housing starts

It used to be fairly easy to find a new home for under $200K in North Texas. But according to a recently released report from Metrostudy, first quarter 2016 data shows a “new normal,” reflecting a meteoric rise in starts above $200,000, meaning it’s harder than ever to find a new home in the sub-$200K price range.

“When comparing the increase in starts and closings year-over-year, starts between $250,000 and $299,999 are nearly three times the closings increase,” said Paige Shipp, Regional Director of Metrostudy’s Dallas office. “Starts between $300,000 and $349,999 jumped 81.2 percent, which is almost twice the increase in closings. Conversely, starts below $200,000 have dropped 14.6 percent and closings plummeted 31 percent.”

With rapidly rising land and development costs, developers tell Metrotex there is not much hope for the revival of the sub-$200,000 new home market in North Texas. This will remain an issue until cities, developers, and builders understand and deliver higher-density lots and smaller homes to the market, Sharp explained.

Metrotex isn’t the only one ringing this bell — for some time, other experts have said the same thing. We wrote a piece in November of last year where Dr. James Gaines, chief economist with the Real Estate Center at Texas A&M University, explained:

“For years in Texas, we have had the most affordable housing for a major metro area,” he said. “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.”

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Steve Brown jumped on Tuesday’s Case-Shiller report like a kid with a shiny new bike (pay wall? not sure). The report showed Dallas-area home prices up by the largest percentage in more than a decade

Dallas home prices rose 5.7 percent in November from the same period a year ago in the monthly Standard & Poor’s/Case-Shiller Home Price Index. I will caution you, these are sales from November because by now, end of January, all paperwork is in. And it was the ninth month in a row that local prices were up from 2011. Our Dallas-area increase was slightly higher than the 5.5 percent average price rise in the other 20 major cities that Case-Shiller tracks, so yes, I would say that it is time to be very happy indeed. Get on a new bike and hit the Katy Trail!

But from what I see of the flurry of business agents are up to eyeballs in this month, I say we ain’t seen nothing yet when it comes to price increases.

There is so little on the market: local home inventory levels are at the lowest point since the early 2000s, and the analysts Steve interviewed say North Texas could see even bigger price increases in 2013 because there is, quite simply, less to choose from:

“If the inventory doesn’t improve, we are going to see remarkable price increases this year,” said Dr. James Gaines, an economist at the Real Estate Center at Texas A&M University. “If you own a house and want to sell, it’s probably the best time in years.”

Steve says “the number of pre-owned homes on the market in North Texas last year was down about 20 percent. And inventories of new homes are at the lowest point in more than a decade.” Well, what if everyone reads this and decides to put their house on the market? Herd mentality. Folks back in 2008/2009 pulled back, re-grouped, and got a bad taste for real estate. Now, they start hearing about a few good deals, they will get back in.

And Gaines estimates “that Dallas-area pre-owned home prices were up 7.6 percent in 2012 from 2011.” 2011, if you recall, was the first year of median price increases since before the Great Recession. We were probably the least affected state in the Union during the housing crash, but our values still took a 15 percent hit, which we are making up this year.

If the economy continues to chug along and Washington doesn’t do anything stupid…

The big boys confirm that housing is contributing to the nation’s economic growth, which is so interesting because housing is what spurred the crash.

Who is benefitting the most? Phoenix, prices up 22.8 percent, and San Francisco, prices up 12.7 percent from November 2011. Tell me about it: my son is trying to buy a house there.

You know who’s really happy in Dallas right now: home builders. Steve says home construction is still down here and not expected to return to pre-recession levels for years. Actually, Steve, it never will — there are not that many builders out there and banks still have a tight leash.

Steve talked to Dallas real estate appraiser Chuck Dannis, who said he wouldn’t bet on North Texas home prices rising at double-digit rates in 2013:

“but the laws of supply and demand suggest it could happen. If it does, it will just shock people,” Dannis said. “When we had double-digit inflation in housing prices around here, it was always tied to inflation and not necessarily supply and demand.”

Dannis told Steve that appraisers “will be reluctant to sign off on big price increases unless they can support the figures with data from closed home sales.”

Why? Because lenders won’t lend without appraisals that are as tight as Fort Knox security.

I also think that when buyers see billionaires putting their homes on the market, like the $135 million home of Tom and Cinda Hicks, it encourages more people to stick a toe in the water and make a move. In fact, that’s exactly how the herd mentality starts!

 

I am hearing it from agents and sellers, I am hearing it from appraisers and title companies: people are buying homes again (like these) in Dallas. Numbers are the proof: The Texas Association of Realtors said Tuesday that home sales in the state were up 12 percent in the first quarter from the same period in 2011. You know what happens when homes start selling: you get comps, and then prices creep up. Statewide, median home prices in the state were 3 percent higher than a year ago.

Texas Realtor chairman Joe Stewart told Steve Brown the year is shaping up to a very positive momentum:

“In 2012’s first-quarter results, we see a strong increase in sales volume and a meaningful increase in the median price,”

Texas has an average of a 6-month supply of homes on the market,  down from 7.6 months in first quarter 2011, and 6 is considered normal and balanced. The good news (for sellers) is that our home inventory has been decreasing for months. That’s not necessarily good news for buyers: home inventory was down 23 percent in the first quarter of 2012 from 2011. You know the reasons, but according to Dr. James Gaines, an economist at the Real Estate Center at Texas A&M University, some homeowners who don’t have to sell have chosen to wait for prices to improve before selling their homes. Or they leased them. There are also fewer distressed properties in Texas.

Now here’s what keeps me awake at night: people being able to afford mortgages or rents. Rents are rising and as one developer told me, the banks are tripping over themselves to lend money to anyone who wants to build an apartment complex. This leaves fewer affordable properties on the market. Realtor Tom Branch tells me he had MLS run numbers for properties under $200k in Collin County– there is only 3.1 months of inventory! Though I have to pack lunch and maybe even an overnight bag when I go up there, agent Brad Holden tells me there is no stopping Frisco. Since February/March of this year, there have been already around 48 contracts in Richwoods, and there are  8 to 10 lot holds. On top of that, Landon Homes has filled up their first set of available lots in the 64’s and 74’s and they have a combined total of 18 or 20 checks for when then next set of lots are released to write a contract! Landon started selling in the beginning and they have already had a $5,000 increase in prices across the board. On May 1st they plan to raise them another $5,000, another  $5,000 on May 21st. (Jesus that’s $15,000!) Brad speculates they need to slow the contracts down because they can’t get that many permits from the city. What a problem to have. Newcastle Homes has sold a couple and plans to build 6 specs in the $550,000 plus. Toll Brothers were last to release pricing and have sold two with two more lot holds, and KHOV had only eight lots in the first section. Only one of those is still available as of yesterday.

Why, I asked Brad, and I ask you, is everyone suddenly buying? The national economy still sucks. Is it the pending election? Brad says number one reason up north is pent up demand and the location/schools combo.

What do you think?