The good news: more markets are improving than not, should sustain the slow winter and come out with a roar come spring. In fact, Clear Capital says home prices are increasing in most major U.S. markets.
The Dallas forecast — the whole area — is a little less than a 3 percent gain seen in some other markets. But I never fret about this for several reasons:
One, real estate is such a local story it isn’t even funny. Values can differ on the same street! Our Park Cities and Preston Hollow markets are sizzling — talked to Dave Perry Miller this morning, he sold a Dilbeck on Strait Lane before it even came on the market. I’m having lunch with Brian Hagan, so stay tuned.
Clear Capital figures D/FW home prices have risen just over 2 percent in the last year, which is less than a nationwide average of 4.74 percent.
But if you look at Phoenix, where home prices are up 27.7 percent, you are not talking apples to apples. Phoenix prices more than plunged — I mean they were in the gutter! — and many homeowners are still underwater out there. Poor Providence and Atlanta — Rhode Island’s capital is down by 5.2 percent, and Atlanta is down 1.2%. Reason? No jobs.
Still, if you bought low in Phoenix, this may be a good time to sell. Which brings me to my next point: don’t get all giddy and break open the Veuve Cliquot just yet. One of the reasons our markets are doing so well is tightness from the banks and a piddly inventory. What’s going to happen? As news like this comes out, more folks will pop their homes on the market and inventory will puff up — once again tempering prices.
What about low mortgage rates, surely those are helping? Economists at Capital Economics even envision a possible decline to 3.3 percent, which could bring out even more home buyers. Still, these guys say “the bottom line is that housing is unlikely to become a significant driver of GDP growth.”
Why not? Housing makes up too small a portion of GDP to have a major impact. Residential real estate investment made up only 2.4 percent of GDP in the second quarter of this year. That’s just half the long-term average, and well below the 6.3 percent peak recorded at the end of 2005. I mean, people will invest in modest homes, if they can obtain financing. But most of the sales volume is coming from the affluent communities.
“The cumulative effect of the past five consecutive quarters of residential investment growth has been a 0.2 percentage point rise in annualized GDP growth.”
And then there’s the big fat elephant in the room, unemployment above 8 percent. Middle class folks cannot buy homes without jobs, steady jobs. The banks right now don’t like the self-employed.
Don’t get me wrong — I’m happy everyone’s happy and homes are moving at long last. Moving vans are happy, Realtors are happy, even the Home Depot is happy because no one spends money quite like a family who has just moved into a new home.
But keep the good champagne on ice until we see job growth and a serious dip in the unemployment rate.