Economic Outlook for Central Texas Real Estate
Dr. James P. Gaines Research Economist Real Estate Center Texas A&M University jpgaines@tamu.edu
1
REAL ESTATE CENTER at TEXAS A&M UNIVERSITY Mays School of Business
recenter.tamu.edu P bli ti Publications Tierra Grande Monthly Economic Reports
Market Reports
Technical Reports
RECON Newsletter
REC Website
2
Topics • The Economy • The Housing g Markets • Future Prospects
3
Rec cession Start Da ate
Length of US Recessions 19001900-Present September‐02 May‐07 January‐10 January‐13 August‐18 January‐20 May‐23 October‐26 August‐29 August 29 May‐37 February‐45 November‐48 July‐53 August‐57 April‐60 December‐69 November‐73 January‐80 January 80 July‐81 July‐90 March‐01 December‐07
Average Recession is 15 months
Current Recession is 22 months and counting
0
5
10
15
20
25 Months Duration
Source: NBER
30
35
40
45
50
“Big Picture” Economic Themes on a M d -Day ModernModern D D Depression i 1. 1 2. 3. 4. 5. 6 6.
Credit Contraction Asset Deflation Household Wealth Devastation Profit Compression Employment Destruction I Inventory t R d ti Reduction
7 Federal Government Intrusion 7.
5
The New Dollar
6
Percent Growth in Real GDP Since 2000 Seasonallyy Adjusted j Annual Rate 8 6.9 5.4 4.1 3.5
3.6
3.2 2.1 2.0
0.3
3.1
3.6 2.1
1.4
0.1
‐1.3
3.2
3.0 2.1
1.7
1.6
1.4
1.1
3.5 2.8 2.9 3.0
2.6
2.4
1.5
1.2 0.1
‐0.7
‐1.1
‐1
‐2.7
‐5.4
Source: Bureau of Economic Analysis
1Q2009
3Q2008
1Q2008
3Q2007
1Q2007
3Q2006
1Q2006
3Q2005
1Q2005
3Q2004 4
4 1Q2004
3Q2003
1Q2003
3Q2002 2
1Q2002 2
3Q2001
1Q2001
3Q2000
‐6.4
1Q2000
9.0 8.0 7.0 60 6.0 5.0 4.0 3.0 2.0 1.0 0.0 ‐1.0 ‐2.0 ‐3.0 ‐4.0 ‐5 0 ‐5.0 ‐6.0 ‐7.0 ‐8.0
7
-2.0 Jan-0 00 Apr-0 00 Jul-0 00 Oct-0 00 Jan-0 01 Apr-0 01 Jul-0 01 Oct-0 01 Jan-0 02 Apr-0 02 Jul-0 02 Oct-0 02 Jan-0 03 Apr-0 03 Jul-0 03 Oct-0 03 Jan-0 04 Apr-0 04 Jul-0 04 Oct-0 04 Jan-0 05 Apr-0 05 Jul-0 05 Oct-0 05 Jan-0 06 Apr-0 06 Jul-0 06 Oct-0 06 Jan-0 07 Apr-0 07 Jul-0 07 Oct-0 07 Jan-0 08 Apr-0 08 Jul-0 08 Oct-0 08 Jan-0 09 Apr-0 09 Jul-0 09 Oct-0 09
Overall Inflation Rate
7.0 M/M rate up 0.4%, but down 1.4% from a year earlier
6.0
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
Yr/Yr Rate of Change in the Monthly Index, US Urban, All Items, Seasonally Adjusted
Source: Bureau of Labor Statistics 8
10,000
Jan--00 May--00 Sep--00 Jan--01 May--01 Sep--01 Jan--02 May--02 Sep--02 Jan--03 May--03 Sep--03 Jan--04 May--04 Sep--04 Jan--05 May--05 Sep--05 Jan--06 May--06 Sep--06 Jan--07 May--07 Sep--07 Jan--08 May--08 Sep--08 Jan--09 May--09
Billionss of Dollars
Personal Consumption Expenditures 11,000
Personal consumption represents about 70% of US economy y and is declining.
9 000 9,000
8,000 ,
7,000
6,000
Source: Department of Commerce, SAAR
Corporate AfterAfter-Tax Profits (Quarterly With Inventory Valuation & Capital Consumption Adjustment)
$1,300 $1,200 $ $1,100 $1,000
$800 $700 $600 $500 $400 $300
Source: Bureau of Economic Analysis
1Q2009 9
1Q2008 8
1Q2007 7
1Q2006 6
1Q2005 5
1Q2004 4
1Q2003 3
1Q2002 2
1Q2001
1Q2000 0
1Q1999 9
1Q1998 8
1Q1997 7
1Q1996 6
1Q1995 5
1Q1994 4
1Q1993 3
1Q1992 2
1Q1991
$200 1Q1990 0
Billions
$900
Jan‐00 0 Apr‐00 0 Jul‐00 0 Oct‐00 0 Jan‐01 1 Apr‐01 1 Jul‐01 1 Oct‐01 1 Jan‐02 2 Apr‐02 2 Jul‐02 2 Oct‐02 2 Jan‐03 3 Apr‐03 3 Jul‐03 3 Oct‐03 3 Jan‐04 4 Apr‐04 4 Jul‐04 4 Oct‐04 4 Jan‐05 5 Apr‐05 5 Jul‐05 5 Oct‐05 5 Jan‐06 6 Apr‐06 6 Jul‐06 6 Oct‐06 6 Jan‐07 7 Apr‐07 7 Jul‐07 7 Oct‐07 7 Jan‐08 8 Apr‐08 8 Jul‐08 8 Oct‐08 8 Jan‐09 9 Apr‐09 9 Jul‐09 9 Oct‐09 9
Thousands
Change in Monthly Employment
600
500
400
300
200
100
0
‐100
‐200
‐300
‐400
‐500
‐600
‐700
‐800
11 Source: BLS, SAAR
Three Key Questions • When will recession end? – Already ended? End of 2009, 2010 …?
• What shape will the recovery take? – V, U, W or an L ? A “jobless” recovery
• What are the risks of a relapse? – Government’s exit strategy, investor speculation driving commodity prices to unreasonable levels; capital market conditions – who’s providing capital?
12
What Is (Will Be) Holding Up Recovery? • Household’s still heavily in debt, forced to save rather than spend • Unemployment approaching double digits, no relief from job growth • Home prices declining – housing is not leading a generall recovery as with ith pastt recessions i • Commercial real estate drag on community and regional banks • Inability of big banks to lend • State St t and d local l l governments t financially fi i ll sunk k 13
A Thought from Maxine "BAIL EM OUT! ????” Wow, back in 1990 Wow 1990, the Government seized the Mustang Ranch brothel in Nevada for tax evasion and,, as required q by law, tried to run it. They failed, and it closed. Now we are trusting the economy of our country, the auto industry and the banking system to the same nit-wits who couldn't make money running a whore house and selling whiskey!
The Texas Outlook for 2009 • Still vulnerable to US conditions, especially in capital markets • Economy still strongly tied to energy • Texas job growth probably down about 2% to 2.5% for the year, about half U.S. rate • Texas housing markets “spotty” • Significant g decline in commercial real estate
15
Source: Federal Reserve Bank of Dallas 16
May-09 9
Jan-09 9
Sep-08 8
May-08 8
Jan-08 8
Sep-07 7
May-07 7
Jan-07 7
Sep-06 6
May-06 6
Jan-06 6
Sep-05 5
May-05 5
Jan-05 5
Sep-04 4
May-04 4
Jan-04 4
Sep-03 3
May-03 3
Jan-03 3
Sep-02 2
May-02 2
Jan-02 2
Sep-01 1
May-01 1
Jan-01 1
Sep-00 0
May-00 0
Jan-00 0
Sep-99 9
May-99 9
130
Jan-99 9
Texas Index of Leading Indicators (1987 100) (1987=100)
125
120
115
110
105
100
$140 $130 $120 $110 $100 $90 $80 $70 $ 0 $60 $50 $40 $30 $20 $10 Jan-85 Jul-85 Jan-86 Jul-86 Jan-87 Jul-87 Jan-88 Jul-88 Jan-89 Jul-89 Jan-90 Jul-90 Jan-91 Jul-91 Jan-92 Jul-92 Jan-93 Jul-93 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09
Price of West Texas Intermediate C d per B Crude Barrell Jun-08, 133.93
Price fell 71% from peak before rebounding
Source: Federal Reserve Bank of Dallas 17
Texas Rotary Rig Count
1 000 1,000
Sep-08, 927
900
Rig count fell 65% from September 2008 to low point
800 700
Jan-09, 730
600 500 400 300
Jun-09, 326
200 Apr-99, 186
100
18
Source: Baker Hughes, Federal Reserve Bank of Dallas
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
Jan-89
Jan-88
Jan-87
Jan-86
Jan-85
0
Source: BLS, TWC, Real Estate Center at Texas A&M University 19
Jul-09
Apr-09
Jan-09
Oct-08
-3%
Jul-08
-2%
Apr-08
Jan-08
Texas
Oct-07
Jul-07
Apr-07
Jan-07
Oct-06
Jul-06
Apr-06
Jan-06
Oct-05
Jul-05
Apr-05
5%
Jan-05
6%
Oct-04
Jul-04
Apr-04
Jan-04
Oct-03
Jul-03
Apr-03
Jan-03
Oct-02
Jul-02
Apr-02
Jan-02
Oct-01
Jul-01
Apr-01
Jan-01
Annual Employment Growth Rates for US and Texas
7%
Austin
4%
3%
2%
1%
0%
-1%
US
-4%
-5% 5%
Change in Monthly Employment 600 500
US
6.9 million total U. S. job losses since December 2007. Texas lost 303,100 jobs.
Texas
400 300 96
87 45
35
39
44
36 3
0
14
1
9
0
‐100
-72 -144 -180
‐200
-122 -160
-137
-8
-18
-27
-27
-90 -128 -161
-30 -66
-175 -216
-230
‐300
-276 -321
‐400
-322 -380
‐500
-463 -519 519
‐600
-597
‐700
-681
-681
-652
Source: Texas Workforce Commission, BLS, SAAR
Aug-09 9
Jul-09 9
May-09 9
Apr-09 9
Mar-09 9
Feb-09 9
Dec-08 8
Nov-08 8
Oct-08 8
Sep-08 8
Aug-08 8
Jul-08 8
Jun-08 8
May-08 8
Apr-08 8
Mar-08 8
Feb-08 8
Jan-08 8
Jan-09 9
-741
‐800 Dec-07 7
Thousands
100
120
Jun-09 9
200
Texas Metro Areas Ranked by Employment Growth August g 2008 to August g 2009 Rank Metro Area
Percent Growth Rate
Rank Metro Area
Percent Growth Rate
1
McAllen-Edinburg-Mission
1.5
15 Sherman-Denison
–1.8
2
Laredo
0.0
16 Tyler
–2.2
3
San Antonio
–0.8
17 Abilene
–2.4
4
Austin-Round Austin Round Rock
–0.9 0.9
17 Amarillo
–2.4 2.4
5
College Station-Bryan
–1.1
17 San Angelo
–2.4
6
Lubbock
–1.2
20 Dallas-Plano-Irving
–2.5
7
El Paso
–1.3 13
Texas
–2.8 28
7
Midland
–1.3
21 Longview
–3.1
7
Killeen-Temple-Fort Hood
–1.3
22 Wichita Falls
–3.3
10 Brownsville-Harlingen
–1.4
23 Corpus Christi
–3.6
10 Texarkana
–1.4
23 Houston-Sugar Land-Baytown
–3.6
10
–1.4
25 Victoria
–4.1
10 Odessa
–1.4
U.S.
–4.4
14 Waco
–1.6
Beaumont-Port Arthur
–5.2
Fort Worth-Arlington
26
Sources: Texas Workforce Commission, Real Estate Center at Texas A&M University
21
Texas Metro Areas Ranked by Unemployment Rate g 2009 August Rank
Metro Area
Unemployment Rate
Rank
Metro Area
Unemployment Rate
1
Amarillo
5.6
14 Wichita Falls
7.9
2
Lubbock
5.7
Texas
8.0
3
Abilene
6.1
16 Dallas-Plano-Irving
8.2
3
Midland
61 6.1
17
83 8.3
5
College Station-Bryan
6.4
17 Longview
8.3
5
Texarkana
6.4
19 Houston-Sugar Land-Baytown
8.4
7
San Angelo
6.7
20 Sherman-Denison
8.5
8
Killeen-Temple-Fort Hood
7.0
21 Laredo
9.1
8
San Antonio
7.0
22 Odessa
9.3
10
Austin-Round Rock
7.2
23 El Paso
9.6
11
Waco
7.3
U. S.
9.7
12
Corpus Christi
7.8
24 Brownsville-Harlingen
10.5
12
Tyler
7.8
25
Beaumont-Port Arthur
10.8
14
Victoria
7.9
26
McAllen-Edinburg-Mission
11.4 22
Fort Worth-Arlington Worth Arlington
Sources: Texas Workforce Commission, Real Estate Center at Texas A&M University
Housing Market
23
Foreclosure Starts by State 2Q2009
Source: Mortgage Bankers Association, National Delinquency Survey,
Monthlyy Foreclosure Filings g 140,000 130,000 120,000 110,000 100,000
Texas foreclosures have been modest compared to US trend.
US
US foreclosures were up 19% in 2008. Texas was down 30.5%.
90,000 80,000 70,000
Jan-May YTD 2009 filings : US up 62%, Texas is down 12.5%
60,000 50,000 40,000
T Texas
30,000 20,000 10,000
Source: RealtyTrac, Inc. Data include Notices of Trustee Sales plus Notices of Foreclosure Sale
Apr-09
Feb-09
Dec-08
Oct-08
Aug-08
Jun-08
Apr-08
Feb-08
Dec-07
Oct-07
Aug-07
Jun-07
Apr-07
Feb-07
Dec-06
Oct-06
Aug-06
Jun-06
Apr-06
Feb-06
Dec-05
Oct-05
Aug-05
Jun-05
0
25
New and Existing SF Home Sales U.S. 7,000 ,
1,450 ,
Existing SF sales are down 30% from 2005 peak (left scale) 8.2 months supply
6,500 6,000
1,350 1,250
5,500
1,150
5,000
1,050
4 500 4,500
950
4,000
850
3,500
750
New SF sales are down 69% from 2005 peak (right scale) 7.3 months supply
3,000 2,500
650 550
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
Jan-01
Jul-00
250 Jan-00
1 000 1,000 Jul-99
350 Jan-99
1,500 Jul-98
450
Jan-98
2,000
26
Sources: US Census Bureau , NAR, NAHB, NBER, 000s of units
$250,000
$225,000
US Median Home Prices Since 1990 National House Price Bubble
$200,000
$175,000
Prices in 2001 stayed above trend, despite a national recession.
$150,000
$125,000
$100,000
The national housing boom started around d JJanuary 2002 creating i a house price bubble that peaked at around $230,000 in 2006
$75,000
Jan-90 0 Jul-90 0 Jan-91 1 Jul-91 1 Jan-92 2 Jul-92 2 Jan-93 3 Jul-93 3 Jan-94 4 Jul-94 4 Jan-95 5 Jul-95 5 Jan-96 6 Jul-96 6 Jan-97 7 Jul-97 7 Jan-98 8 Jul-98 8 Jan-99 9 Jul-99 9 Jan-00 0 Jul-00 0 Jan-01 1 Jul-01 1 Jan-02 2 Jul-02 2 Jan-03 3 Jul-03 3 Jan-04 4 Jul-04 4 Jan-05 5 Jul-05 5 Jan-06 6 Jul-06 6 Jan-07 7 Jul-07 7 Jan-08 8 Jul-08 8 Jan-09 9 Jul-09 9
$50,000
27
Source: NAR, Real Estate Center at Texas A&M University
US Median Existing Home Price 12--Month 12 M h Moving M i Average A $240,000
Jul-06, 224,283
$220,000 $200,000 $180,000 $160 000 $160,000 $140,000 $120,000 $100,000
2000 Trend line
$80,000 $60 000 $60,000 $40,000 Dec-68 8 Feb-70 0 Apr-71 1 Jun-72 2 Aug-73 3 Oct-74 4 Nov-75 5 Jan-77 7 Mar-78 8 May-79 9 Jul-80 0 Sep-81 1 Nov-82 2 Jan-84 4 Mar-85 5 May-86 6 Jul-87 7 Sep-88 8 Nov-89 9 Jan-91 1 Mar-92 2 May-93 3 Jul-94 4 Sep-95 5 Nov-96 6 Jan-98 8 Mar-99 9 May-00 0 Jul-01 1 Sep-02 2 Nov-03 3 Jan-05 5 Mar-06 6 May-07 7 Jul-08 8 Sep-09 9
$20,000
28
Source: NAR, Real Estate Center at Texas A&M University
Future Home Sales Volume J b Stability Job St bilit Mortgage Rates Home Price Affordability
What’s Holding Up Housing Recovery? • Household’s still deleveraging • Tax credit ending unless extended or expanded • Continued decline in home values • Foreclosures remain high • Fed may stop backing home financing • Banks making real estate loans difficult • Appraisal issues from Home Valuation Code of Conduct • Commercial real estate markets falling 30
Texas and Austin Housing Markets 31
Texas SingleSingle-Family Market Sales
Average Price
22 499 22,499
$199 700 $199,700
$151 500 $151,500
70 7.0
August 2009
19,884 ,
$192,400 ,
$150,400 $ ,
‐11.6%
‐3.7%
‐0.7%
75 7.5
YTD 2008
169 030 169,030
$192,258 $ ,
$147,300 $ ,
12‐mo MA
12‐mo MA
YTD 2009
140,559
$183,775
$143,833
‐16.8%
‐4.4%
‐2.4%
August 2008
Months Median Price Inventory
32
Source: Real Estate Center at Texas A&M University
Annual Texas Home Sales 310 000 310,000 292,805
290,000 270,000 250,000
2007 = about 6% decline from 2006. 2008 = 16% less than ’07 2009 = sales down 10% to 15% from 2008 to 2001-2003 levels
275,582 266,842
241,020 231,371
230,000
216,147 208,234
210,000
201,528 201 528 196,401
190,000
184,056
196,665
188,738
170,638
170,000
146,395 138 123 138,123
150 000 150,000 130,000
122,134 121,823
116,604
110,000 100,047 99,619
107,107
90,000 70,000
Source: Real Estate Center at Texas A&M University
2009p
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
50,000 ,
33
Jan-98 May-98 Sep-98 Jan-99 May-99 Sep-99 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09
Texas Median Home Price 12--Month Moving Average 12
$170,000
$160,000
$150,000
$140,000
$130,000
$120,000
$110,000
$100,000
$90,000
$80,000
Source: Real Estate Center at Texas A&M University
Texas SF Building Permits 180,000
1984 82% of 1983 peak 1985 66% of 1983 peak 1986 57% of 1983 peak 1987 43% of 1983 peak 1988 35% of 1983 peak
160,000 140,000
2006 98% of 2005 peak 2007 72% of 2005 peak 2008p 48% of 2005 peak 2009e 36% of 2005 peak
166,203 163,032 151,384 137,493 122,913
120,000
120,366
111,915 108,782 103,252
101,928 99,912
100,000 84,565
83,132 82,228
78,714
80,000
70,452 70,421 69,964
67 964 67,964
67,870 67 870 66 161 66,161
60,000
59,543
59,143
60,000
80,000
46,209
43,975
38,233 36,658 35,908
40,000 20,000
Source: US Census Bureau, Real Estate Center at Texas A&M
2009
2008p
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
0
35
Texas Immigration Down by More Than 100,000 People the Last Two Years • Total international and domestic immigration to Texas was almost 324,000 in 2006, but only 228,000 in 2007 and 233,000 in 2008
36
Austin Home Sales 3 500 3,500
2006 3,000
2005 2,500
2007
2,000
2009
2008
1,500 1,000
Source: Real Estate Center at Texas A&M University
December
November
ctober Oc
September
August A
July
June
May
April
March
Feb bruary
Ja anuary
500
37
Austin Annual Home Sales 35,000
Estimate that 2009 might look like 1999 1999-2003 2003 period period. About a 17% decline from 2008
30,000 25,000
30,284 28,048 8,0 8 26,905
22,567
22,393
18,135
18,621 18,392 18,716
199 99
200 00
19 793 19,793
20,000
18,500
15,583
15,000 12,597 12,439 11 459 11,459 9,926
10,000
10,571
8,503 6,426
7,159
7,581
5,000
Source: Real Estate Center at Texas A&M University
2009 9p
200 08
200 07
200 06
200 05
200 04
200 03
200 02
200 01
199 98
199 97
199 96
199 95
199 94
199 93
199 92
199 91
199 90
198 89
0
Source: Real Estate Center at Texas A&M University 39
Jan‐0 09
Jul‐0 08
Jan‐0 08
Jul‐0 07
Jan‐0 07
Jul‐0 06
Jan‐0 06
Jul‐0 05
Jan‐0 05
Jul‐0 04
Jan‐0 04
Jul‐0 03
Jan‐0 03
Jul‐0 02
Jan‐0 02
Jul‐0 01
Jan‐0 01
Jul‐0 00
Jan‐0 00
Jul‐9 99
Jan‐9 99
Jul‐9 98
Jan‐9 98
Jul‐9 97
Jan‐9 97
Jul‐9 96
Jan‐9 96
Austin Home Sales 12--Month Moving 12 Mo ing Average A erage
3,000
2,500
2,000
1 500 1,500
1,000 ,
500
Austin Annual Median Home Prices 188,200 184,200 172,200 161,300 154,500154,800154,100 150,600 144,500
126,600 117,900 112,600 108,700 100,500 96,000 91,600 83,700
Source: Real Estate Center at Texas A&M University
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
76,400
1991
73 000 73,000
1990
200,000 190,000 180,000 170 000 170,000 160,000 150,000 140 000 140,000 130,000 120,000 110,000 100,000 90,000 80,000 , 70,000 60,000 50,000
40
Source: Real Estate Center at Texas A&M University
May-09 9
Jan-09 9
Sep-08 8
May-08 8
Jan-08 8
Sep-07 7
May-07 7
Jan-07 7
Sep-06 6
May-06 6
Jan-06 6
Sep-05 5
May-05 5
Jan-05 5
Sep-04 4
May-04 4
Jan-04 4
Sep-03 3
May-03 3
Jan-03 3
Sep-02 2
May-02 2
Jan-02 2
Sep-01 1
May-01 1
Jan-01 1
Sep-00 0
May-00 0
Jan-00 0
Austin Monthly Median Home Prices
$200 000 $200,000
$190,000
$180,000
$170,000
$160,000
$150 000 $150,000
$140,000
$130,000
$120,000
41
Austin Median Home Prices 3-Month Moving Average $200,000 Median home prices are down just 1 8% from August 2008 peak 1.8%
$190,000 $180,000 $170,000 $160 000 $160,000 $150,000 $140,000 $130,000 $120,000 $110,000
Source: Real Estate Center at Texas A&M University
42
May--09
Jan--09
Sep--08
May--08
Jan--08
Sep--07
May--07
Jan--07
Sep--06
May--06
Jan--06
Sep--05
May--05
Jan--05
Sep--04
May--04
Jan--04
Sep--03
May--03
Jan--03
Sep--02
May--02
Jan--02
Sep--01
May--01
Jan--01
Sep--00
May--00
Jan--00
Sep--99
May--99
Jan--99
$100,000
Austin Median Home Prices 12--Month 12 M h Moving M i Average A $200,000 $190,000
Median home p prices are down 1.7% from 2008 peak
$180,000 $170,000 $160,000 $150,000 $140 000 $140,000 $130,000 $120 000 $120,000 $110,000
Source: Real Estate Center at Texas A&M University
May-09
Jan-09
Sep-08
May-08
Jan-08
Sep-07
May-07
Jan-07
Sep-06
May-06
Jan-06
Sep-05
May-05
Jan-05
Sep-04
May-04
Jan-04
Sep-03
May-03
Jan-03
Sep-02
May-02
Jan-02
Sep-01
May-01
Jan-01
Sep-00
May-00
Jan-00
Sep-99
May-99
Jan-99
$100,000 ,
43
Percent of Home P es Sold
15.0 14.0 13.0 12.0 11.0 10.0 90 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0
Source: Real Estate Center at Texas A&M University 500,00 00 and mo ore
400,000 - 49 99,999
300,000 - 39 99,999
250,000 - 29 99,999
200,000 - 24 49,999
180,000 - 19 99,999
160,000 - 17 79,999
Median Price 1998 $ 117,900 2003 $ 154,800 2008 $ 188,200
140,000 - 15 59,999
120,000 - 13 39,999
100,000 - 11 19,999
2008
90,000 - 9 99,999
80,000 - 8 89,999
1998
70,000 - 7 79,999
60,000 - 6 69,999
50,000 - 5 59,999
40,000 - 4 49,999
30,000 - 3 39,999
$29,999 o or less
Price Distribution of Austin MLS Homes Sold: 1998 vs. 2008 16.0 98 Median
03 Median
08 Median
44
$1,000,00 00 >
$900,0 000
$800,0 000
$700,0 000
$600,0 000
$500,0 000
$400,0 000
$300,0 000
$250,0 000
$200,0 000
$190,0 000
$180,0 000
$170,0 000
$160,0 000
$150,0 000
$140,0 000
$130,0 000
$120,0 000
$110,0 000
$100,0 000
$90,0 000
$70,0 000
$60,0 000
$50,0 000
$40,0 000
$30,0 000
$80,0 000
45
Source: Real Estate Center at Texas A&M University
Days on Marrket
630 600 570 540 510 480 450 420 390 360 330 300 270 240 210 180 150 120 90 60 30 0
Tax Credit probably spurred $100,000 to $180,000 market. High High‐priced priced market virtually dormant
$20,0 000
2100 2000 1900 1800 1700 1600 1500 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100 0
< $20,,000
Number of Sales
Austin SF Sales by Price and DoM YTD2009
Austin SF Building Permits 20,000 18,000 16,000
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 46% of 2006 peak 2009 35% of 2006 peak
17,615 17,346
14,309
14,000
13,045
12 000 12,000
12,120
12,116
11 704 11,704
11,072
10,805 10,095
10,000
9,115
8,715
8 000 8,000
8,456
7 567 7,567
, 7,710
7 435 7,435 6,3696,250
6,000
6,200
5,496 5,134 4,643
4,277
4,000
4,641
3,464 , 2,994 2,426 2,0501,9101,916
2,000
Source: U. S. Census Bureau, Real Estate Center
2009e
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
0
46
Source: U. S. Census Bureau, Real Estate Center 47
2008 8
2007 7
2006 6
2005 5
2004 4
2003 3
2002 2
2001 1
2000 0
1999 9
1998 8
1997 7
1996 6
1995 5
1994 4
1993 3
1992 2
1991 1
1990 0
1989 9
1988 8
1987 7
1986 6
1985 5
1984 4
1983 3
1982 2
1981 1
1980 0
Austin MF Building Permits
18 000 18,000
16,000
14 000 14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Future Prospects
Bank Lending for Real Estate Estate “kick the can down the road” “ “extend d and d pretend” d” “a rollingg loan ggathers no loss”
The Best Case Scenario • Favorable corporate earnings 4Q09 • Stocks rise about four months prior to that • Consumer confidence rises with stocks • More spending results in higher profits • Layoffs y end by y the end of the 2009 • “Jobless recovery” in 2010 • Higher interest rates and inflation in 2010-11
The Worst Case Scenario • The securitized lending market doesn’t reopen • Bad banks and businesses propped up • No price discovery for “toxic” mortgages • Political risk for business stays high • Business / investors “sit on their hands” • Unemployment U l t goes wellll over 10% • Commodity deflation and price deflation
Texas Is a High Highg -Growth, Urban State MSA
2007 Population (millions)
2040 Population (millions)
Percent Increase
Austin
1.6
4.0
150.0%
Dallas-Ft. Worth
6.1
14.8
142.6%
Houston
5.6
11.7
108.9%
San Antonio
2.0
3.2
60.0%
Total 4 MSAs
15.3
33.7
120.3%
Total All MSAs
21.0
41.5
97.6%
Texas
23.8
44.9
88.7%
Percent In MSAs
88.2%
92.6%
Source: U.S. Census Bureau; Texas State Data Center 2008 Population Projections, 2000-2007 Scenario
52
Central Texas Triangle Approximately pp y 84% of Texas’ Population Lives within the Triangle
53
Projected Texas Population 2000 - 2030
(000s)
45 000 45,000
At 50% 1990-2000 rate of immigration At 2000-2007 rate of immigration At 100% 1990-2000 rate of immigration
40,000
41,118
37,285
35,000
Between 9 and 18 million more residents between 2005 and 2030 32,737 31,831 30,858
30,000 28,006
25,000
24,327 22,811 20,946
20,000
Source: U.S. Census Bureau, Texas State Demographer 2008 Projections
54
2030
2030
2030
2025
2025
2025
2020
2020
2020
2015
2015
2015
2010
2010
2010
...
2008
2007
2006
2005
2004
2003
2002
2001
2000
15,000
Austin MSA Population
Austin MSA: Bastrop, p, Caldwell,, Hays, y , Travis & Williamson Counties 4,000,000
At 50% 1990-2000 rate of immigration At 2000-2007 rate of immigration At 100% 1990 1990-2000 2000 rate of immigration
3,500,000
3,449,906
3,030,478
3,000,000
On average about 1,400,000 more people or roughly double the current population
2,500,000 2,272,224
2 000 000 2,000,000 1,652,602
1,500,000 1,155,579
1,000,000
55
Source: US Census Bureau, Texas State Data Center and Demographer
2030
2030
2030
2025
2025
2025
2020
2020
2020
2015
2015
2015
2010
2010
2010
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
500,000
Lake Travis Today
56
Lake Travis in 2050?
57
Texas Age Distribution 20052005-2030 650,000
Age
885+
80
75
70
65
60
55
50
45
0
40
0 35
0
Boomers
30
50,000
15
50,000
10
100,000
885+
100,000
80
150,000
75
150,000
70
200,000
65
200,000
60
250,000
55
250,000
50
300,000
45
300,000
40
350,000
35
350,000
30
400,000
25
400,000
20
450,000
15
450,000
10
500,000
5
500,000
0
2010
550,000
5
550,000
600,000
25
Boomers
2005
600,000
20
650,000
Age
650,000 600,000
Age
85+
65
60
55
50
45
40
35
30
25
20
15
58 10
0 5
0 85+
50,000
80
50,000
75
100,000
70
100,000
65
150,000
60
150,000
55
200,000
50
200,000
45
250,000
40
250,000
35
300,000
30
300,000
25
350,000
20
350,000
15
400,000
10
400,000
5
450,000
0
450,000 50,000
Age
Boomers
500,000
80
Boomers
500,000
2030
550,000
0
550,000
75
2020
600,000
70
650,000
Economic Outlook for Central Texas Real Estate
Dr. James P. Gaines Research Economist Real Estate Center Texas A&M University jpgaines@tamu.edu
59