I recently attended a round table discussion with economist, Angelos Angelou, on the Austin real estate market. Here is a summary of our conversation:
In Austin, we have one of the most stable real estate markets in the country. Nevertheless, Austin is not immune to the turmoil in the housing, financial, and equity markets that is occurring throughout the country. "We have been impacted here as well from the repercussions of the credit boom that made it so easy to buy homes, cars, and develop real estate. The negative impacts on our economy should last through most of 2009."
Right now in Austin we know that home sales are sluggish. "There is about a 10% - 30% decline in sales, depending on the area and price range. In times like these buyers tend to hold back, hoping for better buys in the coming months. This slows the market even more. On the positive side, there will be some pent up demand when the bottom is perceived to be reached."
"As the national economy moves into a recession, job growth and retail sales will decline. This will further slow the national housing recovery. In Austin, the economic problems have been limited to the tightening of credit markets, and have not yet translated into job losses in the wider economy. To be sure, most businesses, are feeling the pinch of reduced sales".
Historically, in difficult economic times, people tend to move to places where the economy is healthy and there are jobs. This will help Austin weather the downturn. The positive perception of Austin as a great place to live attracts newcomers. Newcomers with good jobs, in turn, keep the housing market moving. Movement in home sales keeps prices stable and modestly appreciating.
"Areas like Austin tend to recover quickly, no matter what the challenge might be. Folks do not need to be recruited to move to Austin. They already want to come here. Very few cities have this kind of mystique. The Austin brand is strong. The University of Texas and state government are mainstays of our economy. We have a youthful workforce, with 36% in the 25 - 44 age range. This is the demographic that high tech companies want."
However, Austin is evolving as a high tech center. In 2000, there were about 120,000 people employed in 1,600 high tech companies in the Austin area. In 2008, there are about 85,000 people working for about 1,200 high tech companies. We all are aware that many high tech jobs (manufacturing, support, call centers, etc.) have moved to Asia and other countries. In Austin, we are moving toward high tech start ups and research & development, rather than high tech manufacturing.
In today's difficult times it is more important that ever that our city leadership re-focus its efforts to attract companies that provide jobs in Austin. The needs of engineering companies, versus manufacturing companies, versus research and development companies are very different. There should be a strong, unified public policy focused on recruitment and retention of companies that provide quality jobs.
"In the 1980's our city leaders joined with the University of Texas and the Chamber, and went after high tech jobs. They put "Sillicon Hills" on the map. Today we need that kind of concerted effort and attention. We hear of some successes, but there have been many missed opportunities to recruit quality companies to Austin. We don't hear of the companies that quietly selected another city. Under the leadership of the Chamber, economic development must be supported with all of our enthusiasm and tenacity, and with one voice, to create the high paying jobs and capital investment that we need to support our quality of life."
Mr. Angelou is adamant about two things: The first is the need to promote economic development with a focus on recruiting new and impactful companies. And the second is the need to improve on the rate of companies that select Austin, after considering Austin. This kind of momentum and leadership is required to create the jobs that, ultimately, sustain our housing market.
Mr. Angelou will give an overview of the Austin economy and offer projections at the annual Economic Forecast event at the Convention Center on Jan. 15, 2009, from 7:00 - 9:45 am.
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