Mitch Ely, owner of Texan Properties, recently broke ground on the first of three new projects, 62 upscale apartments at Wilson Street and Cumberland Road. Called Flats on Wilson, the $13 million project will have 56 units at market-rate rents and six at more moderate prices.

Ely plans to start two more projects in June: the $28 million Flats on South Congress — 217 units slated for South Congress Avenue and St. Elmo Road — and the $29 million Flats on Lamar, 186 units to be built at North Lamar Boulevard and North Loop. Financing has not been finalized for the South Congress and North Lamar projects.

"The Austin apartment market is arguably one of the healthiest in the nation," said Ely, who also has developed apartment projects in the University of Texas campus area. "High rental rates, coupled with historically low vacancy rates, make Austin a prime target for new apartment development."

The first Flats on Wilson units are expected to be ready by June 1, Ely said. Rents for the market units will range from $1,695 to $2,595 a month, while the more affordable units will rent for about $1,100 a month, said Deacon Shields, broker/principal at Ely Properties, a residential brokerage and development firm that is the listing agent for the units.

At the South Congress project, rents will range from $900 to $2,500 a month. There will be 21 studio apartments that will rent for about $600 a month, Shields said. The North Lamar units will have market rents ranging from about $1,000 to $2,500 a month, with 18 at below-market rates of about $600 a month.

The Austin area ended 2011 with its apartment complexes nearly 96 percent full on average, according to Charles Heimsath, president of Capitol Market Research, a real estate consulting firm that tracks the apartment market. The record occupancy of 97.6 percent was reached in December 2000.

Demand for apartments is being driven by the area's job and population growth, coupled with a relatively small number of new units coming onto the market. And financing continues to limit the amount of new apartment construction, according to Heimsath and local developers.

The projects under construction in the Austin area will deliver about 1,800 units this year, which is much lower than the historical average annual demand of about 4,000 units, Heimsath said.

Although more units — up to 15,000, by Heimsath's count — are in the pipeline, those represent a wish list, as many do not have financing and might not be started for months or years, he said.

The Austin area's apartment market has been on an upswing for at least the past year and a half, and Heimsath has predicted it will continue on the ascendency for an additional two or three years. As apartment occupancies have risen, so, too, have rent prices, leaving many tenants feeling the pinch.

Average rents in the Austin area were up 7 percent last year to $913 a month, compared with $853 in 2010, according to Capitol Market Research.

MPF Research, which tracks rents and occupancies in Austin and other cities nationwide, has forecast that Austin's apartment market will be the nation's No. 2 performer this year, just behind San Francisco, based on anticipated increases in rents and occupancies.

Greg Willett, vice president of research and analysis at MPF Research, said Austin will have demand this year for about twice as many apartments as are expected to be completed, "so the market should continue to get tighter throughout the course of the year."

Current requirements to qualify for a home loan "are impacting the volume" of renters who are able to buy a home "to a small degree," Willett said.

"It's important to realize that homebuying volumes during the easy credit days from the late 1990s through the middle of the 2000s weren't normal," Willett said. "Today's split between demand for rental and for-sale housing doesn't look all that different from the stats seen for the three or four decades prior to the late 1990s."

The sharp jump in Austin's apartment occupancy resulted in part from the region's population, which swelled by 52,000 people in 2011 over 2010, creating the need for about 20,000 new housing units, Heimsath said recently.

Jay Klahn, a corporate consultant in the Los Angeles area, will be part of the region's in-migration when he relocates here this summer. Klahn said he put down a deposit at Flats on Wilson, where he and his girlfriend plan to live.

The location, floor plan and rooftop deck were all draws, he said.

"My girlfriend and I decided on the South Austin area for the active lifestyle, great shops and convenience to downtown," Klahn said. "We chose the Flats on Wilson as they are more like a house than many of the other rental options."

Other big pluses, he said, included the attached garage, having no neighbors above or below and having a yard for his yellow Labrador retriever, Abbie.

"She's looking forward to running around in the yard," Klahn said.

snovak@statesman.com; 445-3856

by Mitzie Stelte

February 24, 2012

http://bit.ly/wEUDkG

http://angeloueconomics.com/

Austin's economic forecast for this year and next year is a positive one with 45,000 new jobs projected in 2012 and 2013, according to economist Angelos Angelou.

Angelou, the founder and principal executive officer of Austin-based AngelouEconomics, has been providing economic forecasts since 1984 with his latest one presented at an event Feb. 23 at the Austin Convention Center.

"We're going to have a good solid two years," Angelou stated. "The economy recovered sufficiently in 2011 to basically allow us to have a more aggressive forecast."

The seasoned economist predicts that of the 45,000 new jobs in store for Austin over the next two years, 18,900 will be added this year. Last year, Austin saw a gain of 12,800 jobs.

According to his forecast, much of the job gains will be in the sectors of retail trade, education and health services, and leisure and hospitality. As a result, Austin's unemployment rate should drop to 5.6 percent in 2013. He said the average for 2011 had been just about seven percent with the unemployment rate at 6.1 percent in December.

Austin's population will grow by 88,000 people over the next two years to nearly 1.84 million with roughly 60 percent of newcomers from out of state and 40 percent from within Texas.

Last year, he said there were about 39,000 newcomers to Austin who collectively spent about $1.1 billion.

"With increases in population, there have been increases in retail sales and employment and more growth in real estate," Angelou said.

An additional 14,500 single-family units and 8,000 multifamily units are expected in 2012 and 2013, as well as increases in office, industrial and retail space construction.

Technology trends were also highlighted, including the semiconductor, personal computer and information technology industries.

According to Angelou's findings, in 2011, the semiconductor industry saw $300 billion in chip sales and 3.1 percent growth between 2011 and 2012. At the same time, the personal computer industry had $357 million in shipments and 9.3 percent growth, while information technology saw $3.67 billion in spending and 3.7 percent growth.

He said nationally and globally, IT spending is projected to grow, which of course, benefits Austin.

Overall, economically, Angelou said Austin historically has always performed better than the rest of the country, with this year as no exception.

"We've always done so," he said.

Angelou also mentioned the upcoming Formula 1 race, South by Southwest Music and Media Conference and the Austin City Limits Festival.

According to his forecast, F1, which has its first race in Austin in November, could have marked implications on the automotive and clean energy industries. He estimated the potential economic impact of F1 at more than $500 million per year.

Attendance has continued to grow for both SXSW and ACL, and 2012 is projected to be no exception.

Angelou said he felt compelled to highlight these events to show Austin is not solely high-tech, but a balance between technology and fun.

“The two brands are not clashing or competing,” he said.

Economist: Austin area to add 45,000 new jobs in next two years

AMERICAN-STATESMAN STAFF

Austin's puny job recovery over the past two years will accelerate into faster job growth this year and next, economist Angelos Angelou said in his 26th annual forecast event Thursday.

The CEO of Angelou Economics forecast 45,000 new jobs will be added to Austin's five-county metro area in 2012 and 2013, more than doubling the job expansion of the past two years.

Austin added 12,800 jobs last year, and its growth rate of 1.7 percent trailed other major cities in Texas and the state as a whole, which expanded jobs by 2.3 percent.

The drivers for a stronger economy, Angelou said, will be venture-backed startups, a resurgence of established tech companies, an increase in new residents moving into the region from elsewhere and a stronger real estate development sector.

Austin's economy, Angelou said, is getting its groove back.

"I am optimistic about the forecast because I believe we had a significant recovery in the high-tech sector last year, which will continue. We had a 7 percent increase in our number of high-tech workers, expanding to 101,000 last year," Angelou said. "That is substantial. Those increased payrolls are going to kick in this year and next."

"Venture capital seems to be doing fairly well, and if those trends continue, we should see more small companies being formed. And people are continuing to move to Austin. Population growth last year generated about $1.1 billion to our total personal income."

Those new jobs, Angelou predicts, will drive the local unemployment rate down to 5.6 percent in 2013 from its current rate of 6.3 percent. He forecasts the population will expand during the two years by 88,000 to reach 1.84 million by the end of 2013.

The forecast calls for 14,500 single-family home starts during 2012-13 along with the construction of 8,000 new apartment units. It also calls for increased construction of office space, industrial space and retail space as occupancy rates continue to rise.

Angelou also is bullish on the rise in Austin's entertainment events, including continued growth for the South by Southwest festivals, the Austin City Limits music festival and the city's first Formula One auto race, which is scheduled for November.

"We are going back to being a high-tech town, a fun place to be and a great place to live and do business," he said. "Formula One is going to provide a lot to this region over time, and it will be very successful."

The eventual impact of Formula One could reach $500 million a year to the local economy, Angelou estimated.

Angelou, who runs an economic development consulting business, has been giving Austin economic forecasts since he was hired as an economist with the Greater Austin Chamber of Commerce in 1984.

Angelou's forecast usually has tracked the economy fairly closely over the years. He missed in 2009, the worst year of the latest recession, when he forecast weak growth of just over 2,000 jobs, and Austin instead recorded a net loss of more than 16,000 jobs.

While Angelou was upbeat about the local outlook, Jay Bryson, managing director and global economist for Wells Fargo Securities, gave a more guarded outlook about the national economy.

Low interest rates and strong business balance sheets in the United States should promote more growth, but the economy may be constrained by consumers' focus on paying down their debts, Bryson said.

Wells Fargo expects the nation's gross national product adjusted for inflation will expand by 2 percent this year, which is slightly better than the 1.7 percent growth recorded last year.

Continued low interest rates and strong business balance sheets will enable growth, but the key remains how much of their income consumers devote to spending versus paying down past debts.

Bryson said the United States faces a few big risks, including rising oil prices, which could slow down consumer spending, and the deep problems of dealing with heavy government deficits both in Europe and this country.

The European financial crisis still poses a substantial threat to banks in Europe, he said. If the European debt situation is not worked out, it could cause a "major disruption" for the European financial system, which could lead to tighter credit in the U.S.

"Europe is not over yet and is not going to be over for awhile," Bryson said.

Continued heavy deficit spending in the United States probably won't create an economic crisis in this country this year, but he said the issue needs to be addressed by politicians in the next 18 months or risks could rise dramatically.

Business people who are expanding, Bryson said, should consider not only the best-case economic scenario, but how well their business plans would hold up against those major economic risks.

"Caution is well-advised," he said.

kladendorf@statesman.com; 445-3622

Predicted job growth, 2012-13

Industry New jobs % growth

Education/health services 7,200 7.9%

Leisure and hospitality 7,000 8.1%

Retail trade 6,900 8.2%

Professional services 5,700 5.2%

Construction 4,400 11.3%

Other services 2,800 8.1%

Financial activities 2,800 6.5%

Manufacturing 2,600 5.4%

Government 1,700 1.0%

Wholesale trade 1,700 4.2%

Transportation 1,200 9.2%

Information 900 4.7%

Source: Angelou Economics

 Statesman.com

Ask an Agent: Is flipping a home worth it in Austin?

Five years ago, TV shows made flipping houses seem like fun. Those shows are still on and, from time to time, show up in Austin. Can flipping houses still work in our current economy? If I'm interested in flipping a house, what should I look for in a property?

Kinan Beck, One Source Realty: If you watch the shows closely, you will see the ups and downs of flipping houses. It is not always as easy as it might seem, and it is important to bear in mind these are TV shows, so sensationalism is important when trying to entertain people. Not every flip will be a huge success.

In our current market, there are definitely some deals to be taken advantage of if you have the right resources: priced-right contractors, electricians, plumbers, etc. When you are a lone person doing one property here and there, you will not have the same advantage of a person or company that does numerous flips each year. Just like anything else, the more quantity you deal with, the better deal you will get from your vendors.

When looking at property for a possible flip, the most important thing is to make sure the house structurally is sound. Some of your most expensive repairs will be foundations, roofing, electrical and plumbing. These are especially true in older homes, in which it might be necessary to rewire or re-plumb the entire home to meet building codes. Other things to look for are asbestos, lead paint and mold.

If you are planning to get a loan to purchase the property, the home must be in sellable condition, with appliances intact and also no serious cosmetic work needed, so these are things to consider as well.

If you are considering trying the flip-side of real estate, I recommend you have a thorough inspection of the property, have an experienced agent to negotiate on your behalf, budget for the unexpected (there is almost always an unexpected) and be prepared for the stress of staying on budget and within your planned time frame.

The longer you hold onto the property fixing it up, the more money you throw out the window. Before you choose to jump into the flip market, talk to a few real estate professionals and do your homework on any property you are considering.

Byron "Buddy" Schilling, President of J.B. Goodwin Realtors:

TV programs about flipping houses warn that it is not easy — but still they make it look like fun and profit. Those programs do not give a complete picture of the financial risks. It is a lot more entertaining to see someone make a lot of money than to see someone losing their shirt.

Flipping homes in Austin is particularly hard because our prices have gone up very little over the years. In 2010 the median price was up 2 percent and in 2011 it remained level. That means you have to buy something below market and make sure you do not spend too much remodeling it to be able to sell it at a profit.

The old rule in remodeling is it will always cost 20 percent to 30 percent more than you originally expected. Once the project begins, you find other things that need to be replaced. The profit margin in flipping is dangerously thin if the prices of homes are not shooting up around you.

If flipping homes were easy in Austin more real estate agents would do it.

Brian Talley, Regent Property Group: Flipping houses can work in any market and can be very profitable if the numbers work. Because there is a lot of money in Austin, looking for good investment opportunities, good deals can be hard to find.

Getting a good deal often requires good timing for a buyer where a seller is willing to take a below market price to sell quickly. Sometimes buyers can find good deals with homes that need updating where the seller is willing to take less than market so they don't have to deal with the hassle of updating the home.

There are many other scenarios where a buyer can purchase a home and flip it for profit. Nonetheless, it is rarely easy to flip a property for profit and I wouldn't recommend it for someone that doesn't have a solid grasp of home values and an understanding of the associated risks.

If you still want to flip houses, be sure to do your homework up front to get an idea of your best- and worst-case outcome before making the initial investment in a home. If the worst-case scenario is unacceptable for your finances then I'd pass on the opportunity.

Allison Olson, Diane Dopson Properties:Though flipping a home might appear to be a nice, quick way to make some fast cash, you must be realistic if you are thinking about flipping a home for a profit these days.

Here are the main things to consider: Talk with a professional, experienced real estate agent who has worked with flippers before diving into this. One hundred percent traditional financing is no longer an option. And, City of Austin permitting can take a long time. You will need to set a realistic budget and then add in additional allowances for unexpected carrying costs. Distressed properties like foreclosures are few and far between in Austin.

Location is key, as always. So, you'll want to buy in an area without a lot of current inventory. The main thing to know is that it can be profitable. You just need to do your homework first and seek professional advice before stepping into a potentially costly situation.