marcus-mc-cue

By Marcus McCue
Executive Vice President and Chief Business Development Officer
Guardian Mortgage Company

The national housing market remains strong, and Texas, in many respects, is leading the way with record existing-home sales in Dallas and robust price growth.

Some housing experts were surprised at just how vigorous the Texas housing market was last year. Sales and prices set records in Dallas, and new home construction in the state was the most robust it’s been in several years.

The global oil price slump presents some headwinds, however, and will challenge housing markets in some Texas regions this year. Houston, South Texas and Midland-Odessa already have felt the pinch from low oil prices, and layoffs in the energy sector have begun to ripple through other business sectors.

James Gaines, chief economist for the Real Estate Center at Texas A&M University, noted in a recent report that job losses in the energy industry haven’t stopped and likely will pick up this year. But growth in other industries such as healthcare, technology, business services, construction, and hospitality should help buoy the state’s economy.

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Hicks Walnut Place

Luxury home sales in Dallas-Fort Worth were hot, according to the latest report from the Texas Association of Realtors.

Demand for high-end dirt in Texas was quite robust in 2015, according to the just-released 2016 Texas Luxury Home Sales Report from the Texas Association of Realtors. Dallas luxury home sales and Fort Worth high-end real estate sales grew by 12.4 percent from January to October 2015, with 1,088 homes priced at $1 million or more selling during the period.

“Texas’ economic prosperity continues to make luxury home sales one of the strongest sectors of the Texas housing market, particularly in the $1 million to $1.5 million range,” said Leslie Rouda Smith, luxury Realtor with Dave Perry-Miller Real Estate and chairman of the Texas Association of Realtors. “In some neighborhoods, the lot alone is well worth $1 million and up.”

Ain’t that the truth! Dallas dirt is getting tremendously expensive, especially in the custom homebuilding market. Buyers and clients should expect the lot purchase to take up a greater share of the budget from now on as land is growing more scarce.

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Paul Volcker

Get ready for the media freak out. Besides a re-hash of last night’s Republican debates — the most substantive thus far, in my opinion — everyone is talking about an expected interest rate hike today from the Fed. I had two media calls yesterday asking me if I thought a rise in interest rates might hurt or slow our blazing Dallas real estate market.

Nearly everyone believes the Fed is going to raise interest rates for the first time since June 2006. If so, the federal funds rate — which is the wholesale rate banks charge each other for overnight loans — will tick up a quarter percentage point from near zero.

Only one-quarter of a point. But experts say that may begin a chain reaction that leads to higher rates in 2016.

Jonathan Miller

My favorite New York-based Real Estate guru Jonathan Miller looks at why have rates been so low for so long — basically a cruddy economy and slow job growth? And he asks, is it really time to raise them?

Looking at the charts it seems like no, though it would be nice to have banks pay us some money for keeping our money in their banks. Right now, the rates banks pay savers are so insignificant, it almost makes no financial sense to have large sums in the bank. That’s one reason why real estate investment has been so strong.

Secondly, a quarter of a percent is nothing. I remember Paul Volker’s days of 18% interest rates. It was like paying an HOA fee on top of your mortgage. He was trying to wrestle inflation, which was feverish. Then, people were buying houses to make money on them. Today, they are buying houses (or investing in the stock market) because you cannot make money saving it in the bank.

Which makes me wonder if a more significant rate hike would cool the market a bit.

Also, I wonder if Millennials, who have no experience with higher interest rates, might be scared off by a significant rate increase. Remember, this is the generation that, like their grandparents, doesn’t like debt.

What do you think? Would an interest rate hike hurt your real estate search or your business if you are in the business?

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New housing starts have grown the most in the $300,000 to $400,000 price ranges. (chart: Metrostudy)

 

More confirmation that Dallas has pricey dirt in this latest report from Metrostudy: While housing starts are up to the tune of 12.4 percent year-over-year and 8.3 percent over last month, few of those have been in more affordable price ranges. More people who would have preferred to buy new construction have turned to the existing home market, and those unable to find an affordable home in the market have turned to renting in droves.

“New home starts below $200,000 dropped as starts between $250,000 and $400,000 surged,” said Paige Shipp, Regional Director of Metrostudy’s Dallas Office. “Although starts between $200,000 and $250,000 increased, a diminishing supply of homes at that price point is a concern. Buyers seeking affordable housing near employment and urban core are forced to buy from the limited resale market or into the rental market. Starts during the third quarter surged 38.9% and 74.5% higher than the second quarter for homes priced $250,000 to $750,000. The most notable increase in starts was in the $300,000 to $350,000 range, which is quickly becoming DFW’s new “affordable” price point.”

That’s exactly what we heard from the Real Estate Center at Texas A&M University last month, as economist Dr. Jim Gaines noted the gap in the less-than-$200,000 bracket:

“For years in Texas, we have had the most affordable housing for a major metro area,” said Dr. James Gaines, chief economist with the Real Estate Center at Texas A&M University. “Affordability and workforce housing are going to be a major issue.

“We are not building enough houses in the $150,000 to $200,000 bracket.”

So what fallout could we expect from that? What is the increased demand for leases in Dallas-Forth Worth doing to rents?

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Yes, it’s that time of year again. CoreLogic has come in at the head of the pack for 2016 predictions, issuing its forecast and data brief today. And while we’ve heard a bit of “doom and gloom” from Steve Brown, CoreLogic’s report says that not only will we see more home sales and more demand, but rents will continue to tick upward as well. Read the full list of predictions after the jump.

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employment growth

We love graphs and data, especially when those graphs and data show Dallas and Fort Worth at the very tip top. Not only did Realtor.com call the Dallas metro the second-hottest real estate market in America for August (up from third-hottest in July), but CoreLogic has D/FW at the top of its Housing Price Index rankings for July, outpacing the Houston metro area — its closest competition — by two percentage points. Local Market Monitor says Dallas is still a low-risk place to invest, with great growth projections for sellers and landlords.

Jump for a quick summary of the latest Dallas Real Estate reports.

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Dallas Breakdown for Diff Family Types

Breakdown of Monthly Income Required to Live as a Human in Dallas According to the Economic Policy Institute

By Jon Anderson
Columnist

Candy and I have been opinionating back and forth on low-income citizens and how their access to safe and affordable housing is a means to promote economic upwards mobility. After all, if the poor are less poor, they will live richer lives (by any definition) and contribute more to society.

Unlike the rich who sequester money in intangible investments or various savings schemes, when the poor have more money, they spend it – because they need to. This creates a cycle that reverberates throughout the larger economy. If the poor buy more, manufacturers must make more which means hiring more people which in turn creates more people with money to spend, and so on, and so on. It’s exactly like the recession when governments were screaming for money because tax revenues took such a hit. Once people were put back to work, tax revenues rose, and in some states like Texas, overflowed.

In fact, recessions in general would be rarer and less dramatic if companies were forced to keep workers on the payroll or if unemployment benefits paid close to salary levels. As it is, recessions create a domino effect where one company dumps workers and then its suppliers dump workers because they’re not getting orders – and on and on. Call it trickle-back economics.

Personally, I spent nearly three years unemployed during the telecom meltdown that sent 500,000 skilled workers out on the streets early in the millennium. Desperate, I was open to anything and willing to uproot my life and leave my partner for any job. In the end, I was required to move to another state which led to the dissolution of my relationship. And compared to many, I was lucky.

For part of that time, I collected unemployment benefits that paid me the maximum $1,600 per month, a tiny fraction of my former salary. (Let me tell you, swallowing my pride and taking unemployment was one of the hardest things I’ve done – even though I’d paid into it for years. It felt like a stigmatizing failure.) All that check did was slow the eventual evaporation of a three-year “emergency fund.” I tell you this because $1,600 per month is more than the minimum wage in America and it was crippling even with a free place to live and extensive savings. Before you groan, this column isn’t about the battle for living wages, it’s about documenting and understanding how much it takes to live as a human being in Dallas. (Spoiler alert: it’s not the current minimum wage.)

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Texas Condo Report Mid 2015 Graphic

Condo sales are still brisk compared to last year, but sales have decreased an average of one percent between January and May of 2015, says the Texas Association of Realtors‘ recent report. Using data from the Real Estate Center at Texas A&M University, The 2015 Texas Condominium Mid-Year Sales Report shows that condo and townhome sales are flat or slipping in the four largest markets.

With runaway demand, Austin still leads the price-per-square-foot category, while condo sales actually decreased 12 percent year-over-year in the state capital. Both Dallas and San Antonio posted modest gains of 3 and 6 percent, respectively. Houston condo sales dipped just 1 percent from the same time last year. Jump for more interesting stats.

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