Always enjoy Sprague’s take on the market…great read!
Mark Sprague- Notes on Appreciation, values, and Austin.
We are blessed to live in Austin.. you know that, I know that. Not just because of the great Tex-mex food, live music venues and laid back lifestyle. Historically, for the last 100+ years the city of Austin has doubled in size every 20 years through thick and thin. This is not going to slow. Why? People want to live here despite the obstacles to the locals of more traffic, affordability, etc.
Take a comparison to a city the same size to the south, San Antonio. While Austin is projected to grow by 2.2+ million over the next 20 years, San Antonio will increase by 1 million. They have a lower cost of living, better traffic times, and lower cost of living. What’s the difference? Desirability.
Could this desirability disappear. Absolutely? That’s why it’s important to continue to create the employment opportunities that Austin has become known for. More regulation, higher cost of development regulation is not going to help.
Looking at the numbers, historically listings and sales surge every April / May through July. This year being no different. Although it’s a seller’s market, most sellers and their advisors seem to be pricing appropriately, allowing strong sales in most areas. Pricing appropriately is important.
Averaging the past five years’ appreciation is near 7% (6.76 to be exact). Here’s the individual improvement year-over-year: This is outside of historical norms for the last 50+ years, where the annual appreciation has been around 3.5+/-% in Austin. (1986 /87 saw the highest with a city average of over 12%)
Date Appreciation from Previous Year
2012 5.98%
2013 7.85%
2014 7.12%
2015 7.82%
2016 4.82%
2017 YTD 6.94%
So, where does that put us? 4th quarter, 9th inning with 1+ outs. This record breaking positive run has been phenomenal.
Why 9th inning? We have begun to see concessions on Austin area apts. over 50% of the market. The first sign of softening of the market. Austin has begun to see a slowing of employment growth. (compared to the last 5 years.) Both of these are signs of softening of the market, although the current record pace does not show that. There are multiple other economic elements on a national, regional and local level that are contributing to this.
Do we see values decreasing? No. Just slowing in the next couple of years. The lower the price point, the greater appreciation and demand.
Most of the economic issues being discussed are elements of a strong market, That won’t last. (having analyzed, profited as well as lost, over the last 40 years watching the local and regional markets.)
That said, with rates, values continuing to rise there is not a better time to buy.
Thanks for the opportunity to discuss.
MS
