Mark Sprague is the State Director of Information Capital at Independence Title. He is known throughout the real estate industry for his expertise in economic forecasting for real estate in Texas and Austin. In a speech he gave this month (November 2018) he reported that he expects 2019 to continue be good economically for Austin and Texas. He is predicting that Austin will have 5+ more years of continued appreciation in its real estate values and increase in sales of 3%+ overall in 2019.
One of the reasons for this is that Austin is a desirable place to live and work. This desirability should not be underplayed. Many jobs are no longer tied to location so living in a desirable location is becoming more and more obtainable.
This may surprise you, but Austin still has favorable affordability, even with a .5 point increase in mortgage rates since the beginning of the year. To give you some perspective on interest rates, let's look back several decades. Starting in 1970, 30-year mortgage rates were at 8.26%, in 1980 rates rose to 12.7%, in 1990 rates were at 8.12%, and in 2000 rates were at 6.29%. Today, rates are historically low at 4.725. A good thing to know is the effect interest rates have on a buyers "buying buyer." Every time rates move up 1%, a buyers buying power changes 12%. Sprague thinks rates will continue to rise in 2019, due to improved economy. We can expect one more rate increase this year and three more increases in 2019. But, these increases should cap at no more than 5.5%.
Several other indicators point to continued appreciation of real estate values. He predicts employment growth will be strong in 2019 at 2.5-3.0. And, labor and materials costs will increase between 15% to 30% in 2018 due to supply and demand. Regionally and nationally we are experiencing a tight labor market with a lack of qualified applicants. Plus, consumers are staying longer in homes. Now up to 10+ years. All of this is having a significant impact on supply and demand and is leading to an increase in real estate values here in Austin and in Texas.
I will end with this "take-away" from Sprague’s economic forecast. He says that one of the reasons why many people feel concerned about the Texas markets (especially Austin’s market) is that we’re seeing one of the longest most expansive price growth runs in our collective memories. In other words, there is not a better time to buy than now! Contact me today for help reaching your real estate goals. Let me put my knowledge and 20+ years of experience to work for you!