As I reflect upon the 2016 market in Austin, I find myself writing inspiredly from my homeland (Bangladesh) towards the end of a family trip tracing the roots of my father. So lets dive in!
1.5 years ago I began sharing my belief that 2016 would be the peak year in our cycle due to affordability and feeling the high-end price band had peaked. Most found it hard to believe, the hard proof wasn’t there and I was forecasting off my own lead indicators. Today actual proof is here:
- the $1M+ price band is at 11 mths supply compared to 7.5 mths supply at end of 2015. Bear in mind, a 6 mth supply is considered a balanced market. A clear sign the cycle is ending in a market: the high-end softens first.
- With the last 2 years showing greater sales outside city limits (itself an indicator of affordability issues), now the suburbs are showing 6 mths+ supply above $400k in several sectors.
- 11 zipcodes are now above 6 months supply, I’m only depicting ones within city limits below.
Interestingly, overall market supply is at 3 mths which per above is an undersupplied market. However, this is due to the majority of real estate currently trading below $400k, effectively overshadowing the real story and trend I’ve presented above.
Looking ahead I believe market will:
- Soften about 5% in pricing through 2017
- Soften additional 3-5% in 2018
Affordability issues (per my past 2 market updates), rates likely moving up 1% in 2017, and job growth in Austin finally shifting down from an incredible 4%+ growth rate since 2011 are the main factors.
2019/2020 I believe will be the beginning of the next up-cylce as affordability syncs with household incomes at an attenable ratio.
I feel strong about Austin’s long-term prospects. I believe the next few years are a temporary (and perhaps needed) adjustment. Ultimately our economic engine, future growth sectors along with the high desirability of Austin’s lifestyle bode well for our real estate market. Continued rankings such as #1 city to start a business, #3 in millenial growth while ALSO ranking 2nd fastest growing population over 65 ( bottom of P.3) as well as #2 in tourism satisfaction (top of P.4) only bolster the confidence.
Blessings to each of you, let’s do good things for each other and the world in 2017!