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Raub Report June 2013

June 10, 2013

San Antonio’s jobless rate has risen by .01% for 3 months in a row; but San Antonio at 6.3% is below the Texas average of 6.4% and the national unemployment rate of 7.5%. Austin is super hot though with an unemployment rate of only 5.4%. The implementation of Obama Care next year will be a big blow to the economy once businesses realize how much it is going to really cost them because of the new laws and taxes on employers.  I know of several firms that have 49 employees and can not afford to add the 50th employee because of the added tax burden.  They would have to grow to 100 employees to cover the additional costs.

Then there is the concern when Quantitative Easing or “QE 4-Ever” will end. Some experts think that the Fed is likely to just slowly reduce its buying over many months and then just hold the treasuries and mortgages they bought until maturity, making money for the government.  Hopefully it will not be the big jolt to the economy that many fear.

If the current concern about deflation, that the Fed is fighting, turns into real inflation in years to come as the Fed pulls back, then commercial real estate investments are going to become much more attractive.  One product that IRC really likes is self storage investments as a good hedge against inflation while providing very attractive cash flow. Please call me to discuss.

In the June Forbes, they list the top 10 places in the U.S. to find a job. Texas has four cities in the top ten, unfortunately this year S.A. isn’t one of them, but our job growth is still strong. Since 2001 Austin has seen over 26% growth, and from 2009 to 2011 Texas added 427,600 net new jobs, getting back to the prerecession employment level faster than any other state.

On the home front, sales of existing homes are very strong.  In some cases there are “flash sales.” That is when a house sells the same day it goes on the market, maybe even with multiple offers above the asking price.  This is not typical though but an indication of the strength of the market.

Home building in San Antonio is doing very well.  The home builders with whom we talk are all hiring and pushing up home starts.  The looming problem will be the lot shortage about to hit in 2014 and beyond.  Because the lot development process takes up to 24 months to bring new lots on line, this shortage won’t be resolved quickly. A labor shortage is also developing.

Many new projects are planned but land prices are rising, not having slumped much; then, construction costs are rising and, on the sales end, mortgage lenders have to cope with very strict regulations on credit and appraisals.  This gets interesting as home prices will go up at a time when is it increasingly difficult for the first time buyer to qualify for a new loan.