By: David Tandy, CEO
Gracy Title, a Stewart company
As published on Realty Line Magazine 8/2010<http://www.realtylineonline.com/Monthlypdfs/RealtyLine_Aug_10.pdf#page=27>
While the Austin MSA continues its rapid population growth rate, single family and multi-family construction has gone through a dramatic slow-down. Will this slow-down in new construction cause a housing shortage?
In June, Austin was the fastest growing market (year-over-year) in the U.S with a 1.3% annual growth rate. Although our population growth has slowed from its hyper-growth rate in 2006 and 2007, we are still projected to grow between 40,000 to 50,000 in 2010. We have averaged over 55,000 per year for the last 5 years. According to the City of Austin Household and Population analysis, one household is created for every two and 1/2 new Austin residents; therefore, we will be adding about 20,000 new households per year to the Austin area based on our population growth. Looking forward over the next decade, those projections show we will add between 500,000 and 600,000 new residents: the equivalent of the entire population of Austin in 1980.
So the question is: Will Austin have sufficient housing options for these new residents?
It’s doubtful multi-family options will meet Austin’s housing needs. For the Second Quarter of 2010 the Austin Planning Commission showed only 975 multi-family units in projects with site plans under review and 8,885 units in projects with site plans approved. Since it takes at least a year to obtain planning commission approval and a year to build and there are only 975 units currently under review, it seems likely that a shortage of apartment units over the next several years will begin to develop. Real Estate developers would already be building more projects but for the challenges of securing commercial financing.
The Texas A&M Real Estate Center projects there will only be about 2,500 units completed this year and we could have as few as 1,000 building permits issued for multi-family units. This would compare to about 8,000 multi-family building permits in 2006 and 2007. Add the additional single family new construction and it’s still hard to imagine how Austin’s housing needs will be addressed. There were 6,678 Residential (single family) building permits issued in 2009 and we are on track to issue about 7,000 for 2010. By comparison, there were 17,600 permits issued in 2006.
To summarize, if Austin’s population continues to grow at its historical rate, in 2010 we will create about 20,000 new households but will create fewer than 10,000 new single and multi-family units combined. These were about the same number of units created for 2009. Due to the difficulty in financing new subdivisions and new apartment projects, we should see a similar deficit in new housing units in 2011 and 2012. At some point, Austin will have a noticeable shortage of new housing units which will impact resale inventories and home prices. Austin has not seen this small number of new housing units since around 1994 when the Austin MSA population was just under 1,000,000.