[july '10] housing market analysis for austin, texas [by ankit patel]

8/9/2019 [July '10] Housing Market Analysis for Austin, Texas [by Ankit Patel]

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AUSTIN, TEXAS

Housing Market Analysi

By Ankit Patel

July 5, 2010



H o u s i n g M a r k e t A n a l y s i s o f A u s t i n , T X

Community

Known as the Live Music Capital of the World, Austin is a city that strikes a balance between nature,

education, the arts, and commerce. Austin, the capital city of Texas, is the fourth-largest city in Texas

[12] and the 15th largest in the United States [10]. It is fueled by an entrepreneurial attitude that has

resulted in the city's placement at the top of numerous business and cultural lists. Austin is known for its

quality of life, which enables companies to attract and retain the very best talent from around the

world. Its good jobs, easy living, excellent health care facilities, and low crime rate are a few of the

reasons that make Austin an attractive community to live in.

Recent acknowledgements (in 2010) [2]:

Austin is ranked No. 1 on Kiplinger’s list of the Best Cities for the Next Decade

Austin No.2 on Forbes’ list of America’s Most Innovative Cities

Austin in top 10 for Best Quality of Life

Austin ranked among Cleanest Air Cities

Austin is the Best Big City for Jobs

Austin places in Top 10 of RelocateAmerica’s Best Places to Live.

Austin in Top 10 of Forbes’ annual Best Places for Business & Careers.

Austin is the Healthiest Housing Market for 2010

For More, See [2]

Population

The population of Austin is 785,850 (as forecasted by Department of Planning, City of Austin) [6]. Austin

has been tremendously growing in population since the beginning of the decade (20%), with a currentannualized growth rate of 1.53%. (See chart on next page)




Employment

Austin, TX was recently (June 2010) ranked 3rd out of 21 strongest-performing metro areas by CNN due

to limited job cuts and healthy spending [14]. Gross metropolitan product, a broad measure of economic

activity, grew 5.3% in the first quarter of 2010 in Austin.

To better understand the employment structure, the charts below show the breakdown of employment

in Austin by Industry & Occupation (as of 2008) [13]: (See chart on next page)

640,000

660,000

680,000

700,000

720,000

740,000760,000

780,000

800,000

1998 2000 2002 2004 2006 2008 2010 2012

P o p u l a t i o n

Year

Population Growth In Austin, TX




It is not surprising to see government jobs being the biggest industry as University of Texas, one of the

largest universities in the country, is a central part of Austin, TX. During the last two quarters, Austin

welcomed job growth, adding nearly 8,000 new jobs during the period and increasing payrolls by

more than 1% [14].

The unemployment rate of Austin, TX is drastically lower than the national rate. As of May 2010, Austin

area had an unemployment rate of 6.9%, while the US average is 9.5% (Source: Bureau of Labor

Statistics). Also, each month this year, the employment rate has been dropping in Austin, while at a

national level it has been fluctuating (see chart below). This hints that companies are hiring and

embracing job growth.

9.7 9.79.9

9.79.5

7.6

7.37.1

7.06.9

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10

Umemployment Rate: Austin vs. US

US

Austin




Taking a dig deeper, here is a chart that shows the industries that are experiencing the largest job

growth in Texas in the last year:

Sources: Texas Workforce Commission and Real Estate Center at Texas A&M University [1]

Other interesting data [4]:




Housing Market

According to a report by Real Estate Center at Texas A&M University [11], the volume of Austin home

sales in May 2010 was 2,300, up 24 percent from the same month in 2009. The median price of Austinreal estate decreased three percent from May 2009 to $189,300. In May 2010, the days on the market

for single-family homes decreased 20 percent to 63 days as compared to May 2009. In the same time

period, pending sales decreased 34 percent to 1,405; new listings remained unchanged at 3,072. The

following table summarizes the main points:

(Austin, TX) May 2010 Apr 2010 May 2009

May '09 -

May '10

% Chg. 2010 Avg

‘09-'10

% Chg.

AveragePrice $ 239,800.00 $ 230,500.00 $ 247,800.00 -3% $ 234,200.00 0%

Median

Price $ 189,300.00 $ 185,100.00 $ 193,400.00 -2% $ 183,100.00 -1%

# Homes

Sold 2,300 2,206 1,852 24% 8,704 22%

# Homes on

Sale 12,786 12,270 11,535 11% 11,532 4%

In 2010, home sales have increased for five straight months now, from 983 in January to 2300 in May,

representing an increase of 134%! The chart below also shows that Austin is slowly approaching the

2008 home sales levels before the economy went in a recession late 2008. (See chart on next page)




Source: Real Estate Center at Texas A&M University

Price Distribution of Homes Sold in Austin


The chart above compares the distribution of the price of home sales in 1999 with that in 2009. The

general trend to see is that real estate in Austin has grown greatly and was a smart investment vehicle

for people back then and possibly may be again soon because of the city’s growth potential.




Next, let’s look at how affordable the homes are in Austin. One way to measure such affordability is to

look at the Housing Affordability Index (HAI). The Housing Affordability Index is the ratio of median

family income to the income required to qualify for an 80 percent, fixed-rate mortgage to purchase themedian-priced home. In short, the higher the ratio, the more affordable the homes are in the region.

The following is a chart comparing the latest housing affordability index of Austin against the Texas state

and national average.

Housing Affordability Index

3rd Qtr '09 2nd Qtr '09 3rd Qtr '08 2008 2007

Austin 1.89 1.84 1.5 1.56 1.53

Texas1.84 1.85 1.51 1.59 1.45

USA 1.57 1.57 1.27 1.33 1.11


We can see that as of 3rd quarter of 2009, homes in Austin were more affordable because its HAI was

higher than both the average in Texas and nationally.

Other housing characteristics for Austin, TX: (via U.S. Census Bureau, 2006-2008) [5]

Selected Housing Characteristics Estimate Margin of Error Percent Margin of Erro

HOUSING OCCUPANCY

Total housing units 332,246 +/-1,815 - -

Occupied housing units 303,355 +/-2,587 91.30% +/-0.6

Vacant housing units 28,891 +/-1,921 8.70% +/-0.6

Homeowner vacancy rate 2.5 +/-0.5 - -

Rental vacancy rate 7.5 +/-0.7 - -

YEAR STRUCTURE BUILT

Total housing units 332,246 +/-1,815 - -

Built 2005 or later 14,394 +/-980 4.30% +/-0.3

Built 2000 to 2004 41,767 +/-1,623 12.60% +/-0.5

Built 1990 to 1999 51,632 +/-1,803 15.50% +/-0.5

Built 1980 to 1989 73,776 +/-2,263 22.20% +/-0.7

Built 1970 to 1979 72,665 +/-2,163 21.90% +/-0.6

Built 1960 to 1969 34,002 +/-1,567 10.20% +/-0.5




Built 1950 to 1959 22,390 +/-1,274 6.70% +/-0.4

Built 1940 to 1949 11,550 +/-965 3.50% +/-0.3

Built 1939 or earlier 10,070 +/-892 3.00% +/-0.3

HOUSING TENURE

Occupied housing units 303,355 +/-2,587 - -

Owner-occupied 142,233 +/-2,510 46.90% +/-0.8

Renter-occupied 161,122 +/-2,801 53.10% +/-0.8

MORTGAGE STATUS

Owner-occupied units 142,233 +/-2,510 - (X)

Housing units with a mortgage 106,919 +/-2,364 75.20% +/-1.0

Housing units without a mortgage 35,314 +/-1,486 24.80% +/-1.0

Due to space constraints, more statistics with regards to monthly cost for homes (with and without

mortgage) and rent costs can be accessed via source [5].

Foreclosures in Texas are on the rise, as the chart and the graph below show: [9]

(Texas) May-10 6 Months Ago % Chg. from 6mo. Ago

Total Foreclosures Available 54,308 47,816 7.4

Number of Sales 19,821 21,972 -10.2

Median Sale Price $149,945 $148,755 0.8%

Looking at Austin alone, foreclosures were down an incredible 14% in May (950 homes) from April

(1,109 homes). Real estate experts say that comparing foreclosure rates on a month-to-month basis

more accurately reflects the market’s stability. In May, Austin also shaved off 5 points in their ranking

among metro areas with highest foreclosures, dropping from 120 in April to 115 in May. [3]




Conclusion

According to Hanley Wood, a construction industry research and publishing company, Austin ranks as

the #1 U.S. metropolitan area with the healthiest housing markets for 2010 (greatest potential for homeequity growth and real estate investment returns). Austin has one of the lowest unemployment rates in

the nation, is ranked 3rd out of 21 strongest-performing metro areas by CNN due to limited job cuts and

healthy spending [14], and Portfolio.com recently named Austin the most attractive location for young

professionals out of 67 metro areas studied [8]. Hanley Wood’s rankings are based on projections of

new household formations, resale values, job and income growth, and housing and economic data

from Moody’s Economy.com [7]. Considering all these, Austin’s real estate market seems to be in the

buyer’s favor.

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References

[1] Anari, Ali, and Mark G. Dotzour. Monthly Review of the Texas Economy. Texas Real

Estate Center At Texas A&M University, June 2010. Web. 30 June 2010.

<http://recenter.tamu.edu/pdf/1862.pdf>. ($12$)

[2] "Austin in the News." The Greater Austin Chamber of Commerce. July 2010. Web. 01

July 2010. <http://www.austinchamber.com/DoBusiness/MediaCenter/InTheNews.html>.

($11$)

[3] "Austin Foreclosures down 14% from April, up Year over Year." Business News. July

2010. Web. 2 July 2010.

<http://www.bizjournals.com/austin/stories/2010/06/07/daily42.html>. ($19$)

[4] "Austin, Texas Profile." City Data: Stats About All US Cities. 2009. Web. 1 July 2010.

<http://www.city-data.com/city/Austin-Texas.html>. ($16$)

[5] "Austin, Texas." State and County QuickFacts. 2009. Web. 2 July 2010.

<http://quickfacts.census.gov/qfd/states/48/4805000lk.html>. ($17$)

[6] "City of Austin Demographics." City of Austin - Austin City Connection: Home Page.

Apr. 2010. Web. 01 July 2010. <http://www.ci.austin.tx.us/demographics/>. ($2$)

[7] Egan, John. "Austin Ranks as Hottest U.S. Housing Market for 2010." Examiner . 31

Mar. 2010. Web. 1 July 2010. <http://www.examiner.com/x-37614-Austin-Market-

Examiner~y2010m3d31-Austin-ranks-as-hottest-US-housing-market-for-2010>. ($20$)

[8] "For Unemployed Young Adults Looking for Work, The Southwest Offers Best JobMarket." MyBankTracker . 16 Mar. 2010. Web. 1 July 2010.

<http://www.mybanktracker.com/bank-news/2010/03/16/for-unemployed-young-adults-

looking-for-work-the-southwest-offers-best-job-market/>. ($21$)

[9] "Foreclosures For Texas." Yahoo! Real Estate. Web. 1 July 2010.

<http://realestate.yahoo.com/Foreclosures;_ylt=ArfSejk6ABYxLBq7KTJYS6YN47Qs>.

($18$)

[10] "Population Estimates." U.S.Census Bureau. 2009. Web. 01 July 2010.

<http://www.census.gov/popest/cities/SUB-EST2009.html>. ($9$)

[11] "Texas Residential MLS Housing Activity." Real Estate Center at Texas A&M

University. 2010. Web. 29 June 2010. <http://recenter.tamu.edu/data/datahs.html>.

($15$)




[12] "USA:Texas." City Population - Statistics & Maps of the Major Cities, Agglomerations

& Administrative Divisions for All Countries of the World . 2009. Web. 01 July 2010.

<http://www.citypopulation.de/USA-Texas.html>. ($10$)

[13] "Workforce | The Greater Austin Chamber of Commerce :: Austin, Texas." The Greater

Austin Chamber of Commerce. 2009. Web. 28 June 2010. <http://www.austin-chamber.org/DoBusiness/GreaterAustinProfile/workforce.html#table5>. ($14$)

[14] Yousuf, Hibah. "America's Most Recession-proof Cities." CNNMoney. 24 June 2010.

Web. 1 July 2010.

<http://money.cnn.com/2010/06/22/news/economy/recession_proof_cities/>. ($13$)

[july '10] housing market analysis for austin, texas [by ankit patel]

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