ABJ Economic Outlook Takeaways with Jenny Law and Tabitha LeJeune

Our team had the opportunity to attend the Austin Business Journal Economic Outlook, where economists and industry leaders shared insights on where the economy, housing and interest rates are headed. Below are the key takeaways that stood out most and what they mean moving forward, especially for real estate.

Interest rates are expected to remain uneven. Short term rates may come down modestly in the near term, but longer term rates are expected to stay higher. Because mortgage rates are tied more closely to long term Treasury yields, this means we are unlikely to see any major relief in borrowing costs. The general expectation is one more rate cut, possibly two, but a return to ultra low rates is not on the table. A 6 percent mortgage rate appears to be the baseline going forward.

Job growth is expected to level off. We are not seeing a sharp decline, but we are also not seeing acceleration. The focus has shifted to productivity and AI is viewed as the primary driver of future productivity gains in the US. This is why tech, AI and the Magnificent Seven continue to play such an important role in supporting the broader economy.

Housing inventory is rising nationwide and pricing pressure is easing. This does not indicate a crash, but rather a shift toward a more balanced market. Buyers have more options and leverage than they have had in years, while sellers need to be more strategic with pricing and presentation.

Inflation expectations remain relatively stable and are not projected to rise significantly from here. However, the growing US deficit remains a major factor. Increased Treasury issuance means higher interest expense, which keeps pressure on long term rates. As a result, mortgage rates are unlikely to see meaningful declines anytime soon and could trend higher over time.

The US dollar decline was also noted. While still strong, the dollar is expected to be worth more today than later. A slight decline could be beneficial for foreign investors, making US assets more attractive and potentially increasing international investment.

Texas continues to stand out economically. Utility price increases remain among the lowest in the country and combined with tax incentives, this keeps Texas highly attractive for businesses. That strength continues to support housing demand, even as the market normalizes.

One notable local data point is that Austin Community College is now nearly as large as UT, highlighting the region’s population growth and workforce expansion.

Looking ahead, Austin’s infrastructure investment was also a major point of discussion. The airport expansion plan is focused on accommodating more direct global flights, supporting continued business and international growth. The Austin Convention Center is being redeveloped to better match the scale and needs of a growing city, bringing Austin more in line with other major metropolitan areas. Alongside these projects, the City of Austin continues to invest in broader infrastructure expansion to support ongoing development and long term population growth.

The overall takeaway is clear. Higher rates are here to stay, inventory is improving and pricing is adjusting. The market is not broken, it is simply operating under a new set of rules.