Let’s face it: the Texas real estate industry, and that includes Dallas, is in Veuve Clicquot mode right now. Home sales had their second best year ever in 2014, selling 66,664 homes throughout the Lone Star state just in the last quarter of 2014. Almost 285,000 homes were sold in the state last year, which means 285,000 commissions for agents. And that does not include newly built dream houses.
“The fourth quarter of 2014 marked three-and-a-half years of continual home sales growth for the Lone Star State and the highest annual home sales volume since 2006 – a testament to the strong and enduring demand of Texas real estate,” Scott Kesner, chairman of the Texas Association of Realtors, said in a recent statement.
Because of low inventory, it was a seller’s market and home prices were up 7.76 percent in the fourth quarter, compared to fourth quarter 2013. The median price of a home in Texas is now $185,900.
In Dallas, well, we don’t need to legalize marijuana sales: Dallas-area home price values rose 9.4 percent. That puts the median price of a Dallas home at $207,900 in the fourth quarter of 2014. First time it’s ever been over $190,000.
I am hearing story after story of homes selling for over list price, but this is happening in price lots of $500,000 or under. The $3 million and more price ranges are a little soft.
And not to be Debbie Downer, but I am wondering if we should start to worry about that three-letter word we love so much in Texas: oil.
Face it: energy kept us alive and thriving during the recession while everyone else scraped bottom. I am looking at a J.P. Morgan report on jobs from October, 2014, showing a very positive red line from 2007 to 2013. (This is a Bloomberg report from September of 2014.) That red line dipped ever so slightly from 2008 to 2010. The blue line, which represents the rest of the US, hit bottom in 2009 when it says 8 million jobs were lost or “not created”. It says we created 1,111,300 jobs while the rest of the country caught up.
“All of the job growth” since 2007, Gundlach added, “can really be attributed to the shale oil fracking situation and the energy renaissance. Other than in regions like Texas and North Dakota, “We have not added any jobs.”
But oil. This report comes from the Wall Street Journal:
Hundreds more oil-industry workers in Texas—including 330 in the oil and gas division of General Electric Co. —are about to lose their jobs as U.S. crude prices languish below $50 a barrel.
In recent letters sent to the Texas Workforce Commission, GE Oil & Gas and two other energy companies warned state regulators of plans to cut 720 employees around the state.
GE said it would cut about 45% of staff at its Buck Creek oil field equipment manufacturing plant in Lufkin, Texas, about 120 miles northeast of Houston. The layoffs are scheduled to begin in late March and are part of a restructuring drive to reduce costs, the company said. This “is a decision we don’t take lightly but one we must undertake for the long-term health of the business,” the company said.
Lower oil prices are viewed as a tax cut for the middle class. At Inman Real Estate Connect last week in NYC, Brad Inman queried the top real estate economists on oil, which has been driving the luxury market so well.
Trulia’s Jeb Kolko said “oil is all local. Falling oil prices puts more money into the hands of users, it’s good for the suburban areas, the northeast and midwest.”
Someone on the panel said the obvious: Texas, Oklahoma and Louisiana are all at more of a risk. Zillow’s Dr. Stan Humphries said that oil is ten times more important to Houston than Austin, and I have heard Houston luxury home prices are already seeing a softening.
They also said oil prices affect the less affluent. In general, in the entire country, the lowest one-third priced homes are appraising more quickly — see above — and that rise is at 6.8%.
It was the lower priced homes that took it on the chin during the Great Recession.
The economist from Redfin, Nela Richardson, said that low interest rates are still a huge positive for middle income buyers.
“Wall Street is worrying,” she said, “Main Street is not.”
That extra cash being saved at the pumps — gosh, I saved about $25 yesterday — is not all being spent at stores.
Stan Humphries also said it takes about two years from the initial drop in oil prices to effect real estate prices.
And fourth quarter Dallas-area sales were up 6.42 percent from the final quarter of 2013.
“Texas home sales in the first half of 2015 are expected to be similar to what we’ve seen in 2014, but continued increases in home prices and record-low inventory levels should still continue,” said Dr. James Gaines, economist with the Real Estate Center at Texas A&M University. “Historically, Texas home prices have only risen 4.5 percent year-over-year.
We need that demand to continue — via job growth — to keep up numbers like this. And I’m just a LITTLE concerned that oil prices may chip away at job growth here.
When asked to put a number to their confidence level, economists on Friday morning’s panel spanned a positive range from 65% to 90. Stan Humphries was at 70%. Jed Kolko was at 65% for housing, 95% for rentals.
“There is a strong demand from young people who want an apartment in the city,” said someone on the panel, maybe it was Jed.
As long as they can afford the monthly rent.