Last week, Angelos Angelou (Angelou Economics) presented his recap of how Texas and Austin fared in 2015, and his outlook for 2016 and 2017. As always, it was an excellent and insightful review. There was far too much information to include here, but there are a few points related to Austin’s housing market that I do want to mention.
First, it shouldn’t surprise local readers that both Texas and Austin had a good year in 2015:
In almost every measure, Austin outpaced Texas in a positive way. We should celebrate that, but we also know that growth brings challenges. Traffic is one consequence in Austin, but Angelou pointed out that average commute time here remains lower than other tech centers around the U.S. The local cost of living is also impacted by growth and demand:
Texas cost of living compares very favorably among the five most populous states, and the overall cost of living in Austin — likely a surprise to many here — remains below the national average. The notable exception is the cost of housing:
It’s no secret that rents and home prices in Austin have increased in recent years. This is important, and must be addressed through planning and permitting practices. Austinites tend to think that it’s only happening here, though. We can take some comfort in the fact that, on average, rents are competitive with other tech centers, and median home prices have increased at nearly the same pace as median household income. The table at the bottom right of the chart above points out the ongoing issue to be dealt with — less than 3 months of residential inventory for sale, compared to 6 to 6 1/2 months’ supply that most analysts consider “balanced.”
That table also offers what looks like encouragement in the large growth in building permits, but historical context is important:
In absolute numbers, local builders started about 25% fewer homes in 2015 than they did at the peak in 2005 and 2006. At the same time, though, population has increased dramatically, so notice that the “starts per 1,000 residents” in 2014 was about half of the peak rate and still far below the long-term average. Population growth continued through 2015 and housing starts totaled about 12,000 again, so when the final data is in we will find that we lost ground again on this measure.
Work is underway to rewrite Austin’s land development code. Achieving two large objectives in that project will contribute to progress on housing affordability here: (a) allowing for more types of housing all over town, and (b) accelerating the permitting process so that construction can get underway in weeks instead of months (0r longer). Many developers are working under the existing code to address affordability through reducing unit size and increasing density, but the necessary workarounds themselves cost time and money. In the meantime, and for the foreseeable future, the most affordable housing options will be on the periphery of the Austin metro area, adding to traffic congestion and commuting time and expense. More on this in future posts ….
So … what were Angelou’s conclusions for Austin’s future? He’s optimistic:
I agree. What a great city we live in, and what opportunities we have to build on.