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2017: The Real Estate Market Ahead

Posted by Sharon Rosshirt on Thursday, February 2nd, 2017 at 1:55pm.

At the start of a new year, we like to give special attention to economic forecasts for the year.  As one of the speakers said if psychics really know the future, then why don’t they win the lottery? By the same logic, if economists were really good at predicting the real estate market, why are they still working? With that caveat, it seems that the overall consensus for the Austin MSA is positive.

Mark Sprague, Director of Information Services for Independence Title, had a major theme of Disruptive Change, and a primarily positive expectation for the health of our local real estate market.  Ted Jones, Chief Economist for Stewart Title, titled his talk ‘Things Change’ and pointed out some of the troubling things he sees in the numbers, like the slowing job growth in the Austin area. Yes, it is still growing, but the rate of growth in jobs is decreasing. One factor in that moderation of job growth appears to be lower inventories of reasonably priced properties.  The Austin Business Journal would also offer that the cause of the slowdown in job growth is the lack of availability of commercial space. Additionally, we must consider the impact of traffic, and the lack of what people from other cities have become accustomed to mass transit.

Perhaps the biggest change to business-as-usual is the decreasing number of ‘Boomers’ compared to the coming of financial and home buying age of 83 million ‘Millennials’. This is a distinct advantage for Austin, as we are ranked third in the nation for growth for the Millennial population.

With the new administration, Ted Jones said many programs that favor homeowners are now at risk, including the deduction for federal taxes of mortgage interest. Such a change has been predicted by the National Association of REALTORS to cause a major slowdown in the real estate market and increase the cost of home ownership for everyone who currently takes this deduction.

Also reported is that Texas job growth no longer leads the nation, and is down in the middle of the pack of the fifty states. Texas is not in the top ten of the best state business climates as measured by the Tax Foundation.

All in all, the real estate news does appear good for Austin and the region. In Mark Sprague’s analysis of where we are in the expansion-recession cycle that markets go through, we are still in the “exuberance” phase, the third phase of five.

Consider that a six month supply of home inventory is considered to be a balanced market that does not favor buyers or sellers.  Currently, across our MLS area, we average a 2.1 month supply of homes for sale, making it a strong sellers’ market, and a long way to go before it becomes a buyers’ market.  Entry level home sales will be strong, and homes under the $500,000 mark will continue strong appreciation and sales. 

It is important to remember that not all areas in our market are equal. Real estate markets are really aggregations of submarkets that behave differently.  In the broad analysis of our area, 2017 looks to be a strong year, perhaps better than last year, for our real estate market.  But as our knowledgeable economists are pointing to, change is going to be a factor this year as we go forward.  If you’d like to drill down to how change and current market conditions will affect your own real estate property or ambitions, please allow us to bring that customized information to you! 

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