Austin housing prices have made the national news in a new way recently, but there has been a paucity of local coverage about it. According to multiple national media outlets, the financial giant Goldman Sachs predicted that Austin will be one of four metropolitan areas in the US where home prices will plummet during 2023. In fact it was another number one ranking for Austin.
In early January Goldman Sachs sent a report to clients titled, “Getting worse before getting better.” Goldman Sachs predicted, as quoted in Fortune magazine, ‘“We are lowering our 2023 forecast for year-over-year depreciation in the Case-Shiller Home Price Index to -6.1% from -4.1% previously. This would represent an aggregate peak-to-trough decline of roughly 10% in U.S. home prices through the end of this year from June 2022,”’
They added, ‘“This [national] decline should be small enough as to avoid broad mortgage credit stress, with a sharp increase in foreclosures nationwide seeming unlikely. That said, overheated housing markets in the Southwest and Pacific coast, such as San Jose MSA, Austin MSA, Phoenix MSA, and San Diego MSA will likely grapple with peak-to-trough declines of over 25%, presenting localized risk of higher delinquencies for mortgages originated in 2022 or late 2021.”’
The Fortune article continued by listing Austin as the metropolitan area where Goldman Sachs predicts housing prices will drop the most during 2023: “In 2023, Goldman Sachs expects double-digit home price declines in major markets like Austin (-15.6), San Francisco [which includes San Jose] (-13.7%), San Diego (-13.4%), Phoenix (-12.9%), Denver (-11.4%), Seattle (-11.2%), Tampa (-11.2%), and Las Vegas (-11.1%). Those markets are also the very places that the home price correction hit the hardest in the second half of 2022. Indeed, through November, Austin is down 10.4% from its 2022 peak home price.”
A Goldman Sachs chart included in the Fortune article predicts that Austin housing prices will keep dropping in 2024, although the chart only predicts a drop of around three percent in 2024.
In an extensive Google search the Austin Independent found close to 100 news outlets around the nation that reported on the Goldman Sachs letter. In Austin, however, we only found reports from CBS Austin, KXAN, and the Austin Business Journal. The Independent also used the Austin American-Statesman’s search function to look for a story on their site — in case we had missed it. That search did not turn up a story either.
The Austin Business Journal only mentioned the Goldman Sachs letter in passing in a story from a national reporter on the national housing market. CBS Austin and KXAN gave more Austin specific reports on the Goldman letter. CBS Austin quoted Taylor Smith of the Austin Board of Realtors who said, ‘“We are coming off of an unprecedented high in our market, and what we’re seeing now is just our market re-stabilizing and coming back to a norm, so it’s not doom and gloom as some headlines might suggest.”’
It’s too early to tell who will be right. In fact both Goldman Sachs and Smith could be right. One way of reading Smith’s quote is that Austin is just experiencing a serious correction from a seriously overheated market. That certainly makes sense. And, that is not entirely different from what Goldman is saying. It’s entirely possible that the correction could reach the levels predicted by Goldman. We’ll all have to wait and see.
In the meantime the Goldman Sachs letter gives Austin’s new Mayor and City Council even more to think about; that is as long as they’re not depending exclusively on the Austin American-Statesman and other Austin print outlets as their news sources.
Speaking of thinking by City Councils, it never seemed to occur to the preceding Casar-Adler Councils that one reason Austin housing prices are so high might be that the market is/was extremely overheated — with a correction certain to come at some point. Regardless, the dropping home prices do not in any way mean that Austin’s housing crisis is solved.
The Goldman Sachs prediction and the undeniable slowdown in Austin’s housing market, however, might give the new City Council some opportunities, while at the same time complicating their task. That is, it complicates their task if they are planning on engaging in a thoughtful, coalition building approach to the housing crisis; as opposed to trying the old Council’s policy again. By the latter, I mean treating a Land Development Code rewrite and accompanying citywide upzoning as a panacea — and also like the rabbit at a dog race.
New Council Begins With Emphasis on Working Together
The new Council is still in their honeymoon period, especially since they have only had one voting meeting. Let’s hope it lasts though.
At their one meeting, Council Member Vanessa Fuentes sponsored an Item From Council instructing the City Manager to explore ways to reduce barriers to child care centers in the LDC. It’s too early to tell what that will find or yield, but it certainly seems more thoughtful and more precisely aimed than what we got from the previous string of 10-1 Councils.
The Council swearing-in/inauguration a few weeks earlier (screenshot at top) struck a similar hopeful note. All the new and reelected members talked of working together for the good of the City. Let’s hope that actually happens. The new Mayor, Kirk Watson, did a graceful job of telling Council Members he wouldn’t be holding grudges against the Council Members who supported his opponent, saying, “I couldn’t care less who supported who over the past year.” That came a few weeks after election night when Council Members Chito Vela and Fuentes — both of whom publicly supported his opponent — came to Watson’s election night party and told him they looked forward to working with him.
The Council, and Watson himself, might also do well to follow a maxim he expressed during the campaign. Specifically addressing the housing crisis, Watson said, “There are so many things we can’t control, like inflation, mortgage rates and supply chain. So we ought to be focusing on the things we can control.” While that might seem like a mild, cautious statement, it is a revolutionary viewpoint compared to the atmosphere and ideology that controlled City Hall for the past eight years. The Casar-Adler Councils gave the impression that they could solve all problems; or at least that they thought they could. That extreme exaggeration of their own power and influence is one of the reasons that their initiatives came washing up on shore so often.
Casar-Adler Legacy Pauses for No One
Speaking of failed endeavors left behind by the old Council, the owners of a local hair salon near Ben White Blvd and Menchaca, are experiencing repeated harassment and disturbances that they believe emanate from the nearby homeless encampment under, and around, Ben White — stretching roughly from Westgate and Lamar to Menchaca. The salon, Headspace Salon and Coop, is on Pack Saddle Pass, just south of Ben White between Menchaca and Westgate.
This is happening almost two years after Austin citizens passed Prop B, reinstating the camping ban repealed by the 2019 Council. In another legacy of the previous regime, the small business owners told KXAN that it took APD around an hour to respond to the incident described below.
Here’s how KXAN described one incident at Headspace:
“These days, it doesn’t take long for the routine chatter and sounds of blow dryers at Headspace Salon to suddenly turn into cries for help.
‘I need police officers now!’
‘Is there a closet that we can all go in or something?’
‘Please send somebody now, this is not okay.’
Those are sounds from inside the salon in the past week, caught on video, as a man pulls out a pole from the ground– with concrete still attached– and approaches the salon.
‘Oh my god,’ someone can be heard saying. ‘Oh god, he’s trying to break the window.’”
For some reason the man eventually put down the pole before he managed to break the glass.
Headspace co-owners Erin Mutschler and Laura North told KXAN, and other media outlets, that it took the Austin Police Department (APD) about an hour to respond. According to KXAN, APD “said they issued a criminal trespass notice and are investigating.”
The co-owners said they deal with similar situations roughly twice a week and have lost multiple employees and customers as a result. KXAN quoted North describing her employees trying to leave work: “There’s men jumping out of the bushes threatening to murder and rape them.”
This is obviously unfair to these small business owners who have tens of thousands of dollars invested in the location.
The hopeful aspect of this sad episode is the response of Council Member Ryan Alter when KXAN called him: “Part of that challenge is that APD is understaffed… and that’s on the council, we need to do a better job to get them staffed up and be able to respond in the community better and quicker.” KXAN kindly added, “said Alter, who’s been in office for less than a month.”
That’s right. Ryan Alter has been in office less than a month and he is already accepting responsibility way beyond what most anyone would expect, and beyond what many of his predecessors ever did. So let’s hope he keeps that up. Also, Alter didn’t shy away from mentioning the obvious, that Austin is short on cops and that that is the Council’s responsibility. He was kind enough not to mention that the shortage in cops results directly from the 2020 Council zeroing out the cadet class budget, in order to meet protestor demands to cut funding from APD.
Alter told KXAN that he has been in touch with the owners of Headspace and has also reached out to APD to find out where such incidents stand on the Department’s priority list. The Council Member said he also talked with the City’s Homeless Strategy Division. Based on those talks Alter said it seems that the City has a good long term plan, but has inadequate answers in the near term. “It’s frustrating when the answer is, ‘Well, I’m not sure,’ or ‘We’re working on it,’” he said. “That doesn’t mean anything to people like the salon… or the neighbors in that area.”
Alter’s quick, multi-pronged response may result, at least partly, from his experience with constituent service as a legislative staffer. That, however, doesn’t necessarily explain his philosophy of taking responsibility. Let’s hope he keeps that up and that he can achieve some sort of breakthrough for the owners of Headspace.
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