We keep hearing that we are in a recovery from the ‘great recession’, yet it seems that the market is just a single media zinger away from locking up and shutting down for the third year in a row, perhaps from a sound bite that originates from China, the European debt crisis, or standstill on Capitol Hill.
Homes prices and mortgage rates are at sixty year lows. What’s more, at least locally and regionally a good number of people seem to believe the experts who say that prices have hit bottom, so their sense of risk has diminished and their potential for home investment is greater than it has been the last five years. In addition, people are marrying, having babies, divorcing, and having grandchildren, and keeping their jobs or landing better ones. This could be described as ‘pent up demand’ for household formation.
Home prices and mortgage rates are at sixty year lows
The recession has delayed household formation, resulting in “pent-up” demand for housing
Huge structural changes in the housing market have occurred since the recession
Move from buying a home principally as an investment to buying a home for shelter
Only thirteen states showed positive price appreciation last year
Counter intuitively, a large obstacle in our recovery is under-supply
Despite foreclosures and shadow inventory there is a shortage of well-located, well-priced properties, especially in Texas metros
18,000+ developed lots in Austin, only half are spoken for. The other half isn’t desirable due to schools, financing, utilities, distance, etc. Over 150,000 entitled lots in Austin, 70,000 in Dallas in similar situations.
Undersupply in an oversupplied market – an uncomfortable paradox
Banks are still sitting on $1.7 trillion in bad commercial loans that haven’t been written down to market, making equity reluctant to lend on acquisition and development
“Land is like ice cream. The right amount is wonderful. Too much makes you sick.”
Independence Title quarterly economic land briefing recap
High demand in Austin for well located commercial and community properties continue to drive occupancy and absorption
22,000 planned rental units in Austin over the next two years, yet still not enough to support demand
The most in-demand communities in Austin have a dwindling supply of lots, with no substitute community in sight
“Sweet spot” in the residential market is between $200-$450k