Get a Degree and you get to Rent

The headline doesn’t make sense but it is a true statement.  As taken from a recent article in REALTOR magazine, a recent federal study found that the cost of getting a college degree is keeping many grads from home ownership for about seven years.  I can personally state that the amount of student loans is sometimes staggering as I’ve reviewed hundreds of applications of recent grads whose debt to income ratio is way out of proportion which is one of the reasons they are renting.  It’s not uncommon to see a student loan payment of $500 a month coupled with a new car payment (hey I just graduated why not treat myself) of $450 and credit card debt of $250 a month.  Subtract what the feds take out in income tax, social security etc. and all of sudden there is too much month left at the end of the pay check.  Couple this with the fact that millennials are predisposed to move around anyway and you can make a good case for own well placed residential real estate to accommodate their life style.

 

If you didn’t catch the news, Apple is expanding in north Austin and will add 5,000 new jobs and a recent report states that the Austin population will grow to over 1,000,000 by 2021.

 

Now aren’t you glad that you own Austin area residential real estate!

 

Rick Ebert / Austin, Texas / 17 Jan 19

Renting vs. Buying – If I Could

As recently reported in RECON, an on line reporting firm for real estate professionals, a study by ATTOM Data Solutions 2019 Rental Affordability Report stated that for every $1,000 price increase of a home that 127,500 people are priced out of buying a home.  The study compared wages to rent to obtain a percentage of wages towards rent and to buying a median priced home with a 3% down payment.  They then added in property taxes, property insurance, and private mortgage insurance which is required by most lenders for folks not having a 20% down payment.  I note that it is interesting that they didn’t calculate any repair or maintenance costs which I do when analyzing an investment property.  Could they possibly think that a home is maintenance free?!

 

Over 71% of the 45 Texas counties surveyed (Texas has 254 counties) were found to be more affordable to rent than to buy.  In our area that included Travis county (Austin, Pflugerville, Oak Hill), Williamson county (Round Rock, Georgetown, Leander, Cedar Park), and Hays County (Kyle and Buda).

 

The study reported that affordable housing (especially in our area) is becoming scarce because of many reasons:

 

  1. Dwindling number of affordable lots
  2. Increase in building materials
  3. Increased labor costs
  4. Increasing property taxes (I added this one)

 

So what does this mean for us residential real estate investors in our local area?  It means that you have a potential gold mine.  If it is cheaper to rent than to buy, why buy (even if you could)?  With Apple adding 5,000 additional jobs to our local area that will spin off even more jobs and that means more potential renters for our properties.

 

Not to mention that this week a local economic forecaster this week stated that Austin will reach a population of 1,000,000 in 2020.

 

All these folks have to live somewhere and in something and that folks is our gold mine.

 

Rick Ebert / Austin, Texas / 10 January 19

Austin’s Economy – Reading the Tea Leaves

A recent article in our local paper, the Austin American Statesman, had forecasts from many local economic gurus who gave their opinions on what to expect in 2019. In sum, this year should be similar as 2018 but perhaps not quite as robust as the national economy (look at the stock market this first week of 2019) is showing signs of sagging a bit. Yet Austin is predicted to weather the stormy weather. Here’s why the tea leaves bode well for our august area.

Andrew Glover, a UT economic prof predicts that Austin for 2019 should continue with low unemployment and a high growth rate.

Major players in our area are expanding. Apple will add 5,000 additional jobs to a new north campus. Samsung will add 550 new jobs. Indeed, an online job search firm will be adding as many as 3,000 new jobs as will Oracle.

Eldon Rude, a long time fixture on reading the Austin economic tea leaves stated that there may be a retreat in home building because of higher interest rates and higher home prices. This coupled with the scarcity of affordable lots makes it difficult to build an affordable house. The median price of an average home in our area has increased 40% in the past five years.

Remember when I blogged back then that it was a good time to buy Austin area residential real estate? Well it still is.

Rick Ebert / Austin, Texas / 4 January 19

3,000 more jobs coming to Austin!

Indeed is a home grown internet job search site that recently announced that they are expanding their operations over several years because of their success.  Indeed collects job postings from all over the world and posts them on the net, posts job resumes, and research companies.  They have over 200 “million” folks use their site every month.  According to the article in the Austin American Statesman Indeed currently have 1,600 employees and is an active recruiter of engineering talent but also has staff in the fields of finance, legal, sales and marketing, and in corporate development.  New hires will be sought in all of these fields and it sounds if the positions will pay handsomely. A spokesperson for Indeed informed the paper that the reason for expanding in Austin is the same reason why they started here in the first place:  diverse talent pool and Austin is an attractive place to live.

Now these new hires, many of whom will be our good friends the millennials, will need a place to live.  Millennials continue to like to be unattached to real estate and will rent vs. buy.  And this is good news for us who are holding Austin area residential real estate.

Rick Ebert / Austin, Texas / 20 May 18

Round Rock is About to get Wetter!

Recently a local TV station, KXAN, ran a feature piece about a new water park that coming to Round Rock.  Kalahari Resorts broke ground on a 1.5 million (that’s not a typo) square foot “indoor” water park and convention center.  The hotel will have 1,000 rooms and the water park will be the largest in the country. The location is near the Dell Diamond at US 79 and Kenny Ford Road.  The cost of this Texas sized colossal is a cool $550 million.  An estimated 2,000 jobs will be created from this enterprise that is expected to be completed in 2020 and that is great news for us investors in residential rentals as these folks will need to live somewhere.

Now is absolutely a great time to own Austin area residential real estate.

Rick Ebert / Austin, Texas / 16 May 18

Forbes ranks Austin #2

A recent Forbes article has ranked Austin as the number two city for Big City Job Growth.  In fairness Dallas was ranked number one, but then of course one would have to live in Dallas!  The Austin job was cited as having a 3.4 % job growth in 2017 and reportedly grew jobs at 39% since 2006.  What is interesting is that the article stated that the tech industry wasn’t the biggest sector of the job growth; it was in fact professional and business services which grew 37.1% since 2006.  The article went on to state that Austin’s expansion is fueled by population growth (now which comes first, the chicken or the egg?) which showed the strongest increase in cities with populations of 1 million or more.  This influx of new Austinites created jobs in retail, construction trades, and financial services.  So the old adage of “success breeds success” holds true.  And of course these jobs bring diversity to the job market.

The flip of the coin is what is happening on the west coast and especially in Silicon Valley.  Silicon Valley is in fourth place and the article stated that the San Francisco-Redwood City area dropped from being number two and has landed at number eight.  Seattle always a contender, is in ninth place.  The article went on to state that what is hurting the west coast is the high cost of living and that Seattle may be pricing out potential new residents.

Speaking of prices, the Austin area, has seen an approximate 7% home price increase in 2017 and this is of course discouraging some folks from buying a house.  But our prices are well below those of Seattle and the Bay Area, so those migrants to our fair area can, in most cases buy a house if they are being transferred to the Austin area if they want to do so.  However many are millennials and would rather rent then buy at least in the near future.

All of this sets up a perfect reason for owning Austin area residential real estate.

Rick Ebert / Austin, Texas / 8 May 18

Charles Schwab Expands in Austin

As reported in the Austin American Statesman Charles Schwab will be expanding its Austin presence by an additional 470,000 square feet of office space (that’s almost eleven acres) to house hundreds of new hires.  Schwab already has 1,900 employees in Austin. The expansion will be the creation and enhancement of digital products for their customer base and in all fairness they are also expanding these services in San Francisco.  Austin was chosen because of the talent pool available to meet their needs.  The location for this facility will be near the Domain, a high end retail, dining, and condo area in north Austin.

This good news is just another good reason why owning Austin area residential real estate is a great idea.

Rick Ebert / Austin, Texas / 4 May 19