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Raub Report November 2013

November 8, 2013

Does this look like the front end of a Boom?  Please turn your attention to the following newspaper articles.

The San Antonio Business Journal Oct 16, 2013 San Antonio’s housing prices were up 2.1%, the largest month over month increase for U.S. cities. Also from SABJ Oct 16 – San Antonio housing inventory hits an historic low at 4.6 months, lowest since 2007.  From Marcus and Millichap in October: For Austin, job creation is up 4%, at 33,700 jobs created and more than 100,000 jobs added from pre-recession levels. Retail vacancies continue to decline and rents continue to rise. Bloomberg reports on “Texas’ Modern-Day Land Rush.”  Existing home prices in Dallas and Houston are rising faster than at any time since the oil boom of the 1980’s and builders can’t keep up.   Another report shows there were more home starts in Houston alone than in the entire state of California.  CBRE reports that the shortage of prime Class-A office space in San Antonio could mean missed opportunities for the local business market. Class A office rents jumped to $24.22.

According to the RealEstateCenter’s latest Monthly Review of the Texas Economy, the state’s nongovernment sector added 289,200 jobs, an annual growth rate of 3.2 percent compared with 2.1 percent for the nation’s private sector. Texas’ seasonally adjusted unemployment rate fell to 6.5 percent in July 2013 from 6.9 percent in July 2012 while the nation’s rate decreased from 8.2 to 7.4 percent. In fact, the oil and gas boom based on fracking has added $1,200 per year to household disposable income in Texas.

Mark Dotzour of The Real Estate Center, a highly respected economist and speaker, says that “looking forward to 2014, the housing market in Texas most likely will be hot.” He added, “This constrained supply of homes in Texas (and elsewhere) is likely to continue through 2014 because home builders are having a difficult time getting loans to build new houses.  Texas needs to be building thousands of new homes now to meet demand, but bad memories of the Great Recession and pressure from bank regulators have restrained new home construction.  Ditto new subdivision development.”

In our own brokerage business, we see office and retail vacancies getting much tighter and new construction just now kicking off to meet this growing demand.  We are well past the distressed seller stage and beginning the seller’s market stage.  Apartments and homes are leading the way with the other sectors of commercial real estate right behind.

I think this is just plain old, solid sustainable expansion; no Boom (and No Bust) now.  Let’s keep an eye on job growth, the most important growth factor for commercial real estate.

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