By Phil Crone
Executive Officer, Dallas Builders Association

 

 

Unlike prior years, 2019 will not be full steam ahead for our area’s housing market. The predicted return to normalcy after a run of several frenzied years will be hard to characterize with a broad brush (though many will try). While more nuanced and complicated than before, there will be no shortage of opportunities and no reason why we cannot continue to be the envy of the nation.

Looking ahead, here are four things to watch in the year to come and why they matter:

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dallas housing

We’ve been saying it for ages: the Dallas housing market (DFW, really) is on fire. This is evidenced by a shortage of housing stock, incredible buyer demand, construction everywhere, and a tendency of many houses to fly on and off the market in a matter of days (especially those under $300K), among other things.

Now, it’s easy to find an expert to support almost any position. But we’ve found a few with reputable sources and a history of accuracy that agree with us. We’re interested in why they think the Dallas housing market is one of the strongest in the nation. Read on to find out more.

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dallas housing market

The Dallas market continues to sizzle, with the median price for single-family homes increasing by about 8 percent in May compared to last year.

To paint a bigger picture, prices in North Texas have increased by about 40 percent since the 2009 economic recession, according to a new report from the Dallas Builders Association (DBA) and Meyers Research for the Dallas-Fort Worth-Arlington Metropolitan Statistical Area.

Earlier this year, Dallas overtook Houston as the leading new home market in the country, and it still keeps that spot. Overall, housing inventory was at a 2.3 months’ supply with certain areas, like Collin County, with even less.

The report says about 29,000 new homes are expected in the North Texas region by the end of 2016. This is due in part to one of the strongest employment markets in the country. But prices are still going up, with labor shortages and more regulation increasing prices as builders still struggle to keep up with demand.

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1Hotel Miami Beach pool

The One and Only, Miami Beach

Why in the world would you compare the Dallas housing market to Miami?

At first glance, I thought this may have been irresponsible real estate reporting on the part of WFAA-TV, but it is not. It’s basically taking a look at a nutcase in Florida who says our market is in for a 35% value decline, or crash as he likes to call it. That nutcase is Professor Ken Johnson of Florida Atlantic University. Dallas is 2008 all over again, he says:

“I can see no sign that prices will continue on like this for an indefinite period of time,” he told us.

Johnson helps to put together the Buy vs. Rent Index, which advises whether it’s more financially beneficial to lease or own in cities across the country.

Right now, the index strongly recommends renting over owning in North Texas, and suggests that renters would be much more likely to increase their wealth by investing in things like stocks and bonds instead of local real estate.

In fact, since last summer, every time we’ve checked in with Johnson, he has progressively warned that home prices in North Texas are poised to fall.

But then every time, home prices surge higher.

Now Johnson or his index apparently predicted the nationwide housing crash in 2006 and 2007. (more…)

Clear Capital, a California-based housing and finance analyst, says we can be downright proud of our market: Dallas-Fort Worth home prices will rise by another 1 percent during the next six months.

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.

 

 

DBA DHS Panel on Housing

The annual Dallas Builder Show will include a panel on what’s next for the housing market featuring Fred Balda, Jeff Meyers, and Gary Rae.

 

What’s Next for the Dallas Housing Market?
Where are we in the housing cycle (on the way up, on the way down, right at the top)?
Will we see any relief from skyrocketing land prices?
Is there an end in sight for the ongoing labor shortage in the Dallas area?

All of these questions will be answered during the opening session of the Dallas Builders Show. The panel discussion will feature Jeff Meyers, president of Meyers Research, Gary Rae, area president of M/I Homes, and Fred Balda, president of Hillwood Communities. Moderated by Phil Crone, executive officer of the Dallas Builders Association, Meyers, Balda, and Rae will discuss the state of the local housing marketing and what it has in store for 2017.

The Dallas Builders Association will have several mini education sessions going on in their booth throughout the show:

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Dallas was named the third-hottest real estate market in the country for February, according to Realtor.com. (Graphic: Realtor.com)

Dallas was named the third-hottest real estate market in the country for February, according to Realtor.com. (Graphic: Realtor.com)

It seems like the rest of the world is discovering what we already knew — Dallas is full of tech-savvy buyers who are going online first to start their housing search. Dallas real estate was named the third-hottest U.S. market in February for online home searches, and evidence of that activity is being seen in sales.

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DFW_REALTIES_Sold

If you are up tomorrow morning, tune into Fox 4’s Good Day Wednesday morning around 7 a.m. I will be there talking about our hot hot real estate market, and the latest trends report from the folks at Realtor.com. They just released an early look at the May housing market with Advance Read on May Trends, a glimpse into residential real estate inventory and demand trends over the first 3 weeks of the month.

For May 2015, the analysis of data indicates U.S. housing demand remains strong and continues to outpace supply even with some growth in inventory. Realtor.com gets all it’s data from the Realtors, not through a third party, because the organization is actually run by the National Association of Realtors. So this is good stuff.

Jonathan Smoke, realtor.com‘s chief economist, has ranked the nation’s 20 hottest real estate markets. The rankings are based on a real estate hotness index, which is composed of two indicators reflective of demand and supply: the number of views per listing on realtor.com and the median age of inventory in each market.

Texas makes a bold statement on the list with Dallas-Fort Worth at #4 and Austin at #16. (more…)