Here we go again: CoreLogic’s latest HPI report is telling us what our boots-on-the-ground Realtor sources already know. Fewer homes on the market has meant higher-than-average home price appreciation ahead of one of the most brisk times of year for Dallas-area Realtors. The spring selling season has been filled with cold calls and pleas from Realtors for homeowners who are on the fence about selling to just get off their duffs and do it.
But, while the limited inventory may be a pain in the posterior for those searching for the right home, it has had one side-effect worth mentioning: Market stabilization.
“Since the second half of 2014, the dwindling supply of affordable inventory has led to stabilization in home price growth, with a particular uptick in low-end home price growth over the last few months,” said CoreLogic chief economist Dr. Frank Nothaft. “From February 2014 to February 2015, low-end home prices increased by 9.3 percent compared to 4.8 percent for high-end home prices, a gap that is three times the historical difference.”
In the Dallas-Plano-Irving MSA, CoreLogic reports home price growth of 9.3 percent including distressed sales, and 8.3 percent excluding distressed sales for February 2015. That kind of year-over-year growth has this North Texas area in the No. 2 spot for price growth following the gigantic Houston-The Woodlands-Sugar Land MSA.
We’ve talked about this before, but it didn’t really hit home until I saw how much low-end home prices have jumped since last year: What about investor-owned properties? Will we be seeing a slow cascade of investment homes and flips soon, or will there be a rush to the market for shadow inventory? With renting becoming more and more expensive, how can we make buying a home both attractive and sustainable? With all the frenzy over homes on the market, it’s definitely turning off many would-be buyers in the under $500K market, that’s for sure.
The March 2015 report from the investment-minded Local Market Monitor shows the Dallas-Plano-Irving metro as a “low-risk” investment with high population growth and a shortage of new housing stock:
“Population growth continues high, with high in-migration. There is a large renter population. Home prices were sharply higher in the past year. Homebuilding has been too low for the level of in-migration. Expect a strong housing market the next few years. We expect home prices to increase 35% over the next three years.”
Interesting, especially considering that the capitalization rate (income from rental properties minus costs) is at 4.4 percent, which is not too shabby at all. In some situations homeowners are becoming landlords, renting their existing home out while combing the market for a second house. Still, fewer sellers means more demand for existing homes.
“This is the hottest home price appreciation prior to the spring selling season in nine years,” said CoreLogic president and CEO Anand Nallathambi. “Assuming a benign interest rate environment and continued strong consumer confidence, we expect home prices to rise an additional 5 percent over the next 12 months.”
What do you think?