector will continue to grow at a slow pace. Job growth is needed to increase household formation as the hiring of new workers leads to greater demand for housing and commercial and office space. This has been the case for Texas where metropolitan areas, such as Houston and Austin, continue to show the strongest performance in real estate markets versus other regions that lack energy and technology industries.
The Central Texas real estate rush shows no signs of slowing down. With international events like South by Southwest shining the spotlight on Austin and influential magazines like Forbes putting Central Texas city’s at the top of the best lists almost every month, its boom time. This is credited to a low unemployment rate and a business friendly culture for this economic surge. “I compare Texas to California in the 1950′s,” Sprague said. “The land of opportunity. It’s because of fewer regulations.” But, it comes at a cost to some. Affordable rental housing in Austin is almost non-existent.
The occupancy rate is around 95 percent. And it if you want to live downtown you have to pay to play. Sprague also says traffic, road construction and public transportation are major concerns that must be dealt with over the long term. But, Sprague believes with about 60,000 people moving to Central Texas every year the newcomers see Austin as a bargain. “We’re basically on the top of the pile,” Sprague said. “There are consumers that don’t feel that but compared to other states we are doing phenomenally well and there are only seven states that have pre-recession numbers. Texas leads that.” He says there’s little or nothing standing in our way.
Courtesy of KEYE News Austin
That means unless you can claim more than those amounts, there’s no reason to itemize.
One of the most common ways to get over the threshold, however, is to own a house and unlock the many deductions that come with home ownership. But it’s not as simply mailing a mortgage bill to the IRS and reaping the rewards. There are a bunch of very specific deductions that require specific paperwork.
Here are six important tax tips to look for if you’re a homeowner:
Claiming mortgage interest is the biggie, and one of the most common deductions among taxpayers.
“It’s evolved over the last 10 years, but we now have a cap of $1.1 million in mortgage debt that we can deduct for tax purposes,” said Monica Rebella, a certified public accountant in California. This includes first mortgages, as well as mortgages on second homes.
Rebella also points out that the deduction even covers multiple loans, so those with a primary residence in Ohio but winter home in Florida can claim the interest on both, so long as the total is under the $1.1 million cap.
Just be careful, she warns, of claiming a mortgage interest deduction on home equity loans that haven’t been used to improve the property.
“If you refinanced your loan and decided, ‘Hey, why don’t we take another $50,000 out in equity,’ but then you don’t use that money to, say, build a pool, that’s not fully deductible,” Rebella said. “You have to use the money to improve the house, or you are not allowed a deduction for that.” Read more…
Is renting or buying a better financial bet? Every six months, Trulia’s chief economist Jed Kolko runs the numbers to answer that question and help you stay on top of the trends. So what does Trulia’s Winter 2014 Rent vs. Buy Report tell us? Although the gap between renting and buying is narrowing across the U.S., homeownership is still 38% cheaper than renting.
Homeownership remains cheaper than renting nationally and in all of the 100 largest metro areas according to Trulia TRLA -1.84%’s latest Winter Rent vs. Buy report. Rising mortgage rates and home prices have narrowed the gap over the past year, though rates have recently dropped and price gains are slowing. Now, at a 30-year fixed rate of 4.5%, buying is 38% cheaper than renting nationally, versus being 44% cheaper one year ago.
The rent versus buy math is different in each local market. Buying ranges from being just 5% cheaper than renting in Honolulu to being 66% cheaper than renting in Detroit. But even for a specific market, the cost of buying versus renting depends on how much home prices rise (or fall) after you buy. Our model assumes conservative home price appreciation, but – as we all know after the last decade – home prices can unexpectedly rocket or plummet.
Buying Beats Renting Until Mortgage Rates Hit 10.6%
Even though prices increased sharply in many markets over the past year, low mortgage rates have kept homeownership from becoming more expensive than renting. Also, in some markets, like San Francisco and Seattle, rents have risen sharply; rising rents hurt affordability relative to incomes, but rising rents make buying look cheaper in comparison.
Will renting become cheaper than buying soon? Some markets might tip in favor of renting this year as prices continue to rise faster than rents and if – as most economists expect – mortgage rates rise, due both to the strengthening economy and Fed tapering. For each metro, we identified the mortgage rate “tipping point” at which renting becomes cheaper than buying, given current prices and rents. If rates rise, Honolulu would become the first metro to tip, at a mortgage rate of 5.0%. San Jose and San Francisco would also tip before rates reach 6%. But those are the extreme markets. Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989.
Courtesy of Forbes Magazine
The Austin real estate market showed a solid start to 2014, according to the Multiple Listing Service (MLS) report released today by the Austin Board of REALTORS® (ABoR). In January 2014, 1,449 single-family homes were sold in the Austin area, which is four percent more than January 2013, and the median price for Austin-area homes was $211,800, which is seven percent more than the same month in 2013.
Bill Evans, 2014 President of the Austin Board of REALTORS®, explained, “The Austin real estate market was strong in 2013 and showed steady growth in sales volume and price. We expected to see that trend continue at the start of 2014 and are encouraged to see stable growth for the Austin area in the first month of the year.”
This month, Forbes magazine cited Austin as the fastest growing city in the country for the fourth year in a row. That growth has driven demand for housing in Austin and contributed to decreasing housing inventory. In January 2014, the Austin market featured 2.0 months of inventory, compared to 2.5 months of inventory in January 2013. In contrast, the Real Estate Center at Texas A&M University cites 6.5 months of inventory as a market in which supply is balanced with demand, meaning demand for Austin homes continues to significantly outstrip demand.
Evans continued, “Indications are Austin’s growth will not slow anytime soon, so we must support housing development policies that ensure Austinites have supply of safe, affordable places to live. We should exercise caution in considering any policies that restrict housing availability, such as decreasing occupancy limits, without also committing to solid plans for how to replace that housing stock.”
Austin homes also continued to sell faster than in years past, spending an average of 63 days on the market in January 2014, which is a decrease of 9 days from one year prior. The market also featured four percent more new listings, seven percent fewer active listings and five percent fewer pending sales in January 2014 compared to the prior year.
January 2014 Statistics
- 1,449 – Single-family homes sold, four percent more than January 2013.
- $211,800 – Median price for single-family homes, seven percent more than January 2013.
- 63 – Average number of days single-family homes spent on the market, nine days fewer than January 2013.
- 2,337 – New single-family home listings on the market, four percent more than January 2013.
- 4,591 – Active single-family home listings on the market, seven percent fewer than January 2013.
- 1,946 – Pending sales for single-family homes, five percent fewer than January 2013.
- 2.0 – Months of inventory* of single-family homes, 0.5 months less than January 2013.
- $393,536,808 – Total dollar volume of single-family properties sold, eight percent more than January 2013.
The following sections describe trends in other sectors of the Austin real estate market.
Townhouses & Condominiums
The number of townhouses and condominiums (condos) purchased in the Austin area in January 2014 was 198, which is 13 percent more than January 2013. In the same time period, the median price for condos and townhomes was $210,570, which is seven percent more than the same month of the prior year. These properties spend an average of 53 days on the market, or 20 less time, than in January 2013.
In January 2014, a total of 1,317 properties were leased in Austin, which is 15 percent more than January 2013. The median price for Austin-area leases was $1,370, which is seven percent more than the same month of the prior year.
The Austin Board of REALTORS® (ABoR) is a non-profit, voluntary organization dedicated to educating and supporting Central Texas REALTORS®. ABoR proudly serves more than 9,000 members, promotes private property rights, and provides accurate, comprehensive property listing information for the Greater Austin area. Home sales statistics are released by ABoR on a monthly basis. For more information, please contact the ABoR Marketing Department at email@example.com or 512-454-7636. Visit AustinHomeSearch.com, a public resource on Austin real estate, for the latest news on the local housing market.
* The inventory of homes for a market is measured in months, which is defined as the number of active listings divided by the average sales per month of the prior 12 months. The Real Estate Center at Texas A&M University cites that 6.5 months of inventory represents a market in which supply and demand for homes is balanced.