Austin Economic Outlook - Fall 08
Each year in October, Mark Dotzur of the Texas A&M Real Estate Center gives an Economic Outlook presentation. Below are some important highlights from this year’s speech. Hopefully this will help clarify how the local state of affairs is significantly better off than some sources would have you believe.
Dr. Dotzour began by addressing the local news media and a recent headline in Austin that projected a decline in real estate values. Dotzour said that the “evidence” is merely speculation on the part of two analysts and that the headline should have read “Two guys speculate that home prices could possibly drop sometime in the future.” He cited Austin MLS statistics that show that prices have historically remained on a slow and steady increase for people willing to hold onto property at least 3-5 years, and concluded that anyone who tells a buyer with the desire and means to purchase property to wait is doing them a great disservice.
Regarding inventory of homes for sales in Austin, Dotzour noted that Austin is holding at 6-6.5 months, which he said is the point where we consider a market “balanced” between the interests of buyer and seller. According to Dotzour, there is no time in the last 18 years when home values did not rise overall in Austin.
He said there will continue to be a lot of homes sold in Texas, where we still have positive job growth, and a population that is expected to grow 13-million by the year 2030.
Dotzour said we should react positively to national and local news that building permits are down. This means that we’re adjusting the inventory to meet demand, which will help prices stabilize.
On the national economic front, Dotzour said there are several “shoes” that have to drop on the banking community before we hit bottom, including the full picture of the effects of the sub-prime lending debacle, defaults on credit cards and auto loans, and the real extent of credit default swaps. This last issue is just now starting to emerge into the light, and could dwarf the problems created by sub-prime loans.
Dotzour was not in favor of many of the economic stimulus proposals in Washington, and suggested that more useful elements would be a tax credit for home purchases, and a 0% capital gains tax for investors who will hold property for 5 years.
He projected some favorable economic shifts in April or May, as corporate profits begin to recover, oil prices stabilize, foreclosures pass their peak and the political uncertainty is resolved.
