marcus-mc-cue

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.

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employment growth

In Texas, it’s all about jobs, jobs, jobs.

A new report from the Real Estate Center at Texas A&M University says that the Texas economy gained 276,400 nonagricultural jobs from June 2014 to June 2015, an annual growth rate of 2.4 percent, compared with 2.1 percent for the United States. Many of the major metropolitan areas in the state saw much bigger gains, like North Texas.

The Dallas-Plano-Irving metro area ranked No. 2 in job creation in the state (Midland was No. 1), followed by Odessa, Beaumont-Port Arthur, Austin-Round Rock, and San Antonio-New Braunfels. Fort Worth-Arlington ranked No. 7, with 2.7 percent job growth.

“The North Texas economy is more dependent on the U.S. economy, so it’s not energy-based, compared to the Houston or Midland-Odessa economy, where energy has a bigger weight,” said Real Estate Center research economist Luis Torres. “Because the U.S. economy is growing and doing better, you’re seeing that reflected in the Dallas economy.”

In fact, every single Texas metro areas except Wichita Falls had more jobs in June 2015 than a year ago.

Big sectors for job growth were:

  1. Leisure and Hospitality: 5.05 percent growth
  2. Education and health services: 3.87 percent growth
  3. Professional and business services: 3.54 percent growth
  4. Transportation, warehousing and utilities: 3.52 percent growth
  5. Construction: 3.34 percent growth

“The correlation between the Dallas economy and the U.S. economy is very high, and the main reason is because Dallas is a transportation hub and all the goods and services that pass in the state use Dallas transportation systems,” said Real Estate Center research economist Ali Anari.

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Home For Sale Sign Dallas

Let’s just say that my eyes widened a little without the help of coffee when I read this story from Steve Brown. According to Fitch Ratings, Texas home prices are way overvalued, by 11 percent they say, and there could be a reckoning coming thanks to falling oil prices.

The financial analysts at Fitch are concerned about the year-over-year growth in Houston, Austin, and Dallas, which posted home price increases of 20 percent since 2011.

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Photo courtesy of Robert Hensley via a Creative Commons license

Photo courtesy of Robert Hensley via a Creative Commons license

Dallas is one of 15 top markets poised to attract baby boomer homebuyers because of an affordable cost of living, sunny weather, and friendly business climate, according to new research by the National Association of Realtors (NAR).

NAR looked at 100 metro areas with lower state taxes (or none at all, as is the case in Texas), stable job market conditions, and strong migration patterns of “leading-edge baby boomers” (those 60-69) moving to that area. By doing this, they predicted which housing markets are likely to see a boost from baby boomers. Cost of living, housing affordability, and housing inventory availability were also factors in their rankings.

For these reasons, Dallas was identified as one of five markets with strong potential for attracting baby boomer homebuyers.

“It comes down to housing affordability, and lower tax rates in the Dallas area and the state as a whole,” said Adam DeSanctis, NAR economic issues media manager. “More boomers after 65 are working, some because they have to, or feel like they have to, but also those that are healthier and want to maintain an active lifestyle. Those [baby boomer] business owners come to Dallas for its dynamic local economy.”

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Dallas Q3 Housing Report

During the course of the year, spring and summer tend to be the hottest seasons for home sales, with the pace of closings slowing as fall takes hold and school starts. That’s not what happened in Texas during the third quarter of 2014, says the Texas Association of Realtors Quarterly Housing Report, which was released just now. Additionally, inventory increased this quarter each month, continuing to fuel brisk sales in some areas.

In Dallas, though, sales are down year-over-year by 2.36 percent, while median home prices are up 8.73 percent and inventory is down precipitously from Q3 2013 by 10.71 percent. Logic says that, until inventory increases, home prices will continue to increase and sales will continue their slow, downward trend. Still, some areas are seeing increases (Midway Hollow, Lakewood, Lake Highlands, West Kessler) while some areas and price ranges remain sluggish. All real estate is local, y’all!

“The third quarter of the year is typically a much slower sales period – summer is over, school has started and families are staying put for the upcoming holiday season. That was not the case this year,” said TAR chairman Dan Hatfield. “Texas home sales continue to slightly exceed last year’s levels. If this trend continues, 2014 will surpass 2013 to become the second-best year ever for Texas real estate.”

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So, as it turns out, if household income increases, then more families have more money to buy new homes.

I know. I’m totally shocked, too.

What you’ll find interesting is that Texas, with our steady job market and low taxes has resulted in the Lone Star State leading median household income growth AND new home sales for 2013. In Texas, homebuyers are basically like this:

Aziz Ansari Make it Rain

And home builders, they’re like Liz Lemon here:

Tiny-Fey-Money Dance Make it Rain

 

“This year’s Texas Homebuyers and Sellers Report is showing the impact of the last few years’ strong housing market and economic growth on Texas homebuyers and sellers,” said Dan Hatfield, chairman of the Texas Association of Realtors. “Households are earning more income and new home development continues to play an increasingly important role to meet our state’s ever-increasing housing demand.”

Yup, we’re makin’ it rain, folks. The report, which uses data from the National Association of Realtors, says that Texas homebuyers’ median household income is up 9.6 percent to $91,700 year-over-year in 2013. That’s almost twice the increase in buying power of the average American homeowner, which increased just 5.6 percent to $83,300. First-time homebuyers are making more scratch, too, with a 9.3 percent increase in median household income to $67,800 year-over-year. Repeat homebuyers are making more modest gains, though, with median incomes up just 4.9 percent to $107,100. Still, that’s a lot of simoleons, peeps. And I wonder how many of these new homebuyers are using homebuilding concierges such as Page One to make their experience even better.

Interesting takeaways from the report:

1) Of all homes purchased in Texas for 2013, 30 percent were new homes, up 4 percent from 2012 and almost twice the proportion among home sales nationwide.

2) With tight-fisted lenders rivaling Scrooge McDuck and home prices skyrocketing, married couples continue to lead the homebuyer demographic, up 2 points in 2013 to 71 percent.

3) First-time homebuyers in Texas are a shrinking share of the market, down 2 percent to 33 percent.

4) “In 2013, the average Texas homebuyer was 43 years old, while the average first-time buyer was 31 years old and the average repeat buyer was 50 years old. This is on trend with the ages of homebuyers nationally,” the report stated.

5) The time frame a homeowner actually owns a property decreased from nine years to eight in 2013, but nationally, figures still show homeowners staying in their home nine years. tenure of owning a home in Texas decreased one year to eight years in 2013, but remained unchanged at nine years nationally.

6) 94 percent of Texans sold their home with a Realtor in 2013 (YAY!), compared to 91 percent nationally. Likewise, “FSBO homes in Texas sold for significantly less than homes sold using a  Realtor. The average Texas FSBO home sold for $153,500, compared to $200,000 for the average Realtor-assisted home sale.”

What tidbit of data strikes you the most?

In a meeting with a major North Texas developer this week, he said to me: “I do not like Rick Perry all that much, and I do not think he is very smart. However, he is sending out a great message about Texas and we are getting all sorts of out-of-state interest in our properties. So do I support him for the White House? Heck yes!”

When it comes to politics, people often vote with their checkbooks or, in the case of this election,  negative wallet biopsy. Make that negative home equity biopsy. And like Bill Griffin says, there are so many rules and regs that haven’t even been written yet, no one knows what’s coming down the pike! Anyhoo, I was on NBC’s NonStop Nightly last night with precious Jane McGarry talking real estate, Case Shiller and CoreLogic, and how Perry’s campaign is putting the Texas economy AND real estate in the spotlight. People in other states are wondering what we are doing right that we have jobs and 30% of our homeowners are not underwater on their mortgages. Truth is, we have a lot less regulation that most states and we limit how much Texas consumers can borrow against their homestead. In fact, it wasn’t too long ago that Texas homeowners could not borrow one dime against their homestead!

View more videos at: http://nbcdfw.com.

Glenn CloseI found this piece in the LA Times over the holiday weekend — it takes a brutally honest look at the Texas economy. One of every four jobs in the U.S. has been created in Texas post-recession — something I know you’ve heard here before, but the sound is now resonating loud and clear across the nation all the way to L.A. Which is why, of course, Rick Perry is exploring a presidential run. Never mind that he has not had all that much to do with those jobs (not all CEO’s that’s for sure) as well as keeping our economy afloat and one of the high spots in the U.S.A. But as the writer, Rick Wartzman, points out, Texas has some quirks that can not be replicated elsewhere. For one, when the price at the pumps go up, so do we:

“Aspects of the Texas economy are unusual, if not unique, and it will be difficult or impossible for other states to replicate them. For example, the energy industry is booming right now, as are agricultural commodities destined for export — a boon for a huge cotton and beef producer like Texas.

What’s more, thorny trade-offs surely exist. Texas is attracting businesses, in part, because it has low taxes. But that, in turn, makes for a smaller safety net, which is one reason Texas has a high incidence of poverty and, compared with every other state, the biggest proportion of its population without health insurance. There are also serious questions about the quality of jobs in Texas. A “right to work” state, it is tied with Mississippi for having the biggest percentage of workers paid at or below the minimum wage.

But even with these significant caveats, Texas has long been the most robust jobs engine in the country, and its policies and practices deserve deeper reflection. Some say, for example, that an increase in education funding 25 years ago lifted the quality of the workforce. “That set the table for job expansion,” Fort Worth Star-Telegram columnist Mitchell Schnurman has asserted. (Budget pressures in Texas are now forcing education spending to go in the other direction.)”

Also worth a second look: the way we limit HELOC lines on homes to 80% loan to value ratio, which saved our butts big time this last go ’round. And we passed tort reform, which has helped medicine somewhat and is one reason why businesses are relocating here. Our real estate market did not bubble in most areas, our high end market is doing quite well. 

And that may be one reason why Glenn Beck decided to relocate here to North Texas. His move means that, more than ever, Texas is going to be in the limelight as a place where we have done many things right these last few years. Looking at the other side of the political spectrum, last fall, Glenn Close came to Dallas looking for underwriting for a film she desperately wants to make, a project she and her producer, Dallas native Bonnie Curtis, affectionately call “Nobbs.” Albert Nobbs is a feature film adaptation of George Moore’s  Irish short story of the same name, and  Glenn says when she played the role of Albert off Broadway twenty years ago, she felt a connection that never left her. Here’s a Dallas connection that will never leave her: Glenn picked up major bucks to get “Nobbs” into production.

Those of us who know exactly what goes into the sausage may be snickering, but like an 80 year old woman with a great facelift, we are looking pretty darn good to everyone else. Countless CEOs want to snag a second or third home here to take advantage of our lack of a state income tax. I say, come on in and drop some major bucks in our economy along the way.

All this, my dear readers, is good news for Texas property values.

Glenn Beck

Glenn Beck