Report from Central Texas Housing Summit

Annemarie Diaz • • July 27, 2023

Today, Shaniko and I had the opportunity to attend the 2023 Central Texas Housing Summit, put on by the Austin Board of Realtors. This significant event brought together visionaries, industry experts, and community leaders, all driven by a shared mission to shape the future of housing in Central Texas and build a better tomorrow for our residents. We though there were a few highlights worth sharing with our TRS community!

The Summit had many great speakers, experts in the field of national and local housing, economy, labor and employment markets, and the interplay between them, including Dr. Selma Hepp, Chief Economist with CoreLogic; Dr. Clare Lowry, ABoR Housing Economist; and Mark Sprague, State Director of Information Capital with Independence Title.

ABoR also announced their new Rent vs. Buy report, just released today, more info and link below!

And Austin Mayor Kirk Watson provided an update on what City government is doing to address affordability and streamline the development review process, something for which all of us working in construction in Austin are looking forward to!

Key Questions Answered

Summit presenters answered several questions we believe are on the minds of our TRS community.

What will happen with interest rates? Still some debate on this one - we may see a slight decline coming in the fall, though other experts anticipate 2-3 years before we will see any reduction in interest rates. Something to bear in mind, while we all have loved the 2.5% interest rates we have enjoyed over the last couple years, in reality that low of an interest rate isn’t healthy for the overall economy. The current 6% interest rate is still manageable, especially given the concessions sellers and builders are still willing to provide and the long-term financial relevance of homeownership, something highlighted in the Rent vs Buy report linked below.

Will home prices continue to decline? The fall in home prices we have seen over the last year is expected to level off, we have reached a plateau. While we may still see a slight decline in home prices, that will be offset by continued population growth as Austin remains one of the most popular cities for relocations. In addition, the last two years new home construction has significantly declined, leaving a supply shortage in place that will support future price increases.

Is the Austin economy remaining strong? Very, very strong. We continue to see job growth, we continue to have an influx of population, Texas remains a desirable location, and Austin perhaps the most desirable location within Texas.

What are Austin homeowners looking for in their new home? There is a national trend of people moving out of dense urban areas into less dense areas and smaller towns. Driven in part by affordability constraints in the city as well as personal preferences, people are looking to move out into surrounding areas where they can get more home and space for the money.

Are construction costs declining since the end of COVID? Unfortunately no, labor costs have not gone down and there has not been a significant increase in mills to support lumber availability. From TRS experience, we can say that there absolutely has been some price reductions in certain types of materials (for example basic 2x4 studs), while on average most other materials remain at similar price points over the last year. This affects cost of remodeling as well as construction of custom homes and home additions.

Rent vs. Buy Report

There are many factors a prospective homebuyer has in mind when considering whether to purchase a home of their own instead of renting. How long they will be in the home, affordability, and whether they can find something that meets their aesthetic and style. That said, the American Dream of homeownership remains, and for good reason.

ABoR was pleased to announce the release their 2023 Central Texas Rent vs. Buy Index during today's summit. Seeing as the producers of this report are far more intelligent than I, we better just provide an excerpt from the Executive Summary here and you can see more at the link below!

"The buy vs. rent index developed in this report models the tradeoff between purchasing a home or renting and investing in stocks, comparable alternative to homeownership. Specifically, this index creates a “horse race” between owning or renting and investing in stocks by comparing the proceeds from the sale of a home to the proceeds from a stock portfolio. The index is generated for three types of homebuyers: first-time buyers, move-up buyers, and luxury buyers for two scenarios, the first of which models retrospective outcomes for buyers who purchased between 2007 and 2022 and sold between 2007 and 2023, while the second models the potential outcomes buyers who purchase in 2023 and sell between 2023 and 2037.

In the Austin-Round Rock-Georgetown MSA, the results of the index indicate that, on average, homeownership would have been more financially favorable for all three types of buyers and for both scenarios. Under the first scenario, homeownership favored renting and investing nearly every 4 times out of 5 for first-time buyers, over 9 times out of 10 for move-up buyers, and nearly 10 times out of 10 for luxury buyers. Under the second scenario, homeownership favored renting and investing nearly every 3 times out of 4 for first-time buyers and in every instance for both move-up and luxury buyers." - 2023 Central Texas Rent vs. Buy Index

You can find the full report here.

Committed to Collaboration

By working together, we firmly believe that working together we can create a thriving housing ecosystem that stands as a testament to innovation, affordability, and sustainability.

The road ahead is filled with challenges, but we also see boundless opportunities to make a lasting difference in the lives of Central Texas residents.

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