Residential Real Estate

Dated: 07/04/2015

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Residential Real Estate

Texas housing market still faster than the rest of the country, despite energy sector declines

Texas housing market still faster than the rest of the country, despite energy sector declines

Home price increases in the state are running at about twice national rates, the National Association of Realtors’ chief economist said.MIAMI — The energy industry recession so far isn’t putting the brakes on Texas’ hot housing market.

“I think Texas is diversified enough to withstand the oil price decline,” said Lawrence Yun.

Declines in oil prices in the last year have led to a slowdown in employment growth in Texas and job cuts in some cities.

But Texas’ housing markets are still holding up.

Home sales in North Texas are running about 4 percent higher this year compared with 2014, hitting a new record for both purchases and prices. In Houston, sales are basically flat.

Prices in all of Texas’ big cities are still rising.

Nationwide home prices are up by more than 5 percent this year.

In Dallas-Fort Worth, median home sales prices are growing at almost twice that rate.

“I’m less concerned with Texas because the price compared with the coastal regions is still very affordable,” Yun told members of the National Association of Real Estate Editors meeting Friday in Miami. “Texas, for the first time in a long time, is seeing a double-digit price appreciation.

“The builders just build,” which adds to the housing supply, he said. “This time, the builders are not building.”

‘Buyers coming back’

Yun said that he’s not happy with the strong home price gains in many markets, but that he doesn’t believe there is any price bubble.

“The buyers are coming back to the market,” he said. “As a result, prices could touch a new high this year.

“We need to tone down the price growth, because prices are rising too fast,” Yun said. “House prices nationally are now reaching back to 2006 levels,” before the recession.

Home sales across the country are still about 25 percent below where they were in 2006.

The Realtors’ association is forecasting about a 5 percent increase in nationwide preowned home sales this year, to about 5.3 million purchases. That’s still well below the almost 7 million homes sold around the country in 2007.

Homebuilders also have a long way to go to get back to the construction levels the industry saw a decade ago, before the economic crash.

New-home construction in North Texas is 40 percent below where it was in 2006.

Nationwide single-family home starts last year were about half what they are in a “normal” year.

“The single-family market has struggled and is only halfway back,” said David Crowe, chief economist with the National Association of Homebuilders. “There is a gradual rise in new home sales.”

Lean inventory

Crowe said builders are primarily serving the higher end of the housing market, not their traditional first-time and moderate-income buyers.

“We have almost a completed flip in those houses under $200,000 and those houses over $400,000,” he said. “We’ve had this complete reversal in what homes are being sold.”

For 2015, the homebuilders’ association is forecasting a 12 percent increase in home starts.

Crowe said a tight supply of land for building sites and labor shortages continue to hold back builders.

“Builders are seeing a profit squeeze,” he said. “They are paying higher prices for their land and labor.

“It’s difficult to make money — particularly for first-time homebuilders.”

Lagging home construction levels and strong demand in markets like Texas are keeping home supplies in a pinch, the housing economists said.

“For the last three years, the inventory for sale has been extraordinarily lean,” said Frank Nothaft, chief economist with CoreLogic Inc. “We are seeing a pickup in housing demand with lean inventory, and that’s what’s pushing up prices.”

‘Should be booming’

Home finance costs have so far remained low enough not to affect sales, he said.

“With mortgage rates where they are, things should be booming,” Nothaft said. “But they aren’t booming.

“Home sales are still below the level of 2000, 2001 and 2002.”

But some owners still are saddled with too much debt on their properties for them to sell.

And large numbers of young Americans are stuck in the rental market because of high student debt burdens, he said.

Nothaft said that in markets including Dallas, Atlanta and Houston, the number of houses being rented has grown by 50 or 60 percent since the recession.

About 3 million U.S. houses have been purchased by investors — moved from owner-occupied houses to rentals, he said.

“That’s about a one-third increase,” Nothaft said. “Single-family homes represent 40 percent of the rental stock in the U.S.”

“In some markets we’ve seen double-digit increases in rents on single-family detached loans.”

By Steve Brown

Real Estate Editor Published: 26 June 2015 09:31 PM

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