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2019 Austin Economic Forecast with Ted Jones

Ryan Rodenbeck

Ryan started in Austin real estate as an investor in 2001. He looked at all investment opportunities — Austin foreclosures, condos, homes for sale...

Ryan started in Austin real estate as an investor in 2001. He looked at all investment opportunities — Austin foreclosures, condos, homes for sale...

Jan 9 6 minutes read

Austin Economic Forecast of 2019

Below are the notes from my economic forecast with economist Dr. Ted Jones of Stewart Title.  Ted is a nationally known economist and senior vice president of Stewart Title. These notes were taken by Ryan Rodenbeck at an economic event. 

Jobs are everywhere. Period.

There were 312K net new jobs last month (December) in the U.S. Job growth has been steady for the last several years. We peaked in September 2015. Job growth went down and then turned the corner last January.  He says the tax credits did help, but it was mainly due to the rollback of all the regulation.  70% of all jobs are created by small business.  The rollbacks helped small business tremendously. Before rollbacks the government did nearly nothing before then to help small businesses grow.  That’s changed.

Statistics

  • Unemployment rate is 3.9%, up from 3.7% last month.  It went up because people that weren’t in the job market now entered because they now think they can get a job.
  • 90% of taxpayers pay less taxes today if they earned the same one year ago.  This lead to $80 billion extra money spent on housing, according to the National Association of Realtors.
  • Texas is the 15th best place to do business in.
  • The best states to do business in are Wyoming, Alaska and South Dakota, respectively.  
  • They are not competitors.  Florida is number 4 and is a competitor.  In short, the top 3 don’t really matter.

3.2%

Average wage increase, past 12 months

3.9%

Unemployment rate

Omnichannel Marketing - New Buzzword

Consumers who have bought both in store and online.

Light weight vehicle sales - if we have good auto sales we have good home sales.  We’re doing very well.  Anything above 16 million is good and we’ve been selling more than 16 million since 2014.

Fed is going to raise rates 2 more time this year. Why?

To achieve full employment which is gauged at 3.2%

To stave off inflation.

We have more available jobs today than we have unemployed people.

When Obama was President we had 8 unemployed people per available job.

National Home Prices 

  • NAR is predicting home prices going up nationally, even though pending home sales are going down.

  • 13.6% of the US homes bought were done so by 25-34 year olds (Millennials), which contribute to 36% of homes sold in the US. The myth that millennials don’t buy homes is no longer true. In fact, they are now the largest segment of the home buying demographic, according to Ted.

  • 4.6% increase in home prices since last year

Austin Economic Forecast - Is a recession in Austin looming? He says No.

  • 35,400 net new jobs in the past 12 months

  • 67,200 jobs in oil and gas in Austin - that’s 6.2% of jobs

  • January is the best time to close on a home because you pay the lowest price.  (We’ve been saying this for years.  Key word is if you “closed” on a home in January.  See Seasonality of the Market Blog)

  • Housing sales did go down from the peak but overall we are selling more homes today than in 06, 07, 08 when we had subprime lending

  • We have issued more home building permits in the past 12 months than we have since 06.  

  • 1.7 new jobs per dwelling unit.  We only need 1.2 to keep up with inventory.

Austin commercial sales are down simply because no one wants to sell right now.

Austin is a low risk market and people are willing to pay a premium for commercial real estate here.  Ryan’s note (not Ted’s) - Although he didn’t speak on residential income properties (rental homes, duplexes and fourplexes) I believe the same could be said about these types of rental properties.

The Bad

  • Federal Debt Interest payments +30% March 2017 vs 2016
  • The same period from 2017 to 2018 went up 10.7%

The Thing About Tariffs...

We already have agreements with Canada and Mexico - no issue there. 

What China buys from us is minimal compared to what we buy from them, 4x to 5x more.

What’s worse is that they are buying low value stuff here: What we bought from China - $167B in computers and electronics.  That’s just the highest.  The only thing we buy from China that is high value is leather. The only reason we buy leather is no environmental controls.

Jones states that if we stopped buying from China, we can’t lose in the long run.

If we bought a $100K car from China, the tariff is $40K.

If they buy a $100K car from us, the tariff is $6K.

This sheds a lot of light into the trade war on China.  Yes, it’s a concern, but according to him, not nearly as much as one might think.  China has a lot more to lose than the U.S. with the trade war.

Oil

  • This is the first time in 75 years the U.S. is a net oiler.

  • In 2014 the U.S. was producing 8 million barrels per day and we use 18 million per day. Today we’re producing 12 million barrels per day. 

  • Almost 40% of the lower 48 states have oil or gas or both.

  • Midland’s job growth is 9%

  • Predicting oil $60 a barrel

2019 Economic Outlook

Fundamentally Strong

Lagging Home Construction

Growing Jobs and Wages

Rising Interest Rates

Rising Home Prices (Albeit At A Lower Pace)

Cheaper Energy

Home Values Will Go Up But Remain Lower Than Before

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