Austin Housing Market on Upswing

AMERICAN-STATESMAN STAFF

Thanks in part to healthy job growth, the Austin area’s housing market is on the upswing, an industry expert said Wednesday.

The optimistic local forecast from Eldon Rude also included encouraging signs for other metro areas around the country.

In the last six to nine months, we’ve seen a turn not only in Austin, but in other markets in the U.S., said Rude, director of the Austin market for Metrostudy, which tracks about 40 markets in the United States. We’re beginning to see a pulse in the housing market.

Rude’s comments were made to a group of real estate developers and other businesspeople at an event on residential housing trends sponsored by the Urban Land Institute’s Austin chapter.

Locally, Rude said, very strong job growth — 26,800 net new jobs were added from January 2011 to January 2012, a 3.5 percent growth rate — has been a key driver of demand for housing, Rude said.

I see good things in the market this year and next, Rude said.

The positive forecast comes after several bleak years for builders, which scaled back sharply during the recession. Last year, builders in Central Texas started construction on 6,105 homes, a 62 percent decline from the 15,977 starts at the peak in 2006, according to Metrostudy’s data.

Rude predicted that home starts in 2013 and 2014 could return to pre-recession levels, with builders potentially starting construction on 8,000 to 11,000 new homes during each of those years.

The growing demand for housing, which also is coming from population growth, comes as the supply of newly built houses in the Austin area is at the lowest level since the early 1990s, Rude said.

That puts us in good shape as we move forward, Rude said.

He said that means builders will put more houses on the ground, with that construction activity having ripple effects throughout the economy.

With new-home construction flat in the last three years, builders have managed their inventories of new homes fairly well, Rude said. But as demand ticks up amid a tight supply of homes, Rude said he expects to see builders raising prices.

Some already have.

I’ve raised prices three times in the last six months, said Ken Swisher, Austin division president for David Weekley Homes, although he said the increases have been small. In pockets of the market seeing the most activity, labor is tight and the cost of materials is starting to rise, he said. It’s going to be a challenge to keep the costs down as this market heats up, Swisher said.

At Pulte Homes, traffic at our 20-plus Central Texas communities is up 10 to 15 percent from March of last year, and we’re seeing the pace of (contracts) exceed our initial 2012 projections across the board, said Scott Eckley, vice president of sales for Pulte in Austin. This demand has led us to initiate some modest price increases at select communities.

Austin-area builders are reporting that more prospective buyers are looking at houses, Rude said. Metrostudy’s monthly sales and traffic survey showed 50 percent more buyer traffic this February than a year ago February. The increased traffic also is translating into more sales — 31 percent more in February than the same month a year ago, according to Metrostudy’s survey.

Like Pulte, Swisher said David Weekley had seen a very good uptick in customer traffic and sales since the first of the year. I’m hearing that from the other major builders in town also, Swisher said.

David Weekley builds 250 to 600 homes annually in Central Texas, with an average sales price in the low $300,000s.

With a low supply of homes and historically low interest rates, the prices out there that are being offered are the best that we’re going to see in many, many years, Swisher said. I think people are taking advantage of a good opportunity right now, and who knows how long that opportunity will last?

Contact Shonda Novak at 
445-3856

By the numbers

6,105 — Austin-area housing starts in 2011

6,400-6,700 — Metrostudy forecast for 2012 starts

3.5 percent — Current annual job growth rate in Austin

3,047 — Supply of newly built homes, year-end 2011