Thanks to the Home Builders Association of Greater Austin and Eldon Rude of 360 Real Estate Analytics for inviting me to participate in the 2016 Housing Forecast today. Slides are now posted: HBA 2016 Housing Forecast.
2016 will be an interesting year. We’ve reached some major milestones in Austin:
- Austin-Round Rock MSA likely surpassed one million jobs and two million in population in 2015. We’ll know more when the Census Bureau publishes the 07/01/15 estimate in March.
- Unemployment in Austin (city and MSA) is down to its lowest level since the dot-com era. With job growth of 3.0%+ annually and historically low unemployment, we’re finally seeing some upward movement in wages, at the average at least. In fact, it took fifteen years, but average wages in Austin are finally back to pre-dot-com recession levels.
- Total employment in the tech sector in Austin has surpassed peak employment of the dot-com era. Tech companies in Austin added more than 23,000 jobs between 2010 and 2015, a 27% growth rate that was nearly double the growth rate of other leading Texas markets and well above most peer markets around the country, with the exception of San Francisco (42%) and San Jose (31%). Manufacturing employment in the tech sector appears to have stabilized for now, and Austin’s IT Services and Applications industry (NAICS 5415, for data wonks), is among the highest performing markets nationally, doubling in employment since 2010.
A few other thoughts from today:
- There is still a great deal of uncertainty about how sustained lower oil prices will impact Austin, relative to what’s going on in the rest of Texas. Eldon brought up a good point today about underperforming assets in Houston and what that might do to availability of capital and real estate investment in Austin. Discretionary spending in Austin could also take a hit, since oil and gas holdings have generated a lot of income for Austin residents holding them over the last few years; same goes for the pricier end of the housing market, I suppose.
- But I still think Austin’s biggest exposure is how the state budget may be impacted. State government accounts for about 7.5% of total employment in Austin, more than 70,000 jobs. If sustained lower oil prices start to translate to budget cuts and staff reductions, then we’re going to feel it. So while lease holders, investors, and people working for oil and gas related firms in Austin may be having a different experience, there’s no evidence that lower oil prices are having much of an impact on the Austin labor market, at least not yet.
- EMSI projection for job growth in 2016 is 3.1%, with tech at 2.4% (3.1% services, 0.4% manufacturing). The consensus forecast for Austin at this time last year was in the 2.0%-2.5% range, with most forecasting firms expressing a great deal of uncertainty about how the oil and gas market would impact Austin. With a year of data now available in the context of lower oil prices and slower statewide growth, perhaps the forecasters are a bit more confident of Austin’s resilience in the face of what’s happening in the rest of Texas. We’ll see.
Finally, what would a forecast be without a new year’s resolution? If you look at only one slide from my presentation today, please make it Slide 13. It’s about as plain as I can make it in terms of how educational attainment, income disparity, and housing costs are painting a discouraging portrait of economic segregation and inequality of opportunity in Austin.
We hear a lot about traffic these days from our elected leaders in Austin and around the region. Yet, it’s the one issue we can do the least about. Traffic is an inevitable consequence of economic growth, and until people make different decisions about where and how they want to live–contingent on having more affordable housing and better transit available to give people that choice of living differently–traffic is going to get worse. Dispensing with the calls for “fixing” traffic or employing an “all of the above” approach to transportation would be a great way to start 2016. I realize it’s good politics, but it distracts from the real trade-offs we need to grapple with.
Instead, let’s focus on something we can do something about: empowering more people with education and training they need to fully participate in Austin’s dynamic, growing economy. Increasing the number of high schools offering dual credit so students have the opportunity to earn a postsecondary degree–the prerequisite for having a chance to keep up with rising cost of living in Austin–before graduating and leaving home. Taking a close look at the positive impact of family resource centers (disclosure: I’m on the TAP board) and the community school model as stabilizing factors in areas undergoing rapid change.
Investing in neighborhoods willing to innovate, something we profess to love so much in this town.
Austin isn’t alone, of course, in facing challenges related to economic segregation. However, the astounding influx of wealth (Slide 11), high-wage job creation (Slide 7), and rapidly increasing housing costs are putting a finer point on it here, especially compared to peer markets like my hometown area, Raleigh-Durham. Given the limited tools and resources at the disposable of cities and counties in Texas, we’re not going to “fix” any of these challenges, at least not locally. But we can make progress toward measurable goals, if we’re willing to be serious about it.
Inclusive prosperity would make a great 2016 resolution.