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May 11, 2018

Volume 40, Number 6

Multiinch rainfall fell throughout much of the Austin area last week.  The benefit is obvious when you look at the trees, shrubs, grass, etc.  Vegetation is thriving nowBut, emergency crews will tell you the dog days of summer harbor the potential for disaster.  Were not talking about flooding, were talking about wildfires.  As the summer temps rise, dry vegetation provides fuel for fastmoving wildfires.

Specifically, we’re referencing the northwest quadrant of Austin, lavishly graced with massive amounts of trees – especially cedar/mountain juniper.  Fire casualty companies have rated Austin #3 in the nation for high wildfire risk, with more than 37,000 homes at risk.

Public Safety Commission member Mike Levy says the Austin City Council chooses to ignore the critical, immediate need for another fullystaffed fire station in the Loop360 corridor.  “If a wildland fire pushed by high winds from the northwest is not contained at 360, there goes Austin,” Levy warns.

Pointing to recent widespread fires in California and Colorado, Levy says the heavily-wooded area of Austin along the 360 corridor poses even greater risk.  “We have massive amounts of cedar and persimmon,” he said.  “Because of their oils, they dont ignite; they explode.”

He envisions a scary perfect storm scenario:  Thirty-to-thirty-five mile an hour winds that don’t “lay down” at night.  Low humidity.  Very dry vegetation in large quantities serving as hot fuel.  “One home on the urban interface ignites, most likely by a flying ember under the eaves rather than direct contact with flame, similar to how Bastrop homes, several miles from the actual flames, ignited,” said Levy.

“Then that fire igniting homes on either side and then on either side of those, with the same pattern across the street, with the fire jumping to the homes behind those … Well, you get the idea of the checkerboard pattern of rapidlyspreading house fires,” he continued.  “A monstrous inferno.  In less than 2-3 hours, thousands of homes will be lost along with lives of firefighters and civilians.”

Levy continues to press for expanded fire protection in Austin’s northwest quadrant, saying “Austin so far has dodged the bullet.” Read more →

May 4, 2018

Volume 40, Number 5

Yes, median pay at Facebook really is about $240,000 a year.  The median is the midpoint at which half of workers make more and half make less.  $240,000 a year!  Median employee pay at Alphabet (parent company of Google) is $192,274How do we know these eye-popping numbers?  Congress required this disclosure to be made to the Securities Exchange Commission (SEC) starting this year as part of the DoddFrank law.  The objective was to compare employee salaries to their CEOs compensation to name and shame bad CEO actors.

Since this was the first year for the requirement to take effect, enterprising reporter Kathleen Pender dug up these numbers and published them this past weekend in the San Francisco Chronicle.  The problem is that the law is a bit obscure as to what is included in the compensation.  So Pender reports it is not quite apples-to-apples when you compare companies, even though the companies stand behind their SEC filings for their individual entities.

The employee totals are the most interesting numbers for Austin.  The CEO’s don’t live here.  Employee payrolls are of the utmost interest in the Austin area as these two companies are expanding their local workforces regularly.

But, let’s quickly look at the CEO figures.  Pender reports, “Facebook founder and CEO Mark Zuckerberg made 32 times what the median Facebook worker earned.  But, Zuckerberg only took a $1 salary last year and got no new stock grants (on top of the $70 billion in Facebook stock he already owns).  So where did the compensation figure come from?  His $8.8 million in compensation last year was mainly for his personal security detail and private aircraft use.

What about Alphabet’s CEO’s compensation?  Pender further reports, “its CEO and cofounder Larry Page took home his usual $1, producing a pay ratio near zero.”  Other CEO’s (not just tech) pull down annual salaries ranging in the eight-digit millions.

For this report, weve selected just a couple of companies with a major, growing presence in Austin.  The law was designed to single out companies perceived to be bad actors.  But, there are other ramifications.  Some “CEOs got pay envy” and sought more bucks.  As for employees, backlashes occurred when disgruntled workers found they were earning less than the median and poaching of employees is starting to occur.  Stay tuned. Read more →

April 27, 2018

Volume 40, Number 4

Even as oil and gas production enjoys another resurgence in Texas, the state has issued a positive report on solar powers momentum as a separate energy source.  “The longterm prospects seem as bright as the Texas sun,” said Glenn Hegar, Texas Comptroller of Public Accounts.  And, the cities of Austin and Georgetown were cited as examples of early adopters of the technology.

Ten years ago, Texas’ solar industry was fairly small, but today some believe it’s ready to take on a much larger share of the states energy needs, according to a report by Patrick Graves and Bruce Wright, of the State Comptroller’s office.  How big is the Texas solar industry?

Nearly 8,900 Texans work in the solar industry, in manufacturing, installation, sales, distribution and more,” Hegar noted.  “Our state has 532 solar companies and nearly 100 solar manufacturers.”  Hegar did acknowledge the Texas solar industry is “a relatively small slice of the national industry,” but went on to say “its growing rapidly, driven by improved technology and falling prices.”

Research fellow with the Energy Institute at UTAustin Roger Duncan sayssolar is where wind was 10 years ago and he believes the economics of solar power are as good as wind energy, and maybe better.”

Austin was cited as being at the forefront of using these new energy sources:  “Between solar and its windpower resources, Austin expects to be able to meet more than half of its total needs with renewable energies by 2020,” the Comptroller’s report noted.

It also pointed out nearby Georgetown signed agreements recently that will allow “Georgetowns municipallyowned utility to rely entirely on wind and solar sources.  The city will sell excess power to ERCOT, the states power grid, which will also provide backup power for Georgetown in the event of any shortfall in its power resources.”

To be sure, “there are still unknowns that may rock the industry, including the fate of an important federal tax credit and a recent tariff on foreignmade solar panels,” said Hegar. Read more →

April 6, 2018

Volume 40, Number 1

This week the Austin AmericanStatesman, an important, venerable Austin institution dating back to the late 1800s, is under new ownership.  Gatehouse Media, a national media giant, paid $47.5 million for the news operations (real estate was not included).  Will there be changes?  You betcha.  A lot of changes.  Not this week.  But soon.  What can you expect?

Assuming the price tag was a good deal for the buyer, you can further assume the buyer is convinced it can do a much better job with the Statesmans assets than the former owner.  Otherwise, why make the purchase?  In other words, they obviously feel they can make a lot more money — even at a time the revenue streams have been shrinking for years at the Statesman.  How will this manifest itself?

First of all there will be layoffs.  “That’s inevitable” the new owner was quoted as saying.  The Statesman is now part of a media behemoth.  So you can expect some consolidation of functions, and that could result in job increases in certain areas, as well as decreases.

Yeah, but what about reporters, writers, photographers, etc.?  Right now, only about 100 employees fall into that category.  This is about half of where it stood ten years ago.  So, the editorial staff is not likely to be hit with a meat axe approach.  But some attrition is likely.

You can look for Gatehouse to focus heavily on the digital side of the business.  Subscriptions to the Statesman’s digital offerings have grown, even as print subscriptions have dropped precipitously.  This includes new approaches to advertising revenue (the mother’s milk of publications).

Also, bear in mind other Statesmanowned news assets were part of the sale, such as community newspapers like the Bastrop Advertiser, Westlake Picayune, Lake Travis View, Pflugerville Pflag, Round Rock Leader and the Spanish language weekly, Ahora Si!.

And for what it’s worth, Gatehouse Media also has another major presence in the Austin area.  The Center for News & Design opened in 2014, where more than 240 employees provide editing and design work for publications nationwide.  Add it up.  It’s a New Day for news and reporting in the Austin area, playing out over the coming months.  Stay tuned. Read more →

March 30, 2018

Volume 39, Number 50

It hasnt come close to peaking yet, but a coupla races for Congress in Central Texas will soon start coming into focus in the public eye.  Its only a handful because the next election is a runoff.  It will be held May 22ndThis will determine the Dem vs GOP contests to ultimately select the final winner in the General Election contest in November.

The most wide-open runoff race will be for the District 21 Congressional seat that extends from parts of Austin to parts of San Antonio.  Lamar Smith decided not to run for reelection.  One reason was, under House rules, he is term-limited and would not be able to keep his powerful committee chairmanship even if he were reelected. So what does the race to replace him look like now that the Dems and GOPers both have runoffs to select their party nominee?

First the Democrats.  Two candidates will be on the May 22nd ballot – Joseph Kopser and Mary Street Wilson.  They emerged from a crowded field, but neither, obviously, got 50+% of the vote to avoid a runoff.

The same is true for the Republicans. Matt McCall and Chip Roy will be going head-to-head for the GOP nomination.  The primary contest was notable in that USenator Ted Cruz went all-in for Roy, his former chief of staff.

Two Democrats will be scrambling for the opportunity to challenge District 10 Congressman Michael McCaul, who is the high profile chair of the USHouse Homeland Security Committee.  They are Mike Siegel and Tawana WalterCadien.  This district includes all of Austin, and runs east through several conservative counties to the edge of Houston.

Another congressional district race, that encompasses a portion of Austin and runs all the way north to the edge of Fort Worth, has two Democrats vying for the chance to challenge incumbent Roger WilliamsJulie Oliver and Chris Perri emerged from a crowded field of Dems to make the runoff.

These are the only Congressional runoffs in Central Texas.  But, there are others in Texas that bear watching if you’re interested in the balance between Democrats and Republicans in the USHouse, that is now heavily Republican.  Of particular note is District 23, which the Dems have targeted nationally.  They want to oust GOP Will Hurd, an African American in heavily Hispanic West Texas, where Gina Ortiz Jones is facing Rick Trevino in a runoff.  Stay tuned. Read more →

March 16, 2018

Volume 39, Number 48

Despite much of Texas being hammered by Hurricane Harvey, 2017 was a recordbreaking year for residential real estate sales (the third year in a row, by the way).  And, sales activity across the state should be even more robust in 2018, according to the chief economist for the TexasA&M Real Estate Center and a longtime chronicler of residential real estate, Jim Gaines.  He has specific reasons for such a positive prediction.

“One of the big drivers will be from firsttime homebuyers finding opportunities in the market with more builders focusing on the entrylevel price point and lenders relaxing the requirements for first-time homebuyers,” Gaines predicted.  “Additionally the likelihood of more volatile interest rates in 2018 will influence homebuyers to buy now rather than later.”

This look-ahead is interesting.  But what about now?  How are sales holding up during the early part of the year?  Right here in the Austin metro?  For a change, we’re going to give you the stats on a city-by-city basis so you can see where the activity is taking place. These numbers reinforce Gaines’ prediction for the future.  This is a one-month snapshot, February 2018.  These are official Austin Board of Realtors single family home sales numbers.

The big kahuna is Austin, due to sheer size.  Units sold in Austin in February 2018 totaled 604, with a median price of $366,710.  But, metro areas also posted impressive numbers:

#2 Round Rock sold 165, with a median sales price of $272,000

#3 Georgetown sold 129, with a median sales price of $300,000

#4 Leander sold 103, with a median price of $245,000

#5 Pflugerville sold 82, with a median price of $252,500

#6 Cedar Park sold 64 units, with a median price of $288,950.

The southern part of the metro also showed strength.

48 units sold in Kyle, with a median price of $209,500

41 units sold in Buda, with a median sales price of $250,000

44 units sold in Hutto, with a median sales price of $224,500.

Notice the trend?  Most units sold were in the $200,000 range.  Sales of pricier homes were limited.  Example:  West Lake Hills tallied only 3 sales (median price $1,100,000), 4 sales in Horseshoe Bay (median price $996,250), and 5 sales in Driftwood (median price $970,700). Read more →

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 →

February 2, 2018

Volume 39, Number 42

Downtown Austins skyline is an intriguing thing to behold.  Its continually changing, with office, hotel and residential skyscrapers replacing tall construction cranes on a regular basis.  Infrequent visitors to downtown Austin express amazement over the visual transformation.  Well, it wont be long before two more office towers will emerge closer to the State Capitol.  Yep, the State of Texas will soon join the building spree.  Lets check out the latest.

Consolidating state offices and state employees has long been discussed.  After all, in a state that has been one of the fastest-growing in the nation for years, it is not surprising the size of state government has been expanding as wellAs this expansion takes place, many state agencies have been paying rent to provide space for state workers.  And, many of those employees are spread around town.  So, what’s the plan?

The Capitol Complex Master Plan is composed of three phases that will consolidate several state agencies in buildings near the State Capitol.  It’s big.  The current cost is estimated at $581 million.  And, this is planned to deliver about one-million square-feet of office space in two new office buildings.

One building is a 14story office tower.  It is planned to contain about 600,000 square feet of office space.  The other state office building is a 12story tower.  The plans call for it to contain about 400,000 square feet.

Yeah, but what about parking in this area that is adjacent to the downtown area, where City of Austin policies have severely restricted auto access and parking?  Part of the plan includes a fivelevel underground parking garage.

 To the credit of most state building plans, a lot of effort is focused on cosmetics.  Right now, a grassy openair mall, with a lot of trees, on Congress Avenue is part of the Master Plan.  After all, this is public space that hosts visitors.  It will run from the Capitol’s north steps for several blocks up to MLKJr Blvd.

When viewed as part of the overall downtown Austin skyline, 14story and 12story office buildings will not compete visually with the highrises shooting skyward a couple of blocks away.  But the investment is planned to save state money in the long run and theoretically make state government more efficient by this consolidation.  And it will “fill-in” a changing skyline. 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 →

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 →