“We’re going to have a good year in our housing market. … All of you [homebuilders] that I’ve talked to in the first part of the year have experienced a strong start to the year, and I don’t think that’s going to change as we move through much of the year,” Rude said.
Here are a few takeaways from the housing forecast event held at the J.W. Marriott Austin hotel that featured presentations by Rude as well as Greg Hallman, a senior lecturer in real estate finance at The University of Texas at Austin, and Colleen Sharp, vice president and associate head of insights integration at Kantar Futures.
Homebuyers are more confident.
Some key indicators that impact the housing market are up, Hallman said. The Texas economy has surpassed U.S. growth, and nationally, consumer confidence has risen back to levels it was at in 2007.
Home starts have increased, and about 23,000 new housing units were added to the Austin area in 2016, Rude said.
Prices are still on the rise.
Median single-family home prices have continued to increase in the Austin area in the past few years.[/caption]Median single-family home prices and resale market prices have continued to rise, Rude said. The Austin area has seen growth in terms of new housing options being built in the high-end suburban market as well as in the entry-level market for homes costing less than $300,000, though the latter is more difficult to develop closer to the city, Rude said.
The area's supply of active home listings on the market for previously owned homes has been less than four months for the past 52 months, Rude said. The Southwest Austin area and suburban cities, such as Round Rock, Leander, Cedar Park and Georgetown, are areas for potential growth, according to Rude's presentation.
Rude expects home starts to increase in 2017 to between 14,000-14,500 for the Austin area, an increase of between 5 and 8 percent compared with 2016.
The ‘individualism’ trend is growing.
Consumer trends to watch in 2017 include technology, demographic shifts and declining ownership of items such as cars, according to Sharp, who shared her analysis of changes in consumer needs and how to leverage those needs with product offerings.
The rising popularity of companies such as Uber, Airbnb and Instacart have consumers taking control through technology, and homebuilders should be aware of those changes, Sharp said. As an example, she said homebuilders might look to develop homes with one-car garages to cater to customers who are increasingly using ride-hailing companies instead of owning their own cars.
“Consumer expectations have changed,” she said.
Demographic shifts and changing views about gender and ethnicity are also affecting consumer habits, she said, explaining Kantar Futures calls today’s society “polycultural,” blending several backgrounds and focusing on open-mindedness and individuals rather than cookie-cutter groups.
Single women are the largest group of homeowners after married couples and are more likely to pay more for their mortgage and default less than single men, Sharp said, advising homebuilders and real estate professionals should look to open up the market to respond to that demand. Sharp said marketers should look to create commonality to reach consumers and referenced Dove’s “Real Beauty” ads as an example of a strong campaign.
The job market has outpaced national growth.
Employment growth in Texas is higher than in the rest of the U.S., Hallman said.
Texas has seen a 25 percent increase in employment since 2006 compared with New York, which has experienced more than 10 percent growth over the same period. Austin has seen an average increase of approximately 40,000 jobs annually since 2006 and has an unemployment rate of 3.5 percent, according to Hallman's data.
Some people have expressed concern over recent slowing job growth, which some say is impacted by low unemployment rates in Austin, Rude said. But another leading indicator of what is happening in the job sector is what is happening in the commercial real estate market and in office space in particular, he said.
In Austin there is less office space available now for companies to expand. Growth in the professional sector influences growth in the service industries, with most workers renting, he said. In terms of apartments, about 10,000 more units were added to the Austin area in 2016, and Rude expects to see the addition of about 10,000 more in 2017. Rent increased by about 6 percent during the past 12 months, and rent increased 14 percent during the past 24 months, he said. A slowdown in acceleration of rents is possible during the next few years, Rude said, noting rising rents will encourage more renters to look into homebuying instead.
