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The Home Builders Association of Greater Austin2019 Housing Forecast

(11.26.18)

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November 6, 2018 

Austin, TXCollege Station, TXSan Antonio, TXNaples, FLCharlottesville, VASalinas, CALafayette, LA

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Austin Denver Seattle

AUSTIN, DENVER & SEATTLEActive Residential Listings

ActiveListings

7,001

5,131

11,193

7,750 7,530

15,830

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Austin Denver Seattle

Nov. '17 Listings Nov. '18 Listings

Source: MLS

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AUSTIN, DENVER & SEATTLETotal Residential Sales

Sales

2,448

4,703

8,068

2,442

3,732

6,837

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Austin Denver Seattle

Nov. '17 Sales Nov. '18 Sales

Source: MLS

AUSTIN, DENVER & SEATTLEMonths of Supply Based on Previous Year Sales

MonthsOf Supply

2.5

1.01.4

2.7

1.6

2.3

0

1

2

3

4

5

6

Austin Denver Seattle

Nov. '17 months of supply Nov. '18 months of supply

Source: MLS

Equilibrium

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AUSTIN , DENVER & SEATTLEAnnual Home Price Change Trend

Source: FHFA

Ann. Price

Change

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Austin Denver SeattleAnn. Price

Change

-7%-6%-5%-4%-3%-2%-1%0%1%2%3%4%5%6%

Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18

Austin Denver Seattle

AUSTIN, DENVER & SEATTLETrend in Percent Annual Job Growth/Loss

Source: BLS

Ann. Job Growth

Rate

Annual Job Growth Nov. ‘17 to Nov. ‘18Austin: 35,200 (3.3%)Denver: 30,800 (2.1%)Seattle: 72,100 (3.5%)

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3.5 3.3 3.2 3.4 3.5 3.2

4.8 4.65.0

8.2

9.9

0

2

4

6

8

10

12

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

Austin DFW Houston S. Antonio Nashville Raleigh Denver Portland Seattle San Fran San Jose

2017 Median Family Income 3Q18 Med Home Price

Source: NAR & U.S. Census

Multiplier of Median Home Price to Median Family IncomeMajor Texas Markets & Selected Tech Centers

MultiplierMedianHome Price

Multiplier

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

Median Home Price Median Family Income

Source: NAR & U.S. Census

Income/Home Price

1.9X

2.5X

2.5X

3.5X

2.4X

$73,0001990

$39,400

$100,5001995

$318,2002018

$189,4002010$161,300

2005$144,50020002.3X

$91,862$73,800$67,300

$58,900$43,200

The Austin Metropolitan AreaTrend in Median Home Price & Median Family Income

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THE AUSTIN ECONOMY

THE AUSTIN ECONOMY

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THE AUSTIN ECONOMYTrend in Annual Job Growth/Loss

Ann. Job Growth/Loss

Ann. % Change

Job Growth Nov.‘17 to Nov. ’18 = 35,200 Jobs (3.3%)Nov. ‘18 Unemployment Rate = 2.7%

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

0%

1%

2%

3%

4%

5%

6%

7%

8%

Unemployment Rate Annual Job Growth/Loss

Source: TWC

THE AUSTIN ECONOMYAnnual Job Growth/Loss by Category

Annual Job Growth

6,100

200

11,600

500 600

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

Mining, Logging, Const Manuf. Trade, Trans., Util. Info. Fin. Activities

Nov-16 Nov-17 Nov-18

Source: Texas Workforce Commission

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THE AUSTIN ECONOMYAnnual Job Growth/Loss by Category

Annual Job Growth

4,5003,400

4,200

2,100 2,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

Prof. & Bus. Serv. Edu. & Health Serv. Leis. & Hosp. Oth. Serv. Gov.

Nov-16 Nov-17 Nov-18

Source: Texas Workforce Commission

THE AUSTIN ECONOMY-THE OFFICE MARKETAnnual Net Absorption of Office Space

Absorption

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Source: Cushman & Wakefield

Last Four Quarters Net Overall Absorption = 524,195 SFApproximately 4 mil. SF under construction

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THE AUSTIN ECONOMY-THE OFFICE MARKETTrend in Total Vacant Space & Average Rental Rates

AvailableSpace

AverageAsking Rents

Source-Cushman & Wakefield

$20

$22

$24

$26

$28

$30

$32

$34

$36

$38

$40

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Total Vacant Space Average Rents

4Q18 Market Vacancy Rate = 10.6%

4Q18 CBD Vacancy Rate = 7.7%

FAANG Stocks Combined

Net. Cap.: $2.8 Trillion

12 Mo. Rev: $644 Billion

Cash: : $246 Billion

Ford & GM Combined

Net. Cap.: $190 Billion

12 Mo. Rev: $306 Billion

Cash: : $43.5 Billion

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Major Lease Transactions in 2018

Facebook: 320,000 SF Lease (Domain 12)Indeed: 307,000 SF Lease (Block 71)Amazon: 140,000 SF Lease (Domain 10)Visa: 135,813 SF Lease (Research Plaza Park II)

Major Announcements in 2018

July: Selected Austin as home ofFutures Command (up to 500 employees)

Oct: Moving corporate headquarters to East Austin (120 executives)

Nov: Started construction of 420,000 SF Phase II of Riverside Campus

Sept: Announced creation of world class tech facility and innovation lab in East Austin

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Major Announcements in 2018• $1 Billion Investment• 5,000 Employees Initially• Phase One completion in 36 mos• As many as 15,000 employees• 3 million SF of space

Our Housing Markets

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• Entered 2018 With Questions About Supply, Not Demand.

• A Great Start to the Year…Strong Spring Market.

• Things Began To Change Late Summer/Early Fall• Rising Prices & Int. Rate Hikes…Some Buyers Hit a Wall• Continued Delays in Lot Deliveries Pushed Starts• The Mid-Term Elections• Consumer Confidence Shaken by Economic Volatility

• These Factors Combined to Slow Market Momentum Oct. & Nov.

• And Then…A Strong December!

MAJOR THEMES IN NEW HOME MARKET IN 2018

The Resale Market

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THE AUSTIN RESALE MARKETAnnual Closings Trend (SF, TH and Condo)

Source: Texas A&M Real Estate Center

AnnualClosings

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,00034,791 Closings Last 12 Mos. (+3.5%)

THE AUSTIN RESALE MARKETAverage and Median Price Trend (SF, TH and Condo)

Source: Texas A&M Real Estate Center

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

Avg. Annual Sales PriceMedian Price

November 2018 Average Price: $381,919 (+4.4%)November 2018 Median Price: $300,000 (+3.4%)

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THE AUSTIN RESALE MARKETMonths of Supply of Listings & Average Sales Price

(SF, TH and Condo)Sales Price MOS of

InventoryMOS of Listings Has Been <4 MOS for 75 Months

0

1

2

3

4

5

6

7

8

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

Average Sales Price

Months of Inventory

Source: Texas A&M Real Estate Center

THE AUSTIN APARTMENT MARKET

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THE AUSTIN APARTMENT MARKETOccupancy & Rental Rate Trends

4Q18 City-Wide Avg. Rent = $1.45/SF4Q18 City-Wide Avg. Occ. = 93.%

$0.75

$0.85

$0.95

$1.05

$1.15

$1.25

$1.35

$1.45

$1.55

80%

82%

84%

86%

88%

90%

92%

94%

96%

98%

100%

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

4Q18

Occupancy Rate Avg. City-Wide Rent

Source: Austin Investor Interests

AverageOccupancy Average

Rent

• Avg. Rent +50% in 10 Years• Added +64,000 Apts. Last 10 Years

78702

78704NEW CONSTRUCTION

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78702/East Austin (excluding large condo projects)

Last 12 Months Median Sales Price =$489,000 (<3%)Last 12 Months Average Sales Price =$515,740 (+2)Active Listings (new const.) = 16 (16 in 1/18)Sales Last 12 MOS = 139 (132 in 2017)MOS Active Listings = 1.4 mos (1.5 mos 1/18)

24% of sales in the last 12 months <1,000 square feetSource: MLS (Jan. 2019)

78704/Central South (excluding large condo projects)

Last 12 Months Median Sales Price =$653,000 (<11%)Last 12 Months Average Sales Price =$839,729 (+5%)Active Listings (new const.) = 49 (65 in 1/18)Sales Last 12 MOS = 130 (138 in 2017)MOS Active Listings = 4.5 mos (5.7 mos 1.18)

Source: MLS (Jan. 2019)

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5th & West• 154 Units• Complete• +90% Sold

Independent• 363 Units• 1Q19• 86% Sold

Austin Proper• 98 Units• April 2019• +71% Sold

70 Rainey• 164 Units• 1Q19• 75% Sold

THE HIGH-END MARKET

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THE AUSTIN LUXURY MARKET-NEW & RESALEActive Listings, MOS & Sales Last 12 MOS +$750,000

Source: MLS

Jan ‘19 Overall MOS of Active Listings +$750,000 = 5.1 MOS(Down from 5.9 MOS in January 2018)

4.3 3.7

7.46.2

18.6 17.7

0

5

10

15

20

25

0

200

400

600

800

1,000

1,200

$750K-$1Mil. $1Mil.-$1.5Mil $1.5Mil.-$2Mil $2Mil.-$2.5Mil $2.5Mil.-$3Mil +$3Mil.

Active Listings Sales Last 12 Months MOS Active Listings

Jan. ‘184.0

Jan. ‘185.3

Jan. ‘189.2

Jan. ‘1811.2

Jan. ‘1818.4

Jan. ‘1820.5

Sales/Listings

MOS ActiveListings

THE AUSTIN LUXURY MARKET-NEW CONSTRUCTIONActive Listings, MOS & Sales Last 12 MOS +$750,000

Sales/Listings

MOS ActiveListings

Source: MLS

Jan. ‘19 Overall MOS of Active Listings +$750,000 = 6.4 MOS(Up from 5.7 MOS in January 2018)

7.3

5.2

6.7

2.2

4.0

10.7

0

2

4

6

8

10

12

0

25

50

75

100

125

150

$750K-$1Mil. $1Mil.-$1.5Mil $1.5Mil.-$2Mil $2Mil.-$2.5Mil $2.5Mil.-$3Mil +$3Mil.

Active Listings Sales Last 12 Months MOS Active Listings

Jan. ‘184.8

Jan. ‘185.8

Jan. ‘185.3

Jan. ‘186.0

Jan. ‘188.0

Jan. ‘1826

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A Forecast for 2019

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• Economic Data Suggests Continued Strong Demand for Housing in Austin.

• Good Sales in December & Early January Bode Well for Spring Market.

• Buyer Confidence More Fragile Than Any Time This Cycle.

• Higher Interest Rate & Price Increases Combine to Increase Costs.

• Builder’s Challenges to Deliver the Right Product Persist:• Land/Lot Issues (location, price, entitlement, utilities)• Labor Shortage Persists (who controls labor?)• Material Prices…Lumber a Bright Spot!

• Biggest Pubic Builders vs. The Rest of the Pack• Resources, Margin Pressure…

2019 FORECAST: PRIMARY FACTORS TO CONSIDER

The Home Builders Association of Greater Austin2019 Housing Forecast

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For further information, contact:Eldon Rude, Principal360° Real Estate Analytics512‐796‐7850erude@360reanalytics.com