I found an interesting report yesterday on an important aspect of the national housing market:
US housing starts fell in April but permits surged
I have not seen final April data for the Austin area yet, but I took this article as a prompt to write an update on new housing construction activity here. I will provide another update when April data is available.
Housing starts data is a reflection of permits issued earlier, so let’s begin there. As always, historical perspective is important so I charted activity since 2005 in order to include the entire market cycle just past:
Note that this shows construction of single family homes only. Here is a more complete look at the same time period, this time showing new permits issued for all residential property types:
You can see that the general contour of single family permitting activity generally matched the housing starts curve. Relative to 2005 and 2006, the number of single family permits issued over the past couple of years was modest. Pay attention to scale, though: there were 33% more permits issued in 2012 than in 2011.
The big story in that chart, however, is approved plans to build apartments and condominiums — almost 3X from 2011 to 2012! Single family construction will be constrained for a while yet by limited availability of land, but the 5+ Family permitting activity is a huge sign of confidence in continued growth and demand in the Austin metropolitan area.
Simply to add another layer of detail for interested readers, this chart shows new permits issued by month since January 2012:
The lack of investor interest in duplexes and fourplexes is especially noticeable in this chart. 2 – 4 Family permits represented less than 1% of total permits over this 15-month period. New construction of these property types has generally been rare since the mid-1980s, but the number of these permits was about 2.7% of all permits over the 2005 to 2012 period. Virtually all the money in planned residential construction is going to single family properties and to apartments and condos. Take a drive around town over the weekend, and you can see that trend easily.
Bill Morris on Austin Real Estate 
Great points and charts. The biggest point is that for every two jobs you need a minimum of 1 housing start historically. Austin has not kept up with this historical point for at least the last 5 years.
Based on that need and the projected job growth over the next 3 to 5 years, Austin will 23,0000 to 25,000 ‘shelter units per year for those projected years.
Currently home starts will reach maybe 9,000 starts this year, and it will be a challenge to do that the following year or 2015 with the land and lot challenge. You don’t have enough listings. Other than a few challenged submarkets, the market should remain strong for that 3 to 5 years.
Thoughts?
MS
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Posted by Mark Sprague | May 19, 2013, 1:53 PMMark, thank you for your insight. I agree that the market will remain strong for the next few years, but I hope that it doesn’t stay so completely supply-constrained. That seems inevitable for the rest of 2013. Perhaps a little relief in 2014? Given our underlying vitality, I’m not especially concerned about a bubble, but in my opinion this kind of supply vs. demand imbalance isn’t healthy, and even exaggerates limitations to the extent that prospective sellers stay out of the market due to “where do I go next?” concerns.
Posted by BillMorrisRealtor | May 23, 2013, 2:24 PM