Real Estate Blog

Coming out of the election season and going straight into the holiday madness, the pundits and newscasters are having a field day with negative reports about foreclosures and mortgage delinquencies. The issue of the fiscal cliff is certainly real, and has implications for all of us, but if we listened to all the naysayers on the networks, we'd throw ourselves off that cliff long before we're driven off.

Here's the thing you have to remember about the nightly news. We're talking sound bites. The real picture about what is happening in the housing market is too complex to be dealt with in a couple of minutes before the next commercial. A large part of that deeper story involves how people are ordering their lives in response to the poor economy over the past 5 to 6 years.

Pent-Up Demand for Household Creation is Growing

Of all the indicators that make me believe we could be looking at an actual housing boom in the coming years, household creation tops the list. There's a tremendous amount of pent-up demand in this country. Throughout the recession, the lousy job market, the looming student loan bubble, people have been waiting.

We've seen delayed marriages and delayed divorces. Young people have moved back home after college instead of getting a place of their own. They're sharing apartments to cut down on expenses. For the first time since 1940, fewer than half of the households in this country are maintained by married couples. While economically feasible, a less than ideal living situation is stressful and even the most patient people get tired of waiting.

When an economy starts to improve, the first thing people do, is improve their living situation. Is the economy back to where it was? No, and frankly in many respects, we don't want it to be. For as painful as it was, hard financial lessons were learned during the recession, and necessary corrections have been made, and are continuing to be made in the lending industry.

Demand Translates to Investment Opportunities

How does that translate for us as real estate investors? The suppressed demand for housing will translate to larger numbers of people looking for long-term lease opportunities. It's a big leap to go from living over Mom and Dad's garage to buying a house, but a reasonable move to look at improved finances and contemplate a lease.

Locally, all indicators in Texas in general, and Austin in particular are poised to take advantage of that situation:

- Texas leads the nation in jobs creation.

- The projected population growth in Austin is currently at 60,000 annually (or 160 new residents every day.)

- Texas is the second most popular retirement destination for Baby Boomers.

- There's no state income tax in Texas.

- Businesses are moving here in droves, with high tech endeavors and alternative energy leading the pack.

The Austin culture is just icing on the cake. People are attracted to the laid-back, funky way of life, and to the live music scene.

Currently, Austin has a limited residential inventory with rental occupancy at 95-98%. If you have a good rental property in a high demand area, potential tenants will be knocking down your door. In fact, HomeVestors tapped Austin as one of the top 25 areas in which to buy investment property.

The recovery is stronger in Austin (and really in Texas) than it is nationally. Certainly potential policy changes being contemplated, as a budget solution by lawmakers in Washington will affect the housing market. Real estate investors will have to respond to those, but the thing to understand is that market trends are improving and they are looking especially strong for the Austin area.