Economic Outlook for Central Texas Real Estate - PowerPoint PPT Presentation

Slide1 l.jpg
Download
1 / 69

Economic Outlook for Central Texas Real Estate. Dr. James P. Gaines Research Economist Real Estate Center Texas A&M University jpgaines@tamu.edu. News. Publications. RECON Newsletter. Data. Market Reports. Tierra Grande

Related searches for Economic Outlook for Central Texas Real Estate

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.

Download Presentation

Economic Outlook for Central Texas Real Estate

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Slide1 l.jpg

Economic Outlook for Central Texas Real Estate

Dr. James P. Gaines

Research Economist

Real Estate Center

Texas A&M University

jpgaines@tamu.edu


Slide2 l.jpg

News

Publications

RECON Newsletter

Data

Market Reports

Tierra Grande

is our quarterly magazine with timely research and analysis of the trends and events shaping Texas real estate today. Experts on appraisal, housing , finance, law, demography, economics, investment and other areas share insights unavailable anywhere else.

Building permitsEmploymentHome SalesHousing AffordabilityPopulationRural Land

You'll be an insider – if you subscribe to our electronic newsletter RECON. RECON is an acronym for Real Estate Center Online News. It's a twice-weekly briefing on Texas real estate news. Currently more than 20,000 subscribers worldwide are signed on. Best of all, RECON is free.

Planning to invest in Texas real estate? Are you looking for local real estate market information for Texas cities? Click here for extensive data for every metro area in the Lone Star state. Our reports include employment trends, population, residential, multi-family, office, industrial and retail information.

RECONNews ReleasesEvents CalendarVideosTRECI Index

Events Calendar

Happy New Year! The staff of the Real Estate Center wish you and yours a happy and prosperous new year! This year marks the 35th anniversary of the Real Estate Center. In 1971, Gov. Preston Smith signed legislation creating the Texas Real Estate Research Center and placed it at Texas A&M University.

Instructor Training Courses, May 18-19, College Station, Texas. The Legal Update and Ethics instructor training courses include credit for the required 3-hour Legal Update course and the required 3-hour Ethics course. In addition, each instructor training course will include a brief orientation to the teacher’s manuals for each course as well as a discussion of training issues.

REAL ESTATE CENTER

at TEXAS A&M UNIVERSITY

Mays School of Business

http://recenter.tamu.edu


Slide3 l.jpg

We’ve Spent a Lot of Time Around the Ole Water Cooler


Summary of the great recession l.jpg

Summary of the “Great Recession”

  • A 0% funds rate, $1.4 trillion annual deficit and a $2.2 trillion Fed balance sheet

  • Approximately $3.5 Trillion in total government stimulus

  • Nearly one-third of homeowners have negative equity

  • 1 in 6 are either unemployed or underemployed.

  • 1 in 7 homeowners either delinquent or in the foreclosure process

  • Small business failures are up 44% y/y

  • 20% - 30% slide in home prices

  • 50% plunge in commercial real estate values


Percent growth in real gdp since 2000 seasonally adjusted annual rate l.jpg

Percent Growth in Real GDP Since 2000 Seasonally Adjusted Annual Rate

An uninspired 2.7% increase during first half of 2010

Source: Bureau of Economic Analysis


Personal consumption expenditures l.jpg

Personal consumption represents about 70% of US economy and is showing signs of recovery

Personal Consumption Expenditures

Source: Department of Commerce, SAAR


Consumer confidence index l.jpg

Consumer Confidence Index

7 cycles since 1967:

Avg. during recession = 72

Avg. at end of recession = 71.5;

Avg. during an expansion = 102

Source: The Conference Board (1985=100)


Annual employment growth rates for us and texas l.jpg

Annual Employment Growth Rates for US and Texas

Texas

US

Source: BLS


Annual employment growth rates for us texas and austin msa l.jpg

Annual Employment Growth Rates for US, Texas and Austin MSA

Austin

Texas

US

Source: BLS, TWC, Real Estate Center at Texas A&M University


Measures of un and underemployment l.jpg

Measures of Un- and Underemployment

Percent SA

U-6, the broadest measure

Headline Rate

Source: BLS


Measures of un and underemployment11 l.jpg

Measures of Un- and Underemployment

Percent SA

U-6, the broadest measure

Headline Rate

Austin

Source: BLS


Unemployment rate by level of education june 2010 l.jpg

Unemployment Rate by Level of EducationJune 2010

Source: BLS , 25-years old +; Seasonally adjusted rates


Small business outlook planning to hire people in the next six months l.jpg

Small Business Outlook“Planning To Hire People In The Next Six Months”

Source: National Federation of Independent Business


Are there secular changes going on given economy credit collapse and household net worth implosion l.jpg

Are There Secular Changes Going On Given Economy, Credit Collapse and Household Net Worth Implosion?

  • Debt & Savings

  • Discretionary spending patterns

  • Homeownership

  • Financial System & Banks


Slide15 l.jpg

A Thought from Maxine

"BAIL EM OUT! ????”

Wow, back in 1990, the Government seized the Mustang Ranch brothel in Nevada for tax evasion and, as required by law, tried to run it.

They failed, and it closed.

Now we are trusting the auto industry, the banking system and healthcare to the same nit-wits who couldn't make money running a whore house and selling whiskey!


Looking ahead to 2010 2011 l.jpg

Looking Ahead to 2010 & 2011


Slide17 l.jpg

Our Last Economic and Housing Forecasting Staff Meeting


Major hurdles for 2010 2011 l.jpg

Major Hurdles for 2010 & 2011

  • State, local and school districts’ falling revenues

  • Credit contraction continues – business, consumer credit, mortgages

  • Jobs, income and spending

  • Pending changes in laws, regulations and taxes – capital gains tax; cap and trade; financial institutions & banking regs – UNCERTAINTY!

  • “Extend & Pretend” in banking system

  • “Foreclosure-gate”

  • Psychological malaise


Texas scenarios for 2010 2011 l.jpg

Texas Scenarios for 2010-2011

  • Texas lagged into recession may be leading out

  • Expect job losses to stop and new jobs to start being created, 1.5% maybe 2% job growth in 2010

  • Natural gas prices and activity just as important as oil prices

  • Flat housing sales and prices until economy truly recovers

  • Small and regional bank problems to work out

  • State, local and school districts financial problems just really starting

  • In-migration should reinvigorate economic growth and housing markets


Texas index of leading indicators l.jpg

Texas Index of Leading Indicators

(1987=100)

Source: Federal Reserve Bank of Dallas


Texas retail sales monthly seasonally adjusted billions of dollars l.jpg

Texas Retail Sales MonthlySEASONALLY ADJUSTED , BILLIONS OF DOLLARS

Source: Federal Reserve Bank of Dallas


The housing market l.jpg

The Housing Market


Current housing trends l.jpg

Current Housing Trends

  • Tax credit & direct subsidies over

  • Household creation very slow; generational housing preferences changing

  • Purchase mortgages much more difficult to obtain – tight underwriting

  • Renting a more viable option

  • Appraisals are major issue in purchases

  • Jumbo home loans and ADC loans difficult

  • Housing deflationary expectations


Lost wealth households equity in real estate l.jpg

Lost Wealth: Households’ Equity in Real Estate

$6.2 trillion or 47% in lost real estate equity

RE Equity about where it was in 1999-2000

Source: Federal Reserve, Flow of Funds, B-100


Total hh home mortgage borrowing l.jpg

Total HH Home Mortgage Borrowing

$0.5 trillion between 1972 and 1979;

$1.5 trillion between 1980 and 1989;

$2.1 trillion between 1990 and 1999;

$6.1 trillion between 2000 and 2007

Source: Federal Reserve, Flow of Funds, D-2


First time home buyers percent of total home buyers l.jpg

First-Time Home Buyers (Percent of Total Home Buyers)

Top Four Reasons for First-Time Buyers:

Desire to Own (62%)

Current Affordability (10%)

Change in Family Situation (8%)

Tax Credit (6%)

Source: NAR, 2009 Profile of Home Buyers and Sellers


Slide27 l.jpg

US Mortgage Delinquency Rates

US mortgage delinquency rate set all time high in 4Q2009

Subprime Mortgages

All Mortgages

Prime Mortgages

Source: Mortgage Bankers Association, National Delinquency Survey


Monthly foreclosure filings l.jpg

Monthly Foreclosure Filings

Texas foreclosures have been far more stable than US

Source: RealtyTrac, Inc.

Data include Notices of Trustee Sales plus Notices of Foreclosure Sale


Slide29 l.jpg

New and Existing SF Home Sales U.S.

(000s)

Existing SF sales are down 21% from 2005 peak

1980-1989 3.55 million per year

1990-1999 4.7 million per year

2000-2006 7.15 million per year

2007-1H2010 4.3 million per year

New SF sales are down 78% from 2005 peak

Sources: US Census Bureau , NAR, NAHB, NBER


Distressed home sales l.jpg

Distressed Home Sales

Total Distressed Sales

Foreclosures

Short Sales

Source: NAR


Number of housing units vacant and held off market l.jpg

Number of Housing Units Vacant and Held Off Market

Total inventory of vacant units may be closer to 9 million, including condos, foreclosures and other properties effectively vacant

Source: US Census Bureau


Annual u s median existing home price percent change l.jpg

Annual U.S. Median Existing Home Price Percent Change

Since 2005, median price of a SF home is down 23.5%

Source: NAR


Slide33 l.jpg

US Median Home Prices Since 1990

National House Price Bubble

12-Month Moving Average Since 2001

1990-2000 Trend

Source: NAR, Real Estate Center at Texas A&M University


National housing affordability index l.jpg

National Housing Affordability Index

Average 1994-2003 = 132.4

Drop of 31.5% from April 2003 to July 2006

Source: NAR Composite Index


Us total housing starts total units 12 month moving average l.jpg

US Total Housing StartsTotalUnits & 12-Month Moving Average

Monthly Units

12-Month

Moving Avg.

Source: US Census Bureau, Real Estate Center at Texas A&M


Has the housing market bottomed l.jpg

Has the Housing Market Bottomed?

Answer: maybe, hopefully, probably. But we still may not really know for sure for another several months.

  • Can the market sustain itself without massive Federal government help

  •  Foreclosures will stay high. A large number of Option-ARM and prime ARM mortgages reset starting this quarter and going through all next year and into 2011.

  • The health of the housing market, nationally and locally, depends on a general economic recovery - especially stopping the loss of jobs and preferably adding new jobs.

  • The housing market may have bottomed out, but will probably have a long, slow recovery – think 5 to 10 years, not just one or two.


Number of years to clear available inventory l.jpg

Number of Years to Clear Available Inventory

When and How Does the Housing Market Go Back to “Normal”?

* 2009 annual sales level

Somewhere between mid-2012 and 2014


Texas austin housing markets l.jpg

Texas & Austin Housing Markets


Texas single family market l.jpg

Texas Single- Family Market

Source: Real Estate Center at Texas A&M University; NTREIS

* 12-month moving average to date; # 3Q2009 vs. 3Q2010


Texas single family market 3q2010 l.jpg

Texas Single-Family Market3Q2010

Source: Real Estate Center at Texas A&M University


Slide41 l.jpg

Annual Texas Home Sales

2009 = sales down 8% from 2008 levels

2010 should be relatively flat about equal to 2001-2003 levels

Source: Real Estate Center at Texas A&M University


Texas home sales 12 month moving average l.jpg

Texas Home Sales 12-Month Moving Average

Source: Real Estate Center at Texas A&M University


Texas months inventory of homes for sale and fhfa appreciation rate l.jpg

Texas Months Inventory of Homes For Sale and FHFA Appreciation Rate

Months Inventory

Appreciation Rate

Average Annual Appreciation = 3.9%

FHFA Appreciation Rate

Source: FHFA, Real Estate Center at Texas A&M University


Texas median home prices l.jpg

Texas Median Home Prices

Essentially flat in 2008 & 2009

2010 should hold steady

Source: Real Estate Center at Texas A&M University


Texas median home price 12 month moving average l.jpg

Texas Median Home Price12-Month Moving Average

Current prices are about 8% below trend

Source: Real Estate Center at Texas A&M University


Texas sf building permits l.jpg

Texas SF Building Permits

1984 82% of 1983 peak

1985 66% of peak

1986 57% of peak

1987 43% of peak

1988 35% of peak

2006 98% of 2005 peak

2007 72% of peak

2008 49% of peak

2009 41% of peak

2010p 42% of peak

Source: US Census Bureau, Real Estate Center at Texas A&M


Texas monthly sf permits 12 month moving average l.jpg

Texas Monthly SF Permits12-Month Moving Average

2003 Trend Line

Source: US Census Bureau, Real Estate Center at Texas A&M


Austin single family market l.jpg

Austin Single- Family Market

Source: Real Estate Center at Texas A&M University; NTREIS

* 12-month moving average to date ; # 3Q2009 vs. 3Q2010


Austin single family market 3q2010 l.jpg

Austin Single-Family Market3Q2010

Source: Real Estate Center at Texas A&M University


Austin annual home sales l.jpg

Austin Annual Home Sales

2009 down 7%

2010 Flat ~ 2003-2004 levels

Source: Real Estate Center at Texas A&M University


Austin monthly home sales 12 month moving average l.jpg

Austin Monthly Home Sales12-Month Moving Average

Current monthly sales are about equal to 2004 levels

Source: Real Estate Center at Texas A&M University


Austin median home prices l.jpg

Austin Median Home Prices

2010 up about 2%

Source: Real Estate Center at Texas A&M University


Austin median home prices 12 month moving average l.jpg

Austin Median Home Prices12-Month Moving Average

Median home prices have nearly regained the peak in October 2008

Source: Real Estate Center at Texas A&M University


Austin months inventory of homes for sale and fhfa appreciation rate l.jpg

Austin Months Inventory of Homes For Sale and FHFA Appreciation Rate

Months Inventory

Appreciation Rate

FHFA Appreciation Rate

Average Annual Appreciation = 5.2%

Source: FHFA, Real Estate Center at Texas A&M University


Price distribution of austin mls homes sold 2000 vs 2010e l.jpg

Price Distribution of Austin MLS Homes Sold: 2000 vs. 2010e

Median Price

2000$ 144,500

2005$ 161,300

2010$ 189,900

00 Median

05 Median

‘10 Median

Source: Real Estate Center at Texas A&M University


Austin sf building permits l.jpg

Austin SF Building Permits

1985 63% of 1984 peak

1986 59% of 1984 peak

1987 27% of 1984 peak

1988 24% of 1984 peak

1989 22% of 1984 peak

2007 69% of 2006 peak

2008 44% of 2006 peak

2009 38% of 2006 peak

2010p 33% of 2006 peak

Source: U. S. Census Bureau, Real Estate Center


Austin sf building permits 12 month moving average l.jpg

Austin SF Building Permits12-Month Moving Average


Austin multi family building permits l.jpg

Austin Multi-Family Building Permits

574 units permitted so far in 2010.

Source: US Census Bureau, Real Estate Center at Texas A&M University


Texas poised for a 21st century boom l.jpg

Texas – Poised for a 21st Century Boom

  • Population and Economic growth

  • Low cost, available labor

  • Pro Growth Attitude

  • Migration into State from elsewhere

  • Attractive Retirement Area

  • Pressure on infrastructure, government services, public finance

  • Most affordable state for land, housing and overall cost of living


2000 2009 states with population increases 1 million l.jpg

2000 – 2009 States with Population Increases > 1 million

Source: U.S. Census Bureau

Table 4: Cumulative Estimates of the Components of Resident Population Change for the United States, Regions, States, and Puerto Rico: April 1, 2000 to July 1, 2009


Top growth msas 2000 2009 l.jpg

Top Growth MSAs 2000-2009

Since 2000, DFW added more than 1.28 million people; Houston added more than 1.15 million people; Austin added more than 455,000; and San Antonio added more than 360,000

Source: U.S. Census Bureau


Population growth 1999 2009 l.jpg

Population Growth 1999-2009

Texas

U.S.

Austin

Source: U.S. Census Bureau


Texas urban triangle l.jpg

Texas Urban Triangle

58,410 square miles

Longest distances:

362 miles N-S

315 miles E-W

By 2040, 33.7 million people will live in the four principal metro areas in the triangle, a 120% increase

In 2007, 15.3 million people, about 90% of the total population in the area, lived in the four principal metro areas in the triangle


Slide64 l.jpg

Projected Texas Population

2000 - 2030

(000s)

At 50% 1990-2000 rate of immigration

At 2000-2007 rate of immigration

At 100% 1990-2000 rate of immigration

Between 9 and 18 million more residents between 2005 and 2030

Source: U.S. Census Bureau, Texas State Demographer 2008 Projections


Slide65 l.jpg

Austin MSA PopulationAustin MSA: Bastrop, Caldwell, Hays, Travis & Williamson Counties

At 50% 1990-2000 rate of immigration

At 2000-2007 rate of immigration

At 100% 1990-2000 rate of immigration

On average about 1,450,000 more people or roughly double the 2005 population

Source: US Census Bureau, Texas State Data Center and Demographer


Lake travis today l.jpg

Lake Travis Today


Slide67 l.jpg

Lake Travis in 2050?


Slide68 l.jpg

Texas Age Distribution 2005-2030

Boomers

2005

2010

Boomers

2020

2030

Boomers

Boomers


Slide69 l.jpg

Economic Outlook for Central Texas Real Estate

Dr. James P. Gaines

Research Economist

Real Estate Center

Texas A&M University

jpgaines@tamu.edu


  • Login