Tandy On Real Estate

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Spring Buying Season Is Here

Spring is here. Finally, after a long, cloudy and wet winter we have had a couple sunny days, the bluebonnets are starting to boom, allergies are on high alert, and the Spring buying season is starting. To help you prepare, here is a snapshot of the housing market forecast.

Freddie Mac recently reported, “Mortgage interest rates have been steadily declining since the start of 2019. These lower mortgage interest rates combined with a strong labor market should attract prospective homebuyers this spring and could help the housing sector regain its momentum later in the year.” This is great news as we approach our typical Homebuying Season.

Mortgage interest rates continue to decline

According to Primary Mortgage Market Weekly Survey mortgage rates have steadily declined after reaching a high of 4.94 percent in November of 2018. As of late-March, the 30-year fixed mortgage rate was 4.28 percent, its lowest level since February 2018.

Home sales to slowly regain momentum

Existing home sales nationally fell by 7 percent, to 5.32 million homes, in November compared with November 2017, according to the National Assoc­iation of Realtors. Lawrence Yun, chief economist for the National Association of Realtors, expects sales to be flat in 2019. This spring will be the best measure of whether the housing market is returning from very tight to normal, Yun says.

Freddie Mac reports, “existing home sales slumped to start the year, likely in part due to exceptionally cold weather in January and the temporary effects of the government shutdown. With mortgage rates down significantly from last fall, we expect to see existing home sales bounce back and trend higher for the rest of the year. However, our forecast indicates that total home sales (new and existing) will remain down at 5.94 million in 2019 since home sales are starting the year at such a slow rate, before increasing to 6.14 million in 2020.”

However, home sales for the Austin MSA increased 1.5 percent for 2018 vs 2017. Median home price increased 3.7 percent to $305,900. 

Housing starts
Freddie Mac reports, “Housing starts averaged 1.25 million in 2018. Due to the recent increases in building permits, we anticipate that total housing starts will gradually increase over the next two years with most of the growth coming from single-family housing starts. We forecast that total housing starts will increase to 1.27 million units in 2019 and to 1.33 million units in 2020.”

According to Moody’s Analytics, “homebuilders have been underbuilding for more than a decade. Builders have been hindered by labor shortages, community opposition to high-density projects and growing costs of land, labor and materials. Plus, they’ve been building at the mid-to-high end of the market, not at the entry level. But it’s not all bad news. Builders are offering in­centives to buyers, and they’re slowly starting to build smaller, lower-price homes that are more affordable.”

Locally, Austin single family building permits increased 4.6 percent in 2018 over the previous year. 

Home equity

CoreLogic Homeowner Equity Insights 4th Quarter Report continues to see a rise in home equity. “U.S. homeowners with mortgages (roughly 63 percent of all properties*) have seen their equity increase by a total of nearly $678.4 billion since the fourth quarter 2017, an increase of 8.1 percent, year over year.”

A look at home prices

Home prices started to soften in mid-2018. Kiplinger’s Personal Finance recently reported, “Prices will continue rising, but more slowly, as the housing market regains some balance between buyers and sellers.”

Freddie Mac similarly reports, “After accelerating in recent years, home price growth in the United States has continued to moderate. In line with recent trends, we have lowered our home price growth forecasts to annual increases of 3.5 percent and 2.5 percent in 2019 and 2020, respectively.”

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SOURCES:

Freddie Mac – http://www.freddiemac.com/research/forecast/20190322_economic_growth.page?

Freddie Mac – http://www.freddiemac.com/pmms/

National Association of Realtors – https://www.nar.realtor/

Real Estate Center Texas A&M University – https://www.recenter.tamu.edu/data/housing-activity/#!/activity/MSA/Austin-Round_Rock

Moody’s Analytics – https://www.moodysanalytics.com/

Real Estate Center Texas A&M University – https://www.recenter.tamu.edu/data/building-permits/#!/msa/Austin-Round_Rock%2C_TX 

CoreLogic – https://www.corelogic.com/insights-download/homeowner-equity-report.aspx

Homeownership mortgage source: 2016 American Community Survey – https://www.census.gov/acs/www/data/data-tables-and-tools/data-profiles/2016/

MReport – https://themreport.com/daily-dose/03-25-2019/important-drivers-home-sales

Kiplinger – https://www.kiplinger.com/article/real-estate/T010-C000-S002-where-home-prices-are-headed-2019.html

Austin No. 1 City Gaining Company Migrations from California

Austin continues to grow from California residents and business relocations. A recent study by Joseph Vranich of Spectrum Location Solutions revealed more than 13,000 companies have left California for friendlier locations, with Austin being the No. 1 city to gain the California migrations. The study also ranked Texas as No. 1 in the Top 10 states gaining the most from California business relocations, a distinction Texas has held for the past decade.

“During the study period, $76.7 billion in capital funds were diverted out of California along with 275,000 jobs – and companies acquired at least 133 million sq. ft. elsewhere – all of which are greatly understated because such information often went unreported,” according to the study.

The Austin Business Journal summarized that “Departures are understandable when year after year CEOs nationwide surveyed by Chief Executive Magazine have declared California the worst state in which to do business,” said Vranich, a corporate relocation expert who jokes that he loves California’s weather, but not its business climate. Until recently, Spectrum and Vranich were based in Irvine, Calif. Texas, on the other hand, consistently ranks as one of the best states to do business in.”

The top 10 states starting in the order of those that gained the most from California business relocations were:

  1. Texas, which has held the first-place distinction for at least a decade
  2. Nevada
  3. Arizona
  4. Colorado
  5. Oregon
  6. Washington
  7. North Carolina
  8. Florida
  9. Georgia
  10. Virginia

The top 10 cities gaining company migrations from California were:

  1. Austin
  2. Reno, Nev.
  3. Las Vegas
  4. Phoenix
  5. Seattle
  6. Dallas
  7. Portland, Ore.
  8. Denver
  9. San Antonio
  10. Scottsdale, Ariz.


The report’s ranking is based only on cities, not metro areas. Fort Worth, Houston, Pittsburgh, Atlanta, Indianapolis and Nashville also ranked among the top twenty.

Vranich further details the Texas metro market migrations in the Austin Relocation Guide. Metropolitan areas benefiting from California divestment events show Austin-Round Rock-San Marcos in the top spot, followed by No. 2 Dallas-Fort Worth-Arlington, and No. 10 San Antonio, which was tied with Salt Lake City. Of the Top 15 destination metropolitan communities benefiting from out-of-California Austin tops the list, followed by No. 6 Dallas, No. 8 San Antonio, No. 11 Houston, No. 13 Irving and Plano (tied) and No. 14 Fort Worth.”

The new 2018 Migration Trends study by residential real estate brokerage site Redfin shows California is the top source of people from other metro areas shopping for homes in Austin. KVUE reported that in the Austin area, the biggest generator of inflow (more people seeking to move to area than leave it) was from San Francisco, unsurprising considering both cities are hubs for the technology sector. In Dallas, the L.A. area produced the most potential newcomers.

With the California migrations, it begs the question, how is Austin doing today?

The Austin Chamber of Commerce recently reported:

  • Austin added 36,800 net new jobs, growth of 3.5%, in the 12 months ending in December, making Austin the fourth fastest growing major metro.
  • In Austin, the industry adding the most jobs and growing the fastest is wholesale trade which grew by 6,900 jobs or 12.8% over the last 12 months. Also growing at faster-than-average rates are construction and natural resources (8.1% or 5,000 jobs) and other services (4.4% or 2,000 jobs).
  • Austin’s seasonally adjusted unemployment rate is 2.9%, up from 2.8% in November. Unemployment has been at or below 3.0% for the last 16 months.
  • For new home construction Austin ranked number 1 in the nation in per capita building permits through midyear 2018 with a projected increase over 2017.
  • Home prices are rising with a median home price increase of approx. 4% in 2018.
  • Incomes are rising with total personal income in the Austin metro growing by 6.4% in 2017, the 5th fastest growth rate among major metros.

We continue to see growth in Austin, and we welcome California transplants to make Austin their home.

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Resources:

Austin Business Journal – https://www.bizjournals.com/austin/news/2018/12/13/1-800-companies-left-california-in-a-year-with.html 

The Kumar Law Firm – https://thekumarlawfirm.com/lawyer/2018/12/31/Business-Law/California-Businesses-Flock-to-Texas_bl36525.htm

KVUE – https://www.kvue.com/article/news/local/california-homebuyers-continue-coasting-into-austins-real-estate-market/269-608008889 

PRWeb – https://www.prweb.com/releases/record_number_of_companies_departing_california_study_urges_more_to_leave/prweb15977005.htm

Redfin – https://www.redfin.com/blog/2018/10/q3-2018-migration-report.html

Culture Map – http://austin.culturemap.com/news/real-estate/10-25-18-homebuyer-interest-in-austin-california-san-franscisco-redfin/

Austin Chamber of Commerce – https://www.austinchamber.com/blog/01-22-2019-job-growth-unemployment

Austin Chamber of Commerce – https://www.austinchamber.com/economic-development/business-climate/economic-perspective

Austin Relocation Guide – http://www.austinrelocationguide.com/Austin-Wins-Big-as-Companies-Leave-California/

Buyer traffic on the rise

Each month the National Association of REALTORS® surveys 50,000 real estate practitioners on their expectations for home sales, prices and market conditions to create the REALTORS® Confidence Index. On April 21st, the new REALTOR® Confidence Index was released. The index reflects strong buyer traffic and tight supplies as we enter the peak housing market, and that REALTORS® are optimistic about the next six months. 88% of respondents reported higher prices than a year ago this due to the strong buyer traffic and reduced home inventory levels. Given this demand, REALTORS® believe home prices will continue to climb.

Lawrence Yun, Senior Vice President and Chief Economist highlighted the Confidence Index’s findings as follows:

  • First-time homebuyers accounted for 32 percent of sales.
  • Amid sustained job creation, the share of first-time homebuyers has been on a modest rise, up from 29 percent in 2014.
  • With fewer new foreclosures, distressed properties accounted for six percent of sales, purchases for investment purposes made up 15 percent of sales, and cash sales accounted for 23 percent of sales.
  • Amid tight supply, half of properties that sold in March 2017 were on the market for 34 days or less compared to 47 days in March 2016.
  • Lack of homes for sale was the main issue reported by REALTORS®.

Click here to download the full report.

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SOURCES:
https://www.nar.realtor/news-releases/2017/04/pending-home-sale-dip-08-in-march
https://www.nar.realtor/topics/pending-home-sales
https://www.nar.realtor/reports/realtors-confidence-index

 

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