Housing Today --Thoughts for the Future

Texas Municipal League

February 2, 2013Terry Mitchell

Housing 2013 – The Present

• Nationwide housing market is recovering– Starts UP about 23% Year over Year – 565K– Still 69% less than 2006 Peak – 1.8mm

• Texas almost doubled next state in starts– Texas close to 80K starts– Florida second at about 41k starts

Housing 2013 – The Present

• House prices increasing across the U.S.– Case Shiller Price Index up 3.6% (3rd Qtr 2012)– FNMA Price Index up 4.1% (3rd Qtr 2012)

• Traditional factors affecting Housing demand and pricing:– Job Growth (really population growth)– Inventory (Economics 101)– Interest Rates (historically a short term factor)– Consumer Confidence (US – 65.1; Texas +/- 96)

Housing 2013 – The Present

• Job growth births housing demand . . . .• Housing demand births more jobs . . .• More jobs increases housing demand . . .So, with housing in full recovery mode, what should we expect in the future?

Housing 2013 – The Future

Expect prices for housing – rents and for-sale – to RISE

• 2008 financial meltdown froze capital, but Texas continued to grow

• For about 4 years, very little development occurred, creating very tight market

• Capital still tight, and constraints on inventory persist

Housing 2013

• Another reason for Price increases – REDUCED HOUSING INFRASTRUCTURE

• Reduced manufacturing plants – sheetrock, roofing, lumber, etc.

• Reduced labor force• To resolve, industry has to pay to build and

recreate construction industry• Prices will rise – in some areas, dramatically,

until this issue is resolved

Housing 2013 – The Future

• Prices up.• Incomes relatively flat.• Means more and more Texans will struggle to

find adequate housing.• Why important?– It is the “right thing” to do– Our economic health and competitive advantage

is strongly tied to our cost of living

Housing 2013 – The Future

Three Ways to Lower the Cost of Housing (without government subsidy):

• Cheapen the product. (A tent costs less than a brick home.)

• Make the home smaller.• Increase the density.

Still need open space, community,safety, convenience, connectingplaces . . . Can create exciting, connected places.

Housing 2013 – The Future

• New dominant demand for housing – over next 10 to 15 years – is the Gen Y generation

• Looks at life differently than Baby Boomers and other generations . . . May be less inclined to travel; less inclined to buy; more inclined to want “community” and “gathering places”

• The town square; the coffee shop; the “connected” place . . .

Housing 2013 – The Future

Reality of today: Tight budgets

• Feds are strapped in all areas and are pushing costs to states and cities– Healthcare, transportation, education

• States (even Texas) are tightening belts and pushing costs to local level

• Cities – no excess funds . . .

Housing 2013 – The Future

• Our planning decisions forever affect us. . .

• The natural environment, consumption of natural resources, our taxes, our quality of life – all are affected by the planning decision we make.

Housing 2013: The FutureAn Austin Example

• Austin (metro) is expected to grow 580,000 people over the next 10 years . . .

• Austin grew 67,000 in 2011.

• Focusing on the individual home may have unintended consequences for our environment and natural resources . . .

What will Austin look like in 10 years?

• 580,000 new residents . . . At 2.6 people per housing unit, means 223,077 new housing units will be needed . . .

Suburban Density of 3 Units/Acre

• At a suburban density of 3 units per acre, we will need 74,359 acres of land to house just our population growth over the next 10 years.

. . . or 116 square miles. . . .

Townhome Density of 10 Units/Acre

At a townhome density of 10 units per acre, we will need 22,308 acres of land to house just our population growth over the next 10 years. . . . Or 35 square miles. . . .

Downtown Density of 200 Units/Acre

At a downtown density of 200 units per acre, we will need 1,115 acres of land to house just our population growth over the next 10 years.

. . . Or 1.7 square miles. . . .

What Differing Densities Look Like

• . . . Which pattern of development is more sustainable? Which pattern costs less to maintain and operate?

Roads and Utilites built with eachForm of development . .. .

Roads and Utilities constructed with each pattern of development

What does the differing forms of development mean for Austin?

• If you take the roads – and utilities under the roads – that must be built to house these folks, over the next 10 years (for Austin), you will be building enough roads to get you to:

• At 3 units per acre, almost to Seattle, WA.• At 10 units per acre, almost to Oxford, MS.• At 200 units per acre, about to San Marcos,

TX.

Costs to Operate and Maintain

Consider costs of police, fire, emergency response, road/utility maintenance . . .

Direct, UnintendedConsequences

Jobs . . . In Relation to Housing.

Traffic congestionIn part caused By location of jobsIn relation to Housing.

Housing 2013 -- Summary

• Absolutely blessed to live in Texas. (Amen.)• Housing recovery well underway.• Housing will strengthen economy in near term.• Prices will rise – rents and for-sale prices.• How do we plan for the future?– How you plan will affect the cost of housing.– How you plan will affect your municipal costs and

our natural resources.

Thank you!