As you may have noticed, there is a lot of development going on in the Lake Travis area — except for the development of roads.
On the commercial side of real estate, we are experiencing a boom in hotels because of an occupancy rate for Austin that came in at 72.3 percent for 2014 — a very healthy rate. The City of Austin and surrounding area continues to be a hot bed for business and recreation.
In the Lake Travis area, we have numerous hotel developments that are popping up, from a Sonesta Hotel Bee Cave to a Residence Inn Marriott at River Place. There’s a new CVS pharmacy under construction in Four Points at the intersection of 620 and 2222 with a 5-acre tract available for development and the possibility of another hotel … or restaurant, assisted living facility or another medical project.
A summer opening is planned for an 80-room Holiday Inn Express that is currently under construction at the Trails at 620. Phase 2 of the Trails at 620 will see numerous additions including a child care center along with two more restaurants — Napa Flats and RedFin Seafood Kitchen.
These are just of few of the many commercial developments that are taking place along the 620 corridor.
On the residential side of real estate the buzz word “bubble” is making headlines again. According to one study, Austin home prices are 20 percent overvalued, the highest in the nation. Houston comes in at number two. But then you have Forbes Magazine with the list of Best Buy Cities: Where To Invest In Housing In 2015. You guessed it … Austin, Texas is on the top of the list. It is stated that four cities have reached the point where prices are a slight bit overheated (Austin is one of them) although still considered a pretty safe bet.
And this my friends is nothing new. You’ll always be able to find both sides of the story — the real estate market that is an overvalued bubble about to burst and the exact opposite. This is the best market to buy a house, or sell a house, or both — how is that possible?
We continue to have a low inventory of homes for sale. December numbers remain extremely low with a home supply at 2.4 months of inventory for the City of Austin, and demand for homes is still high. And that is the argument from the bubble naysayers — we are not in a bubble and this is just simple laws of supply and demand. We are seeing healthy increases on home values because of it.
Why do people think we are in a bubble?
Texas’ current growth spurt is out of character with its price history,” the report states. “Fitch has struggled to find adequate support from fundamentals to explain its high, persistent growth rates.” –Austin Business Journal
Let’s take a look at three factors that could have a negative impact on the Lake Travis real estate market in 2015 (and beyond):
As you know, gas prices continue to drop. Most of the gas prices in the Lake Travis area have fallen below the $2 mark. This is great for our wallets, but not so great for the Texas economy. Real estate markets in Houston and San Antonio are more impacted by the oil industry, but that does not leave Austin out of the ripple effect created by declining oil prices.
I believe there’s a bigger story at work here …
Traffic in the Lake Travis area is a big issue and topic of discussion. We continue to see the development of new neighborhoods and apartments to accommodate all the people that are moving to the Lake Travis area. It’s pretty clear that it’s taking quite a bit longer to travel from one side of town to the other nowadays.
A $500,000 TxDOT study of the 620 corridor is set to begin in November and will look at the need for proposed improvements. And you’re going to love this — there is no funding to implement any plans resulting from the study. Are we going to see a solution to our traffic issues any time soon? Not very likely.
We continue to put higher demands on a lake that has been in the mid-30 percent full range for years. The water level in Lake Travis has a huge impact on property values, businesses on and around the lake, our local economy … not to mention it’s our drinking water supply.
Water wars continue to develop as companies are looking to make a buck on what is turning out to be the world’s most precious commodity.
In December 2014, LCRA broke ground on a new reservoir in Lane City, Texas. The lake will be more than 200 river miles downstream of Lake Travis and will help capture all the rain events that seem to be falling on the wrong side of Mansfield Dam — we need rain on the other side of the dam in a big way!
Will a few big spring rains end the drought? How will the water be managed differently when (or if) Lake Travis fills up again?
Uncertainty and Certainty
All the headlines can leave you with quite a bit of uncertainty and certainty in the real estate market for 2015.
We have gas prices that will continue to be unpredictable as always.
I’ll say with certainty that there won’t be any large improvements to roads in the Lake Travis area, so traffic will get worse before it gets better. The upside to this — it’s one of the reasons why people are moving out of the Lake Travis area, so that is opening up some home inventory. Will it be enough to keep home prices in check and avoid the bubble that looms over Austin?
Lake Travis is low. Who knows when the rain will come and fill it up again?
Gas prices continue to drop. Traffic sucks. Lake Travis dries up. Any one of these by itself is enough to cause a good ripple in the real estate market. All three of them combined would be a perfect storm of badness.
Is there some goodness? Austin’s unadjusted unemployment rate is at its lowest point since just before the onset of the Great Recession in 2008. Traffic still sucks, but it’s better than a lot of other places that aren’t as cool to live. We get some rain and Lake Travis is 87 percent full.
Can Realtors predict the future?
It turns out, Realtor confidence is remarkably predictive about the housing market (but not lake levels).
Headlines from the 4th quarter of 2014 and early signs of activity in 2015 have the real estate market in the the Lake Travis area shaping up to look something like it did last year — a demand for homes in the area that will continue to outpace supply, placing a strain on housing inventory and pushing up home values. Just simple laws of supply and demand … right?
But REALTORS in general don’t rely on the headlines. They respond to whether the phone is ringing. And in January, 2011, the phone started ringing – just a little bit more. Prices followed. Then in early 2012 and again in 2013, the Realtors really felt the surge. Home prices rocketed forward. Striking stuff. -Altos Research
Is my phone ringing more than last year at this time? Yep.
Flickr Creative Commons image by dorena-wm.