Austin economy looks sunny, with affordability as the biggest cloud
Friday, December 7, 2018 by Chad Swiatecki
Austin business and policy leaders were shown a optimistic picture of the state and local economy Thursday at the Austin Chamber of Commerce’s annual economic forecast, with the smallest concern on the horizon partly a result of the city’s strong growth for more than a decade.
The fundamentals for the city remain strong. Austin is netting 82 new residents per day, or roughly double the statewide average and well beyond the national population growth rate.
The city’s five-year gross domestic product growth of 6.5 percent bested the state’s 6 percent number, itself almost double the national average. Annual job growth of around 4 percent puts the Austin metropolitan area ahead of larger cities Dallas and Houston.
Much of that job growth has come from a strong information sector, which is where many tech jobs wind up being categorized in macroeconomic studies, though that trend has played a role in Austin’s housing market showing some signs of fatigue. In the recovery from the 2008 recession, Austin’s home prices are 40 percent higher than pre-recession prices, a dynamic that Sarah House, an economist with Wells Fargo Securities, told the crowd is starting to slow the pace of sales and increase the level of price cuts.
“We’ve seen house prices in Austin climb to about 40 percent above pre-recession levels when the average is about 5 percent, so there’s been tremendous price appreciation that we’ve seen, which of course creates a lot of frustration for folks who are trying to enter the market,” she said. “With mortgage rates rising, the affordability issue is coming home to roost a little bit. We’re beginning to see home sales slow a little bit, price cuts increase, and that reflects a recalibration we’re starting to see between buyers and sellers.”
Still, House said there is no reason to expect Austin’s overall economy to flag in 2019, even if national and global debt levels, possible trade wars and other factors make a recession or broad economic slowdown more likely.
Mike Rollins, president of the chamber, told the Austin Monitor that an important component of the local economy will be the adoption and rollout of the city’s revised economic incentives policy, which is intended to fuel the growth of small businesses and middle-income jobs rather than attracting large corporations with hundreds of six-figure employees.
Rollins also said there are issues the chamber will be watching in next year’s state legislative session, but said the early bill filing is a premature time frame for his group to begin weighing in and lobbying on issues of concern.
During a post-forecast panel on economic disruption and Austin’s attractiveness to global firms and organizations, talk frequently returned to the city’s role as a talent magnet and the presence of prestigious higher education institutions as key strengths.
Talking about the U.S. Army’s mission to revamp its operations – which is part of why Austin was selected as a site for Army Futures Command earlier this year – Col. Patrick Seiber said Austin stood out as a natural choice for the center and its hundreds of future-forward jobs.
“We’re here in Austin so we can partner with folks who are the best to ensure that our soldiers can protect America’s tomorrows,” he said. “We’ve been trying our best to become a part of the Austin culture. There’s 150 cities we could have put Army Futures Command in, and when you look at the spirit of innovation here and you couple that with the can-do optimism that Texans are known for, it’s a dangerous combination.”
Ali Occhialini, a vice president with the global asset management firm PIMCO, said the company’s recent opening of an Austin office allows it to be close to the data, artificial intelligence and other advanced tech sectors that have clusters of companies located here.
“In order to remain disruptive in our own industry that means investing heavily in data. What’s changed for us is investing in alternative data,” she said. “We believe hiring in new areas like Austin and partnering with leading academic institutions is essential.”
Photo by Joey Parsons made available through a Creative Commons license.
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