Austin housing market expected to continue growth, despite low supply and rising interest rates

Elon Rude speaks at the Home Builders Association of Greater Austin's 2018 Housing Forecast Jan. 31.

Elon Rude speaks at the Home Builders Association of Greater Austin's 2018 Housing Forecast Jan. 31.

The Austin real estate market is poised for another strong year despite the threat of rising mortgage interest rates and building costs, according to the Home Builders Association of Greater Austin.

Housing and economic experts presented their analysis of the local housing market, including the state of the regional labor market, buyer expectations and housing supply trends, to more than 600 industry professionals at the HBA’s 2018 Greater Austin Housing Forecast on Jan. 31.

Austin’s appeal to the tech sector is critical to its growth, much of which is driven by the flow of tech workers to the city, said Eldon Rude, principal of 360 Real Estate Analytics.

“Austin is so much a part of the national and global economy because of what it sells [tech services],” Rude said.

Despite uncertainty about the impact of the new tax plan and concerns about possible rising interest rates, Greg Hallman, a senior lecturer in real estate finance at The University of Texas at Austin, said both the national and global economies are doing better than they were last year. As a result, he said he expects the GDP to grow 2-3 percent in 2018, which will boost consumer confidence.

“Supply and demand works in this business,” Hallman said of the real estate industry.

One driver of demand is low supply, which is an issue in Austin, Rude said. Despite significant development, especially in South and East Austin, there has been less than four months’ worth of housing inventory for the past four years, according to Rude’s analysis.

Data also shows that low supply drives up cost. The average home resale price in Austin reached an all-time high of $362,000 at the close of 2017, according to data from the Texas A&M Real Estate Center. This represents a year-over-year increase of 5.4 percent.

Builders take on some of these costs in the form of increased lot prices, according to Rude. Coupled with a persisting labor shortage, builders will be scrambling to keep up with demand, he said.

The industry’s task in 2018 is to balance rising costs with what consumers can afford, Rude said. He said he expects construction to begin this year on 17,000 single-family homes, an increase of over 5 percent compared to 2017.

To assuage costs, Rude said he expects builders will be on the prowl for lots that cost less than $300,000 and that are located in sub-markets, such as Southeast Austin and Liberty Hill in Williamson County, away from the expensive urban core.

“Housing affordability will continue to be a challenge for the Greater Austin market for the foreseeable future,” HBA president Lee Whitaker of building company Pacesetter Homes said.

Despite the healthy forecast for 2018, Hallman and Rude agreed that this growth can only continue for a limited time.

“At some point in time, there will be a shock to the system,” Rude said. "Bottom line: planning is easier than forecasting."

By Emma Freer
Emma Freer began covering Central Austin for Community Impact Newspaper in 2017. Her beat includes the Travis County Commissioners Court and local business news. She graduated from Columbia Journalism School in 2017.


MOST RECENT

A photo of the potential Tesla property
Travis County updates Tesla incentive package, pushing for $1 billion-plus investment from the company

Poised for a possible July 13 vote, Travis County has released a refined incentives structure proposal with electric carmaker Tesla.

Texas Commissioner of Education Mike Morath announced in a June 30 State Board of Education meeting that students will be taking the STAAR in the 2020-21 school year. (Courtesy Pixabay)
Education organizations call for STAAR requirements to be waived another year

Gov. Greg Abbott waived the State of Texas Assessments of Academic Readiness, or STAAR, testing requirements in March of earlier this year in response to the coronavirus pandemic.

With a clinical background in internal, pulmonary and critical care medicine, Corry has been with BCM for 20 years. He now focuses primarily on inflammatory lung diseases, such as asthma and smoking-related chronic obstructive pulmonary diseases. (Graphic by Ronald Winters/Community Impact Newspaper)
Q&A: Baylor College of Medicine's Dr. David Corry discusses immunity, vaccine production amid COVID-19 pandemic

Rapid development and distribution of a vaccine worldwide and successful achievement of herd immunity will be key players in determining the lifespan of the COVID-19 pandemic, said Dr. David Corry, a professor of Medicine in the Immunology, Allergy and Rheumatology Section at Baylor College of Medicine.

The building would be used as a 15,000-square-foot real estate office near Stearns Lane. (Site plan courtesy Townbridge Homes)
New office building could be headed to W. Hwy. 290 in South Austin

The building would be used as a 15,000 square-foot real estate office near Stearns Lane.

The new partnership will provide on-site, same-day testing and results for assisted-living facility staff and their residents. (Courtesy Adobe Stock)
State announces partnership for increased COVID-19 testing for patients, staff at assisted-living facilities, nursing homes

These test sites will help the state work toward the goal of processing up to 100,000 tests in the first month.

The city of Austin has sent three samples of algae from Lady Bird Lake to The University of Texas to test them for toxins. (Jack Flagler/Community Impact Newspaper)
University of Texas researchers will test Lady Bird Lake algae for harmful toxins

Last summer, five dogs died in Lady Bird Lake after coming into contact with the toxic blue-green algae.

A photo of Del Valle ISD's Cardinal stadium
Del Valle ISD approves Tesla incentives, paving way for possible Travis County agreement

The school district's July 9 vote could yield Tesla around $46.4 million in tax abatements if the company chooses Travis County as its next factory site.

Travis County has had 13,864 total confirmed coronavirus cases since the beginning of the pandemic as of July 9. (Community Impact staff)
Travis County tops 700 new COVID-19 cases for second straight day July 9

Travis County has had 13,864 total confirmed coronavirus cases since the beginning of the pandemic.

Effective July 9, hospitals in more than 100 counties across the state must now postpone elective surgeries unrelated to COVID-19. (Courtesy Adobe Stock)
MAP: Governor expands restrictions on elective surgeries to more than 100 Texas counties

Texas Gov. Greg Abbott expanded the restrictions that initially required only hospitals in Bexar, Dallas, Harris, and Travis counties to postpone all non-medically necessary surgeries and procedures that are unrelated to COVID-19.

An employee at Terry Black's Barbecue in Austin works in a mask May 1. (John Cox/Community Impact Newspaper)
Austin’s new law: Follow health authority rules or face $2,000 penalty

Austin-Travis County Interim Health Authority Dr. Mark Escott is set to publish new orders mandating masks and social distancing this week.

Big Sky Ranch community sign
700 homes now for sale in Dripping Springs’ new Big Sky Ranch community

The new community is located near Founders Memorial Park.

A photo of the exterior of Epic Fun
South Austin entertainment center reopens with revamped health and safety measures

Epic Fun is fighting to keep its family-friendly offerings going despite economic hardships caused by the coronavirus pandemic.