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The Home Builders Association of Greater Austin2018 Housing Forecast

THE AUSTIN ECONOMY

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0% 5% 10% 15% 20% 25% 30% 35%

NYCChicago

PhiladelphiaLos Angeles

San DiegoPhonenix

AtlantaDenver

NashvilleRaleighSeattle

PortlandBoston

San FranciscoSan JoseHouston

DFWSan Antonio

Austin

TOTAL CHANGE IN NON-AG EMPLOYMENT: NOV. 2007 TO NOV. 2017(Pre-Recession to Current)

Austin, Major Texas Markets, Selected U.S. MSA’s

Source: BLS

The Big Read: Boom and bust - How tech hubs are killing Middle America (New Zealand Herald)

0% 5% 10% 15% 20% 25% 30% 35%

NYCChicago

PhiladelphiaLos Angeles

San DiegoPhonenix

AtlantaDenver

NashvilleRaleighSeattle

PortlandBoston

San FranciscoSan JoseHouston

DFWSan Antonio

Austin

TOTAL CHANGE IN NON-AG EMPLOYMENT: NOV. 2007 TO NOV. 2017(Pre-Recession to Current)

Austin, Major Texas Markets, Selected U.S. MSA’s

Source: BLS

Austin Average Annual Job Growth the Last 10 Years = 3.3% (27,300 Jobs Per Year)

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0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

1940 1950 1960 1970 1980 1990 2000 2010 2018 2020 2030 2040 2050

Source: Census Bureau/City of Austin

THE AUSTIN METROPOLITAN STATISTICAL AREA (MSA)Trend in Population Growth & Forecast

Annual Growth Rate in Population (Actual)1980-1990 = 3.8% Per Year (26,118 per year)

1990-2000 = 4% Per Year (40,353 per year)

2000-2010 = 3.2% Per Year (46,652 per year)

2010-2018 = 2.9% Per Year (54,984 per year)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

1940 1950 1960 1970 1980 1990 2000 2010 2018 2020 2030 2040 2050

Source: Census Bureau/City of Austin

THE AUSTIN Metropolitan Statistical AreaTrend in Population Growth & Forecast

Forecast2018-2030 = 3% Per Year

(75,638 Persons Per Year)

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THE AUSTIN ECONOMYTrend in Annual Job Growth/Loss & Unemployment Rate

Ann. Job Growth/Loss

Unemp.Rate

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

0%

1%

2%

3%

4%

5%

6%

7%

8%

Dec

-97

Apr

-98

Aug

-98

Dec

-98

Apr

-99

Aug

-99

Dec

-99

Apr

-00

Aug

-00

Dec

-00

Apr

-01

Aug

-01

Dec

-01

Apr

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-02

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-02

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Apr

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Aug

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-11

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Dec

-12

Apr

-13

Aug

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Dec

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Apr

-14

Aug

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Dec

-14

Apr

-15

Aug

-15

Dec

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Apr

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Aug

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Dec

-16

Apr

-17

Aug

-17

Dec

-17

Unemployment Rate Annual Job Growth/Loss

Source: TWC

Job Growth Dec. ‘16 to Dec. ’17 = 30,000 Jobs (3%)Dec. ‘17 Unemployment Rate = 2.7%

THE AUSTIN ECONOMYTrend in Annual Job Growth/Loss

Source: TWC & Federal Reserve Bank of Dallas

TWC Dec. ‘16 to Dec. ‘17 = 30,000 (2.7%)FED Dec. ‘16 to Dec. ’17 = 25,160 (3.6%)

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

Dec

-97

May

-98

Oct

-98

Mar

-99

Aug

-99

Jan-

00Ju

n-00

Nov

-00

Apr

-01

Sep-

01Fe

b-0

2Ju

l-02

Dec

-02

May

-03

Oct

-03

Mar

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Aug

-04

Jan-

05Ju

n-05

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06Fe

b-0

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l-07

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-08

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10Ju

n-10

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11Fe

b-1

2Ju

l-12

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Aug

-14

Jan-

15Ju

n-15

Nov

-15

Apr

-16

Sep-

16Fe

b-1

7Ju

l-17

Dec

-17

FED Job Growth Figures TWC Job Growth Figures

Annual JobGrowth/Loss

Annual JobGrowth/Loss

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AUSTIN AND SELECTED TECH CENTERSTrend in Percent Annual Job Growth/Loss

-8%-7%-6%-5%-4%-3%-2%-1%0%1%2%3%4%5%6%

Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17

Austin Denver San Fran San Jose Seattle Nashville Phoenix Raleigh Atlanta Portland

Source: BLS

Ann. % Change

Major Lease Transaction Last 18 MonthsFacebook: 231,000 SF Lease (3rd & Shoal)

Google: 300,000 SF Lease (500 W. 2nd)

Indeed.com: 310,000 SF Lease (Domain Tower)

HomeAway: 315,000 SF Lease (Domain 11)

Parsley Energy: 302,000 SF Lease (300 Colorado)

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$5 Billion Investment 50,000 Employees $100,000 Average Salary

HQ2

Amazon in Seattle/Tacoma MSA

Population: 3.8 million

Employment: 2 million

Employees: 40,000 (5,000 in 2010)

Office Space: 8.1 million square feet

(more than Seattle’s next 40

largest employers…combined!)

Expected to occupy additional 4 million square

feet in the next 5 years

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THE AUSTIN APARTMENT MARKET

+43,000 Apartments Added Last 5 YearsNew Completions Last 4 Quarters = 8,757 Units

3Q17 Under Construction = 18,202 Units

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THE AUSTIN APARTMENT MARKETOccupancy & Rental Rate Trends

3Q17 City-Wide Avg. Rent = $1.41/SF3Q17 City-Wide Avg. Occ. = 92.4%

$0.75

$0.85

$0.95

$1.05

$1.15

$1.25

$1.35

$1.45

$1.55

80%

82%

84%

86%

88%

90%

92%

94%

96%

98%

100%Occupancy Rate Avg. City-Wide Rent

Source: Austin Investor Interests

Avg. Occupancy Rent

Average Rents +47% since 2010

The Resale Market

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THE AUSTIN RESALE MARKETMonths of Supply of Listings & Average Sales Price

(SF, TH and Condo)Sales Price MOS of

Inventory

Source: Texas A&M Real Estate Center

0

1

2

3

4

5

6

7

8

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

Average Sales PriceMonths of Inventory

33,907 Closings Last 12 Mos. (+2.6%)Avg. Sales Price $367,197 (+5%)

Median Sales Price $307,500 (+7%)

MOS of Listings Has Been <4 MOS for 65 Months

78702

78704NEW CONSTRUCTION

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78702/East Austin (excluding large condo projects)

Last 12 Months Median Sales Price =$505,000Last 12 Months Average Sales Price =$515,740Active Listings (new const.) = 16 Sales Last 12 MOS = 132MOS Active Listings = 1.5 MOS

26% of sales in the last 12 months <1,000 square feetSource: MLS (Jan. 2018)

78704/Central South (excluding large condo projects)

Last 12 Months Median Sales Price =$732,500Last 12 Months Average Sales Price =$799,421Active Listings (new const.) = 65 Sales Last 12 MOS = 138MOS Active Listings = 5.7 MOSSource: MLS

(Jan. 2018)

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THE HIGH-END MARKET

THE AUSTIN HIGH-END MARKET (NEW & RESALE)Active Listings, MOS & Sales Last 12 MOS +$750,000

Source: MLS

4.05.3

9.211.2

18.420.5

0

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$750K-$1Mil. $1Mil.-$1.5Mil $1.5Mil.-$2Mil $2Mil.-$2.5Mil $2.5Mil.-$3Mil +$3Mil.

Active Listings Sales Last 12 Months

Jan ‘18 Overall MOS of Active Listings +$750,000 = 5.9 MOS(Down from 7.1 MOS in January 2017)

MOS Active ListingsSales/

ListingsMOS Active

ListingsJan. ‘175.4

Jan. ‘175.8

Jan. '1710.6

Jan. '1711.6

Jan. ‘1725.6

Jan. ‘1735.1

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THE AUSTIN HIGH-END MARKET (NEW CONSTRUCTION)Active Listings, MOS & Sales Last 12 MOS +$750,000

Source: MLS

Jan. ‘18 Overall MOS of Active Listings +$750,000 = 5.7 MOS(Down from 9.7 MOS in January 2017)

MOS Active Listings

4.8 5.8 5.3 6.08.0

26.4

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$750K-$1Mil. $1Mil.-$1.5Mil $1.5Mil.-$2Mil $2Mil.-$2.5Mil $2.5Mil.-$3Mil +$3Mil.

Active Listings Sales Last 12 Months

Jan. '1710.4

Jan. ‘175.7

Jan. '1710.6

Jan. '1716.5

Jan. ‘1724

Jan. ‘1716

MOS ActiveListings

Sales/Listings

A Recap of 2017-An Exceptional Year-First Time Leads the Way-Margin Pressure in Move-Up-Labor Issues-Spec Strategies-Consolidation & Mandate to Grow

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0

2,000

4,000

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Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17

DJ U.S. Home Const. Total Return Index DJ U.S. Home Const. Index

Major Stock Exchanges 2017 Performance

DOW: +25%S&P: +19%NASDAQ: +28%

THE U.S. HOME BUILDER EQUITY MARKETSDow Jones Indexes Tracking Home Building Industry

Source: Dow Jones

Index

Both Indexes Up+57% in 2017

• The Land & Finished Lot Market• Push for lot supply to build <$300,000 (land or finished lots)

• More 30’, 35’, 40’ & 45’ lots• Higher lot prices• Sub-Market expansion• Squeeze placed on smaller builders

• Continued Labor Issues…Impacts Costs & Cycle Times• Increased spec building

• Competition Level Intensifies…Margin Pressure

• The Result…The Market Grows in 2018

MAJOR THEMES IN NEW HOME MARKET IN 2018

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Manor

Southeast

Southwest

Del Valle

Where Can We Grow?

THE AUSTIN MSA NEW HOME MARKET2018 Starts Forecast

0

2,000

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8,000

10,000

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1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Source: Federal Reserve Bank of St. Louis

?

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What About Home Prices & Affordability?

THE AUSTIN RESALE MARKETAverage and Median Price Trend (SF, TH and Condo)

Source: Texas A&M Real Estate Center

Dec. 2017 Average Price: $367,197 (+5.7% in the last 12 mos.)Dec. 2017 Median Price: $307,500 (+7.3% in the last 12 mos.)

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

Avg. Annual Sales PriceMedian Price

Average +38% last 5 yearMedian + 45% last 5 years

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Source: FHFA

Annual Home Price Change Trend: 3Q97 to 3Q17Major Texas Markets

-10%

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3Q16

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3Q17

Austin Dallas San Antonio HoustonAnnual Price

ChangeAnnual Price

Change

Annual Home Price Change Trend: 2Q97 to 3Q17Selected Tech Markets

Source: FHFA

-25%

-20%

-15%

-10%

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0%

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Austin San Jose San Francisco Portland Seattle Annual Price Change

Annual Price Change

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MEDIAN SINGLE FAMILY HOME PRICE TRENDSelected Cities 2011 – 3Q17

Source: National Assoc. of Realtors

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

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$500,000

Austin DFW Houston San Antonio Atlanta Denver Nashville Raleigh Portland Boston Seattle

2011 2012 2013 2014 2015 2016 3Q17

What About Rising Mortgage Interest Rates

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Growth in the Global & U.S Tech Sector

Austin’s Tech Companies Grow

Austin’s Tech Companies Must Hire More People

Job Growth Breeds Strong Consumer Confidence

Strong Consumer Confidence Sells Homes

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THE AUSTIN MSA NEW HOME MARKET2018 Starts Forecast

0

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12,000

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20,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Federal Reserve Bank of St. Louis & 360 Real Estate Analytics

But Eldon, this can’t last forever…

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THE AUSTIN ECONOMY-JOB CREATIONAnnual Trend in Job Growth/Loss (Dec. ‘79 to Dec. ‘17)

(greyed areas represent U.S. recessions)

Source: TWC

Annual Job Growth

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

THE AUSTIN ECONOMY-JOB CREATIONAnnual Trend in Job Growth/Loss (Dec. ‘79 to Dec. ‘17)

(greyed areas represent U.S. recessions)

Source: TWC

Annual Job Growth

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

Bottom Line…Planning is much easier than forecasting…

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The Home Builders Association of Greater Austin2018 Housing Forecast

Copy of my presentation: info@360reanalytics.com

For further information, contact:Eldon Rude, Principal360° Real Estate Analytics512‐796‐7850erude@360reanalytics.com