Real Estate

Apple's Big Announcement and Its Impact on Austin

In early December, while all eyes were on Amazon’s HQ2 announcement, Apple made an important one of its own:  the decision to invest $1 billion in a new 133-acre Austin campus that will increase Apple to upwards of 15,000 employees in the coming years. With the completion of this campus, Apple will surpass other well-known names such as H-E-B and Dell to earn the title as the largest private employer in the city of Austin.

The Apple campus will be located right next to its counterpart just over the county line in Williamson County, placing it 12 miles from the city center. It will bring in a good mix of middle to upper range jobs in technology, research and customer call centers. In addition to catapulting Austin into the big leagues as a technology center, the incoming Apple campus will impact all sectors of life, such as housing, restaurants, traffic, and retail marketplaces.  Some estimate that the overall impact of the new Apple campus could result in over 30,000 new jobs across all sectors of real estate, construction, and the marketplace in Austin. 

What impact will this swell of jobs have on the Austin housing market? Prices will continue to rise if more supply is not created to meet these additional demands. As housing prices in the urban core of Austin continue to escalate, look for more incoming Apple employees to search for homes in the Round Rock, Pflugerville, and Hutto areas because of their close accessibility to the Robinson Ranch area (where Apple is located) via SH 45. Other communities that will likely see further development are Liberty Hill and Leader as I-35 will also become a main thoroughfare for Apple employees.

What might the arrival of Apple mean for your housing sale or purchase? If you are shopping in the housing market right now, the answer is simple.  The sooner you can buy, the better.  Competition and prices are only looking to increase. However, if you own a home in North Austin, you might want to hold onto it for a couple more years.  That is, if you can afford its increasing property taxes!

The addition of the new Apple campus will only contribute to Austin’s reputation as a knowledge and talent center and will continue to draw more people from the West Coast who are looking for solid tech jobs in more affordable housing markets.  However, the infrastructure will have to work hard to keep up with the demands of this brand new influx of people to make this a win for all Austinites.

Supply and Demand in the Austin Housing Market

Real estate is a business of supply and demand.  For the past four years in Austin, Texas, there has been less than four months’ worth of housing inventory available. Data shows that low supply in the housing market also drives up the median home price.   

In a relatively short period of time, there’s been a dramatic shift in home sales by price range. In 2011, 67 percent of houses that were sold were priced below $250,000, while 32 percent were priced from $250,000 to just under $1 million. By 2017, those percentages flipped: 63 percent of sales were above $250,000, and 35 percent were below.

The trends of low supply and high demand look to continue as Austin’s population is projected to increase from 1 million in 2014 to an estimated 2.3 million in 2020.  In 2017, Austin saw 151 net new people move to Austin every day. 

In the past 10 years, the median home price in the Austin area has soared as well. In 2018 so far, the Austin median home price is $319,000, up 66 percent from $192,000 in 2008, and median home prices in recent years have seen a year-over-year increase of 5.4%.  

What does all of this mean for the continued growth of the housing market?  There are some that think there will be an inevitable “normalization” of this strong market curve, while others that think the housing market will continue to boom as the city’s economy and job markets proper. 

What, if anything, could cause a downturn in the market in coming years?  Perhaps a 2020 U.S. presidential election? Other potential factors could be trade/tariff issues, labor shortages, increased traffic and potential water-supply developments as the city continues to expand. 

However, for now, we are enjoying a real estate market that continues to boom with demand significantly higher than supply in Austin, Texas. 

Are you wondering what the fair market price of your home is?  Contact me for a complimentary home evaluation today!

 

 

 

Articles sourced:

1. http://austin.culturemap.com/news/city-life/09-15-15-what-will-austin-look-like-in-2020-new-lawnstarter-report-confirms-rapid-growth/

2. https://www.statesman.com/business/20180627/expert-outlook-bright-for-austin-economy-housing-market

3. https://communityimpact.com/austin/central-austin/development-construction/2018/02/01/austin-housing-market-expected-to-continue-growth-despite-low-supply-and-increasing-interest-rates/

4. https://www.bizjournals.com/austin/news/2018/03/22/austins-population-keeps-popping-heres-how-many.html

Conventional 30 Yr Fixed Interest Rates Are Going Up

The overnight rate is the interest rate the central bank sets to target monetary policy.  Since the Federal Reserve decides when to increase the overnight rate, it can be a good predictor for the movement of short-term interest rates for consumers in the broader economy.  When the Fed increases its interest rate to the banks, the banks then tend to pass on some, if not all, of that increase to the consumer.  Therefore, the higher the overnight rate, the more expensive it can be to borrow money.

After an extremely low interest rate in the recession of 2008, the overnight lending rate has been increasing slowly over the past 10 years and is expecting another rate hike in December, three more hikes in 2019 and another increase in 2020. 

source: https://tradingeconomics.com/united-states/interest-rate

source: https://tradingeconomics.com/united-states/interest-rate

As mentioned previously, many predict that this overnight rate hike will result in increased interest rates being passed on to the consumer. 

30 YEAR FIXED RATE MORTGAGE INTEREST RATE FORECAST 2018, 2019, 2020

https://longforecast.com/mortgage-interest-rates-forecast-2017-2018-2019-2020-2021-30-year-15-year

https://longforecast.com/mortgage-interest-rates-forecast-2017-2018-2019-2020-2021-30-year-15-year

Since the Fed has continued to announce project rate hikes until 2020, here are some suggestions for you, the consumer, to think about now:

1.      Pay close attention to variable interest rates.  These will continue to rise as the federal rate rises.  Credit cards interest, home equity lines of credit and adjustable rate mortgages will continue to climb. Student loans with variable interest rates may also be impacted.

2.     If you are a borrower with an adjustable rate mortgage, consider refinancing if your interest rate is set to change in the next 1-2 years.

3.     The sooner you can lock in a fixed rate mortgage, the better.  Even if you are in the process of searching for a home, many lenders will let you lock in a fixed rate once you have been pre-approved for a loan.

Seasonality in Real Estate

While you might not think the seasons of the year have an influence on the price you are paying or asking for your home, it can make a big difference – in some cases, as much as 10%.

Seasonality of Real Estate—What are the Key Factors?

1. Weather-Weather impacts the seasonality of real estate differently, depending on the climate your home is in. For example, in some popular ski resort towns, homes prices can skyrocket during the winter months, while winter impacts the market in other areas negatively. Understanding how the weather and its seasons impacts real estate value is an important consideration both for buying and selling.

 2. School Year- Studies have shown the busiest moving times of the year occur during the summer, with June being one of the busiest months and July 31 the single busiest moving day.  This data means that people are most likely to shop the housing market from the beginning of May through the summer months.

 3. Holidays- Many people do not want to move or uproot their family during the holidays, which essentially eliminates the period between November and January.  Many people do not want to add a move on top of all the extra obligations of the holiday season.  However, as a buyer, the holidays would be a good time to leverage a lower priced market combined with some holiday vacation days! 

What Does Seasonality Mean for Home Buyers? 

For a home buyer, it’s better to buy in an “off season.”   As a buyer in off season, you will have more negotiating room, less competition, and overall lower prices for the houses on the market during the off season. In addition, sellers may be more willing to give more concessions such as money for repairs or a longer closing period in order to firm up a contract on a house during the leaner selling months.

What Does Seasonality Mean for Home Sellers? 

If you are a seller, you want to obviously sell during those summer months, when the competition is fierce and the market is hot.   Multiple offers and bidding wars are your friend as a seller.  However, the downside is that when you are a seller, it usually means that you are also a buyer.   In an ideal world, sell in the spring/summer months to make the most profit on the home that you are selling. Then find a 4-6 month temporary living arrangement that would allow you to wait to buy until the winter or holiday months when seasonality and lower prices are typically on your side as a buyer.

 

I’m Thinking of Buying/Selling. What Are My Next Steps?

If you are working with a real estate agent, they should be able to provide you with the market metrics for different seasons in your area. By comparing different months and years, you’ll be able to identify where there are significant peaks and lows in your current market and determine when your areas ideal periods for both selling and buying. Interested in the Austin area? Contact me today 512-817-0855. I would be happy to provide you with market trends of any area in Austin and a seasonal analysis of the best time to buy or sell!





The Four Keys To a Successful Inspection

As a prospective home owner, what key items should you look for when the inspection report comes back?  How do you know what items might be potential deal breakers and which are simple repairs? I recommend you start by looking into these 4 categories of major home repairs.

1.     Roof- How old is the roof?  Has it had any previous repair? Have there been any leaks due to problems with the roof? 

A standard roof life is 15-18 years and can cost between $6,000 and $16,000 to repair, depending on the size of the home and on insurance coverage.

2.     Foundation- Has there been any significant shifting or cracks along non-natural seam lines?  Does the floor dip or shift in some parts?

You are looking for the inspection report to say that there has not been any standard significant movement of the foundation.

3.     Electrical- Is the wiring aluminum or copper? Copper wiring is more widely used in homes today due to its greater conductivity and heat resistance.   Aluminum wiring can still be found in some older homes.  Aluminum is much harder to repair than copper wiring, does not conduct energy as well, can tend to overheat and cause damage, and greater care has to be taken to install it properly in the home.  

Ideally you are looking for the inspection report to say that the home uses copper wiring and that no significant electrical issues were detected.

4.     Plumbing- Is the plumbing cast iron or PVC?

Cast iron plumbing will eventually rust from the inside out and should be cleaned out annually to remove build up.  Cast iron was used heavily in construction during the WWII era, so many older homes might have cast iron plumbing in use.  Cast iron is not a deal breaker, but it requires more upkeep and maintenance and can require contractors to dig underground through the slab to get to the pipes. 

Look for the use of PVC piping in the inspection report. If cast iron is used, make sure you understand how it can be accessed for future inspection and repairs and get the inspector to give you a status report on the integrity and lifespan of the cast iron used.