Economic Outlook and Market Update/Prediction
The central Texas market is among the strongest in the country. There are a multitude of reasons why that is.
1. 1. Exponential growth of the tech industry as numerous companies relocate from out of state.
2. 2. Influx of higher paying jobs means people are spending more on homes.
There is no housing “bubble” in Texas. Several reasons for that:
1. 1. Numerous new job growth
2. 2. Higher paying jobs
3. 3. Buyers are more qualified than before
4. 4. Buyers are bringing more money to the table at closing
5. 5. Shortage of housing has created such a low inventory that prices have risen to accommodate (simple supply and demand economics at play)
The rental market is robust.
1. 1. Rental prices are increasing due to higher property tax values and higher insurance rates
2. 2. Low inventory also creates a higher price point
3. 3. Multiple applicants who are highly qualified that were unable to buy due to a home shortage or building new construction.
4. 4. Vacancy rates are around 5% in Austin. This is a record low.
Texas population exploded over the past 10 years. There are multiple reasons why.
During the pandemic and lockdowns, personal savings increased dramatically. As a reference, people on average saved $3 trillion prior to Covid. Now, they are saving $9 trillion.
Many people believe that the US Govt controls the price of oil and gas across the US. That is not the case. OPEC controls oil prices. The cause of rising gas prices currently is due to the much lower demand. When the economy was shut down, no one was driving. That is starting to shift a bit, but fuel usage is still quite low compared to pre-Covid.
Interest rates are projected to stay low through 2022. There may be a slight increase beginning in the fourth quarter of 2022 leading into 2023, but that remains to be seen.
So, after forbearance expired, many experts predicted an increase in foreclosures. That is not likely to happen in Texas. The main reason why is Texas has a shortage of inventory across the entire state. Low inventory means that a seller can sell their house much quicker, thus avoiding foreclosure.
Houston, Dallas and Austin are three of the top five cities in the US for new construction. Houston leads the way, Dallas is second and Austin the fourth. However, Austin shows the highest number of new construction permits of any city in the US. Until housing catches up with demand, our market will stay stable and robust. 3-5 years is the projected timeline.
Commercial real estate has also seen some dramatic changes. During the lockdowns, office space was vacated throughout the country. In Austin, once the lockdowns were lifted, many people returned to the office setting. However, there is currently approximately a 20% vacancy rate for office space. This shows signs of improving. Commercial rent rates are also increasing at the same pace as residential (20-40%) in the Austin area.
The hospitality industry is still suffering and trying to recoup losses from the economic shutdown. This may take some time to recover. There is really no timeline due to the variants of Covid. Every time a new variant hits the media, fear sets in and people stop traveling.
Job loss across the country shows to be the lower paying, entry level positions. Upper-level jobs are stable and have remained that way. It will take some time for the lower paying jobs to recover, but that is already happening. This is evident by the number of businesses that are hiring at all levels.
So, with all this economic data, NOW IS THE TIME TO BUY! For people sitting on the fence waiting for property values to decrease or waiting for the alleged “bubble to burst”, stop waiting. There is no bubble!
Welcome to the Chappell Real Estate Show! We’re Daniel & Roger Chappell, licensed Realtors® in the Central Texas area. This show is all about bringing the latest Real Estate information so that you can buy, sell, and invest with the best! Our personal experience with Real Estate investing, as well as in the business assisting buyers, sellers, and investors gives us a unique perspective on generating wealth through real estate. The Chappell Realty Group team is dedicated to enhancing the lives of the people we serve by cultivating meaningful relationships and providing exceptional client care, while guiding them through their real estate journeys. We are your REALTORS® for life!
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