One of life’s joys is the “I told you so,” because it is so often precluded by a period of scorn and disbelief. Last week I had a bumper crop, but let’s talk about Amazon’s HQ2.
You remember that? The corporate welfare pageant where municipalities fell over themselves, checkbooks flailing in the breeze, trying to lure Amazon to places its corporate relocation team had already picked? Yeah, that.
The Metroplex was one of those entries, and we even made it past the first culling before being sent home roseless, our taxpayer checkbook tucked firmly between our legs. New York may have kicked them out, but Amazon continues to hire there, albeit fewer than the 25,000 expected from their half of HQ2. Amazon wanted a presence in New York regardless of the freebies.
On the other hand, Virginia, happy to accept the Amazon bouquet, has seen home prices surge by 17 percent while property owners hoping for more, have caused new listings to crater – one zip code near HQ2 saw an 85.3 percent decrease in new listings. This has essentially frozen the market and caused property tax bills to swell. Everyone’s expecting that once hiring picks up with HQ2, the lid will be blown off valuations. The same thing is playing out in the rental market especially in areas with the lowest rents as REITs and investors move in.
From staff reports
Although housing affordability is at an all-time low in Dallas, home price appreciation has decelerated recently, the latest report from the Federal Reserve Bank of Dallas revealed.
The report, released March 14, also revealed that Dallas-Fort Worth employment grew by 2.5 percent in 2018.
It’s not unusual to see GoFundMe or other crowdfunding efforts for someone who, facing a catastrophic health crisis, can’t afford to pay their rent or mortgage. But until now, those incidents remained anecdotal.
But a study released this year by Emily A. Gallagher, Radhakrishnan Gopalan, and Michal Grinstein-Weis, professors and researchers at the University of Colorado-Boulder’s Leeds School of Business, Washington University’s Olin Business School and Washington University’s George Warren Brown School of Social Work (Grinstein-Wise is also the Associate Dean for Policy Initiatives at Washington University), respectively, reveals that data clearly indicates a relationship between having health insurance and being able to make your rent or mortgage payment.
But the data doesn’t just tell the story of people with catastrophic illnesses, but also the cascading issues that can occur from just being sick and missing work a few days, when an insured person might be able to see a doctor for more immediate relief.
“When people think of health insurance, they often think of its effect on health. They may even they go a step further and think about its effects on a person’s medical expenses and their medical debt,” the three explained in a synopsis of the study. “Our study says that health insurance has significant downstream benefits to a person’s finances that show up in their home payments.”
“These indirect benefits may not be so salient to health policymakers, but they are extremely important to the overall financial stability of the person,” they continued. “On top of this, they carry broader economic implications.” (more…)
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.
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.
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.
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?
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?