February 9, 2018

Volume 39, Number 43

Did you know that almost 3 million acres in Texas is foreignowned?  When Texas joined the US, it maintained private ownership of all its lands unlike some states, mostly in the western US, where much of their land fell under federal ownership when they joined the union.  Now, foreigners are buying up much of the bigacreage land in primarilyrural Texas.  This is in addition to foreign interests investing in suburban commercial properties.

This type of development is not normally the focus of this newsletter, but it struck us this is a phenomenon in which you might have an interest, if only as someone who is aware of the larger picture of what is going on around us.  Change is an important discussion about what is happening in Texas and this is another facet of change.

Which foreign entities are buying huge chunks of Texas?  Where are they from?  Which parts of Texas are they targeting?  What is the usage for the land?

East Texas is one of the acquisition targets.  Canadian-owned entities are buying increasing amounts of land in the pine timber region of East Texas.  Tyler County, Newton County and Polk County have the largest acreage concentrations of foreign ownership along with the country of origin for the largest owners.  Also land is being gobbled up in Panola, Nacogdoches and Cherokee counties in East Texas.

The largest acreage holdings, in addition to East Texas, are in South and West TexasHidalgo County in the Rio Grande Valley of South Texas is right up there with East Texas timber counties having the largest concentration of foreign ownership.  Willacy County, to a lesser extent, is on the list from the Valley.  Cropland is the primary usage of the South Texas land.

West Texas?  Briscoe, Culberson, Jeff Davis, Zavala, Nolan, Sterling, Presidio and Reeves counties show up on the list where foreign land owners are concentrated.

Besides Canadians, which countries have the largest Texas holdings?  Germany, The Netherlands, the United Kingdom top the list.  By the way, this is the most current tally, but it is only up-to-date as of 2014.  It should expand when the next report is released. Read more →

January 19, 2018

Volume 39, Number 40

Apple will likely be the worlds first trillion dollar company maybe as early as this year.  It already has its largest presence in Austin other than at its California headquarters.  Apple employs more than 6,500 people in Austin, most housed in a 38acre complex in northwest Austin.  Only its home in Cupertino is bigger.  Now Apple, just this week, announced it plans to spend as much as $30 billion on a second corporate headquarters and for expansion of other work sites in the US.  Chickens should not be counted before they are hatched, but no matter what, this is great economic news for Austin.

Austin has been a part of Apple’s phenomenal growth.  The world’s largest consumer electronics company opened its doors in Austin with about 100 people in 1992.  Apples CEO Tim Cook just a few months ago described to the American-Statesman what Apple workers do in Austin:

“They include customer support, online sales, retail sales, we have our Maps team here, and finance and a huge engineering team that’s growing fast.  Literally,” Cook emphasized, “many, many pieces of our company are here.”  Its 1.1 million sf Americas Operations Center in Austin runs many of its corporate functions throughout the northern hemisphere, according to the Statesman.

For these reasons (and, obviously, others) Austin stands to be maybe the biggest economic gainer of any city in the nation as a result of Apples newlyannounced plans.

Some may think this “will really put Austin on the map” if Apple pumps a healthy chunk of its $30 billion planned investment into the Austin economy.  That thinking is so out-of-date.  Austin IS on the map.  Otherwise it wouldnt be in the position it is visàvis AppleAnd visàvis Amazon, Facebook and Google, all also with large Austin investments.  These three make up the other parts of the Big Four companies pushing hard to be the world’s first trillion dollar company based on valuation (check our story last week).

Oh yeah, Amazon’s 2nd headquarters.  Austin just made the long short list for Amazon HQ2.  This is a big deal.  Now it moves to the next step.  Check out the next item. Read more →

January 12, 2018

Volume 39, Number 39

The formal announcement this week that former City Councilmember Laura Morrison will run against Mayor Steve Adler should trigger spirited discussion about Austins governing policies up until the November election day.  Many of their positions differ dramatically, but the mayor only has one vote out of eleven in Austins CouncilManager form of government.  It could be a good time to explore the possibility of changing to a Strong Mayor form of government called a MayorCouncil.

In the Mayor-Council form of government, under which most big US cities currently operate, the Mayor is paid a full-time salary and takes over most of the functions allocated to a City Manager.  The mayor is the citys CEO and directs daytoday affairs of city departments.  The mayor does the hiring and firing.  And of course, the mayor answers to the voters, unlike the city manager who is hired by the Council.

Based on the 2010 USCensus figures and according to the National League of Cities, Austin is one of only nine of the nations 30 most populous cities operating under a CouncilManager form of government.  The five biggest cities, including Houston, are all governed by a Mayor-Council.

Austin is listed as the 14th most populous city on this list.  And, frankly, it is one of a very few cities that manages and sets policies for three very complicated enterprises an airport, an electric utility and a water utility.  Most cities utilize independent entities to manage one or several of these enterprises, negotiating contracts, etc.  As a result, running Austin is a formidable management task.

The arguments pro and con for the two forms of government have valid points.  The City Manager has too much power.  It’s better for the city to be managed by one who answers to voters, rather than a bureaucrat.  Or the flip side, you need to remove politics from these decisions.  You get the picture.

If a change is made, it would be a laborious process that would need to be put on the ballot by the Austin City Council and approved by the voters – much in the same way the City of Austin expanded to a ten-member council elected by districts and a mayor elected citywide, in 2014.  Frankly, it’s a long shot to happen.  But as the campaign for mayor and other council seats unfold, it will be a good thing to keep in mind for the future direction for a growing city. Read more →

December 15, 2017

Volume 39, Number 37

As we wind down 2017 and look ahead to 2018, it helps to know where the local economy standsespecially when it comes to residential real estate.  After all, not only is real estate an important underpinning of the Austin area economy, but the fact you either own or rent, means you are personally affected.  Real estate is an Austin economic barometer, but it also affects your financial bottom line.  So, lets analyze this alwayschanging market.

When we say “always-changing,” consider what an Austin real estate expert, who has been a long-time observer of the real estate market in Austin and Texas, has to say:  “Austin real estate has been traveling at light speed with over 60% appreciation on residential real estate in the last ten years,” reports Independence Title’s Mark Sprague.  Let this sink in for what it means for the homeowner who has owned the same home for the past ten years.

After the wild swings of the real estate recession years, Austin and DallasFort Worth have led the nation with steady appreciation for the last ten years.  In fact, since 1990 Sprague reports “Austin has had an average (annual) residential real estate appreciation of 5.4%, Houston 4.9%, San Antonio 4.7% and DFW 4%.”

Regular readers of this newsletter know that in many real estate segments, sales have slowed this year.  “Not much, but a little,” Sprague points out.  Okay then, Mark, what does this mean?  He emphasizes an important distinction when he says “residential appreciation has slowed, but not declined.”

The differences in housing price movement are stark when you look at the luxury home price points, compared to homes of lesser value.

If you are shopping for a house with a budget above $2 million, I have good news,” Sprague said.  “You have more than a six month supply of homes to choose from, as opposed to a couple months’ supply of homes in many of the lower prices.”  Repeat after me:  it is now a buyer’s market in the luxury market.

Not so in the lower price points.  “Below $700,000, we are still seeing multiple bids,” he said. But, still, the market is slowing.  Its not really slow or crashingIt is simply slowing.  And this is the watchword as we look ahead to the New Year.  It bears watching closely. Read more →

December 8, 2017

Volume 39, Number 36

In a national presentation closed to the news media, Austin mayor Steve Adler outlined Austins actions preserving the environment as it relates to the citys transportation policy.  As he put it:  “Preserving our environment is a big priority in Austin.  Its huge.  But most Austinites, stuck in rush hour traffic every day, will tell you traffic is the most immediate, inyourface challenge.”  Lets look at some quotes he made available.

First of all, the mayor said “we’re going to need to reduce our transportation carbon footprint if we’re going to make a big difference fighting climate change.”  He ticked off a number of steps already taken, including passing “the biggest bond in city history.  It was bigger in fact than all the mobility bonds in the previous 20 years.  And it passed with 60% of the vote.”

He continued:  “We’re making better use of our existing roads, making them more efficient and safer.  Were putting scores of millions of dollars into active transportation; bikes, trails and sidewalks.  We’re managing demand by accurately recognizing the cost of parking and dynamically pricing toll lanes, paid for by automobiles and free for transit.”

“The lessons we’re learning are clear,” he told the C40 Climate Summit.  “Where we offer multiple, diverse transportation options, Austinites get out of their cars and ride bikes, take buses, and even walk.”

Where we dont offer those choices where we dont have protected bike lanes, frequent bus service, even sidewalks people stay in their cars, Adler said.  So, mayor, what is in Austin’s mobility future?  “Our challenge is to expand choices.”

For a picture of what he’s talking about, you need to look no further than the proposal announced Tuesday for the area known as The Drag, adjacent to UTAustin.  It will reduce car travel to one lane in each direction, while adding busonly and bike lanes with expanded sidewalks, eliminating parking along one-mile of Guadalupe St.  At a cost of $33.7 million.  To be sure, this is a unique area with tens of thousands of students within walking distance of UTAustin and shuttle buses bringing in others from greater distances.  But it is an example of the move to allocate city tax dollars to implement the overall plan to curtail car traffic. Read more →

November 3, 2017

Volume 39, Number 31

The future of job expansion/job growth in the Austin area will strongly lie in the field of healthcarethe many facets of healthcare.  The exploding healthcare economy includes all manner of jobs, not just doctors and nurses.  The breadth is impressive.  There are a number of contributing factors, not the least of which is UTAustins Dell Med School and associated development.  But, theres more, much more.  In fact, this is part of a national trend, strongly bolstered by the Austin areas alreadyestablished economic leadership.

Healthcare growth is here and on a fast track, both at the upper and lower ends of the pay scale.  It’s happening.  Bank on it.  (Sure, if Amazon HQ2 picks Austin, it will have a dramatic job impact.  But Amazon HQ2 is not a certainty – healthcare growth in all its facets is a near certainty).  The strong tech job base in the Austin area is a contributor, as is higher education.  Look below at these national trends, keeping in mind Austin’s economic strengths.

Nationally, the US Bureau of Labor Statistics (BLS) projects health care and social assistance is expected to become the largest major sector by 2026.”  This sector will account for about one-third of all new jobs.

Want detail?  BLS notes “healthcare support occupations will grow more than 23%.  Healthcare practitioners and technical occupations will increase more than 15%.  This is what we mean when we mention the breadth of healthcare. Other examples include personal care aides, home health aides, etc.

Auxiliary jobs will expand exponentially in the Austin area because of the core healthcare emphasis here.  Remember, Dell Med did not exist a couple of years ago, admitting its first students in 2016.  It is fledgling in its existence and will only grow in impact.

As we’ve reported many times in the past, the Austin area enjoys major advantages by being in Texas.  But, according to the Texas Medical Association, Texas ranks 47th in physician to patient ratio.  In fact, the state has often recruited foreign medical graduates to fill shortages.  So the need is great, and the opportunity to expand to meet the need is almost limitless.  Austin and Texas have a big advantage to attract med students:  becoming a doctor here is a financial bargain.  We’ll examine this aspect, as well as other supporting info behind the claim that healthcare jobs are the wave of Austin’s future, in the next item. Read more →

October 27, 2017

Volume 39, Number 30

You often hear some Austin oldtimers lament the many changes theyve seen.  Even those whove lived in the Austin area for only 5to10 years sing much the same tune about changes theyve witnessed.  Of course, most US cities have experienced at least some degree of change, whether for better or worse.  But where does Austin rank in a thorough study of the 50 largest US metros?  Using nine elements of data not just the number of construction cranes Austin has changed the most over the past decade.  One element may surprise you.

 MagnifyMoney, a subsidiary of LendingTree, analyzed home prices, crime rates, building permits, commute times and other elements to identify areas of high metropolitan change, and gave each city a “Change Score” of zero to 100.  The highest change score was 90.4 (Austin) and the lowest of the 50 metros was 61.1 (Birmingham, AL).  Let’s examine some highlights.

Austin is a magnet for change, with the fastest job growth in the nation (+40% since 2006), 60% of residents moving since 2010 and a 54% rise in house prices since 2006, the most of the 50 metros ranked,” reported MagnifyMoney.  None of these high percentages should come as a surprise to those who have been paying attention.  So which cities follow Austin’s top “Change Score” ranking?

“#2 DallasFort Worth (89.7 score) is in the top ten for five of the change categories:  employment, recent moves, building permits, house prices and crime rate.”  D/FW’s crime rate is down 43% from 2006.

#3 Houston (86.2) rounds out the trio of big Texas cities at the top of the change list, led by housing factors.”  Houston ranked #2 for house price appreciation and #3 in the US for building permit expansion.

Even though this study was the most recent – released within the last ten days – it is a “change” study for a snapshot in time, 2006-2016.  The dynamics of these cities almost ensure they are changing as we speak.  Another point:  “change” can be seen as good or bad, depending upon your perspective.

Now, for what may be considered a “surprise:”  Austin did not rank in the top five in change in Commute Times.  San Francisco, +18% … San Jose, +18% … Los Angeles, +12% … Boston, +12% and Portland, 12% took the honors in this study.  Wonder what it is today. Read more →

September 29, 2017

Volume 39, Number 26

Its a long way off January 2019, to be precise but its not too early to predict the next regular session of the Texas Legislature in Austin will be unlike any in recent memory.  You can blame (credit?) a force of natureHurricane Harvey.  “Nearly everything that would have been on the states plate between now and the next scheduled legislative session in 2019 has been marked by the disaster,” noted a longtime legislative chronicler.

That’s a pretty strong claim from Texas Tribune columnist Ross Ramsey.  He backed it up with this quote from Texas House Speaker Joe Straus:  “Harvey has changed everything.”  The issues of the next session, Straus said, “are going to be overtaken by Mother Nature.”  Ramsey added details of what is likely to happen.

School finance is dependent on property taxes.  More to the point, its dependent on taxes on properties that are now worth a lot less than they were four weeks ago,” he noted.

“A 2017 legislative debate over insurance – spurred by wind and water claims after previous storms – is now in high relief as insured property owners make their Harvey claims and dicker with insurance adjusters and lawyers,” Ramsey pointed out.

Prisoners have been moved around.  Social services have been stretched.  Lawmakers who were talking about limiting state spending a few months ago are now scheming about how to tap the states $10.3 billion savings account, known popularly as the Rainy Day Fund,” he further reported.

“The physical damage from the storm is relatively easy to spot, assess and catalog,” he observed.  “But it’s becoming more evident that the storm also seeped into every corner of government policy and politics.  State leaders who were preoccupied with social and cultural standards and ideas about the role of government a month ago are now bound to more tangible things:  roads, prisons, schools and other buildings, hospitals and shelters.”

About the Rainy Day Fund that legislators have been reluctant to touch in previous sessions, the official who oversees the Fund, State Comptroller Glenn Hegar, was asked if the Fund should be use for storm costs:  “Absolutely, what else would you use it for?” Read more →

August 18, 2017

Volume 39, Number 20

Do you want to pay a tax to drive into downtown Austin?  A tax, not a toll.  Congestioncharging zones (CCZ) are already in place in some important cities, and being planned in others, as a way to reduce roadway crowding in central cities.  CCZs are just one solution being bandied about, that also have the added advantage of generating revenue.  They all have one thing in common changing the way you pay for driving a vehicle.

While congestion is one of the driving forces, dwindling sources of revenue are also a big contributing factor.  The standard taxes you pay at the pump for gasoline are becoming less and less adequate to handle the increasing number of vehicles, according to The Economist.  And, face it, local and Washington legislators have shown no appetite for raising gasoline taxes.

CCZ’s have their champions.  There has been no serious public discussion about a CCZ for downtown Austin.  However, even as we speak, New York’s Gov Andrew Cuomo is pushing a CCZ tax for access to Manhattan.  But, the outcome is far from certain.

Why?  Take a look at London.  A CCZ was put in place there in 2003, but the city is now seeing congestion rising again.  Seems market forces are at play in London.  Uber drivers, taxis and vans figured out they could pay one tax for entry and spend hours driving around picking up riders, increasing congestion.  So the CCZ may go down as a failed experiment.

Still, fuel tax revenues are drying up even as more vehicles crowd roadways.  The problem of reducing revenue is multi-faceted:  better gas mileage (fuel efficiency has roughly doubled in the past 25 years) … more electric/hybrid cars, that are subsidized to increase production, etc.  So, some form of payby-mile is gaining steam.

A variety of ways to charge you for driving a vehicle are in the experimental stage – all bolstered by scary, unbelievable leaps in technological capabilities.  In less than three years, Singapore will use a GPSbased system to vary the amount it charges drivers based on distance, time, location and vehicle.  At the same time, drivers will receive real-time info about the cost and “busyness” of roads, encouraging them to consider other routes.  Closer to home, California and Colorado have received federal grants for trials of various pay-to-drive schemes.  We’ll detail what Oregon is doing with 1,500 drivers in the next item. Read more →

July 21, 2017

Volume 39, Number 16

For years, Austin Neighborhood Organizations have been a powerful force at City Hall, many times taking a NIMBY (Not In My Back Yard) position against various development proposals, including building new housing/apartment units.  Now, because some NIMBY efforts have led to rising housing costs creating even fewer available living units a new countermovement is emerging nationwide to combat resultant rising housing costs.  Its called YIMBY (Yes In My Back Yard).  Can Austin be far behind?

YIMBY groups are springing up to battle long-established neighborhood groups and local elected officials.  They are demanding an end to strict zoning and planning regulations.  They want to prevent housing construction proposals from being delayed or even derailed.  YIMBY’s view is that rising costs are forcing residents to move further away to find less expensive housing, thereby damaging the environment as people get pushed into longer commutes.  Right now, YIMBY’s efforts are expanding in Colorado and California.

Take California.  The New York Times reported this week “a full-fledged housing crisis has gripped California, marked by a severe lack of affordable homes and apartments for middle-class families.  The median cost of a home (in California) is now a staggering $500,000, twice the national cost.  Homelessness is surging across the state.”

YIMBY groups have organized in many California communities, with full-time staff.  As a testament to their growing influence, the California legislature, controlled by Democrats, is now considering measures that will override local zoning laws, much to the chagrin of neighborhood groups.

Take Colorado.  YIMBY’s first gathering was organized by a group that included Boulder’s former mayor Will Toor who said “… tackling the lack of housing in thriving urban areas, caused largely by local zoning restrictions, is key.”  YIMBY conferences (called “Yimbytowns”) attract several hundred attendees.

We know of no YIMBY group in this area, though Austin is beset with many of the same concerns (high cost of housing, lack of available living units, homelessness, sprawl, local development restrictions, etc.) that have given rise to action in other cities.  But Austin has its own controversial process tackling these issues.  See the next item about CodeNEXT. Read more →