Covid-19 Austin Update
We hope that everyone is doing well and staying safe & sane! (Safe & sane seems to be the standard well wish during COVID.) It was encouraging to see a path forward towards re-opening and we are all happy to see local businesses take additional precautions when choosing whether or not to re-open.
Local retailers & restaurants have been the hardest hit during this crisis. Check out Austin Eater for new ideas of where to grab a seat or family take out Austin Eater
This week, our web traffic saw a return to normal. We believe this is the first leading indicator of the real estate market’s return to normal. We’re going to send an update next week that includes a measurement of all leading indicators. We would love to hear any anecdotal or hard market evidence from anyone who would like to share.
Since we’re now operating post-COVID we thought that sharing some information from a well known Economist about the current outlook would be helpful.
Angelos Angelou spent nearly 12 years with the Austin Chamber of Commerce as Vice President of Economic Development and Chief Economist. He has analyzed and forecast the Austin and central Texas economies for 36 years, as well as presented 200+ economic impact studies to cities around the US. To say that he’s well respected locally is an understatement.
In our experience and opinion, Angelou is neither an optimist nor a pessimist, but a realist. This is incredibly valuable, especially during a crisis. His presentation on Tuesday did not paint a rosy picture, but also did not spell doom for the local real estate market.
At a high level, Angelou predicts that the US economy will begin to recover in late June or early July. We will see huge contraction & job loss between now and June, and these will be at a scale that can not be recovered in 2020. At year-end, will have seen 15% GDP loss and 15% to 16% unemployment nationally. The size and speed of this contraction is unprecedented. During the 2008 recession, unemployment peaked at 10% and the GDP contracted at 3%. The contraction will be short and fast with recovery beginning relatively soon, but it will take some time for everything to fully recover. Angelou predicts that 2021 will see +12% GDP gains and job growth to a 6-8% unemployment rate. It’s important to understand that these gains are also historic & unprecedented.
The constants that have always fueled Austin’s economy are job & population growth. That will not change, but it will slow. Austin typically adds ~60k people per year and Angelou predicts that we will add 35k in 2020 (roughly 60% of normal.) Austin will lose 45k jobs in 2020, and will gain 29k of those jobs back in 2021. The hospitality/leisure & retail industries will be hardest hit. Austin’s technology sector seems to be relatively safe.
Angelou spoke briefly on the residential housing market. Inventory is very tight, and will remain so. Angelou predicts that will see an overall volume decrease of 12%-15% in 2020, caused largely by the shelter-in-place ordinance. To put that in perspective, the 2008 financial crisis caused a 30% contraction that lasted 3+ years. The local housing drop during this recession will likely be very short and roughly ½ as dramatic as 2008.
The hardest hit industries will be retail & hospitality/leisure. Angelou did not sugarcoat the fact that we will see many local restaurants & retail stores go bankrupt. We will likely see large retail corporations also close up shop. This will be the most lasting & visible effect of the recession and it will take time for new local businesses to open up and take their places. That said, Angelou was optimistic that “entrepreneurs are resilient & want to change the world.” He feels that Austin’s entrepreneurial spirit will help the city out of the recession incredibly well and we will once again fair much better than other metro areas.
We believe that a realistic and honest outlook is always the best outlook. Having weathered 2008, we do believe that this will be far shorter & less drastic than that period. Times will be tough, but short, and we will make it through them.
As always, feedback is appreciated and we would love to discuss your specific situation with you. Please reach out if we can help in any way at all.
We would love to hear what you’re experiencing, as well! We hope that everyone is staying “safe & sane” and we hope that everyone has a wonderful weekend!
Published on 2020-05-05 08:50:31