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01/14/2022

January 14, 2022
TRERC researcher: homebuyers must 'be patient'

COLLEGE STATION (Texas A&M Today) – Mortgage rates will increase in the coming year, easing housing demand during a time of low supply, according to an economist at the Texas Real Estate Research Center at Texas A&M University.

"It’s a sellers’ market right now and the housing sector is really strong," Dr. Luis Torres told Texas A&M Today. "The pandemic has increased the preference for home ownership, but supply has been lagging behind since even before the pandemic. So the problem right now is that you have really strong demand facing weak supply and that’s pushing up prices at a very high rate."

Torres said potential homebuyers may want to "be patient to find their dream house."

"If you find a house you really want and you’re in a position to buy, go for it, but don’t overpay because you don’t want all your money going into a mortgage payment each month," he said.

According to Torres, demand should weaken as the Fed's monetary policy increases mortgage rates. "And there’s possibly two rate hikes in the coming year due to inflation," he said. "When inflation is higher, nominal interest rates increase. That will put the brakes on housing demand.

"Also the high prices we’re seeing are going to price some people out and that will decrease demand as well. So we’ll possibly be going back to more normal trends than we saw during the pandemic."

Affordability remains an issue.

"In Austin, home prices are up 30 percent over the last year, Dallas-Fort Worth, 20 percent, and Houston and San Antonio, 18 percent," said Torres. "And that’s happening all around Texas, not just the major cities—we have double digit price growth throughout the state."

The average home price in Texas in January 2020 was $277,945 before hitting $388,555 in June 2021. In November 2021 it fell just slightly to $382,862.

“It’s really hard to find a house to buy right now,” Torres said. “Not only are the prices high, the competition is greater. You may put in a bid for a house and multiple other people do, too."

Torres said the supply problems contributing to the shortage began happening before the pandemic due to factors such as increasing lumber prices, constrained land development, and changes to laws and regulations rolled out in the wake of the 2007-08 housing crisis.

He said when the pandemic happened, the housing market was one of the sectors that benefited. Add historically low mortgage rates to the equation, and the preference for homeownership grew.

The current shortage and high prices are also affecting renters, Torres said. Nationwide, the average rent for a single-family home rose 10.2 percent in September 2021, the fastest year-over-year increase in more than 16 years.

Torres said there is no "housing bubble" like there was in the early 2000s crisis.

"At that time, there was lax oversight and loose lending standards," he said. "The supervising institutions weren’t doing their jobs and allowing all sorts of this malpractice. Also, many people were buying multiple houses as investment properties to flip. But that’s not happening right now. People are buying just a house to live in and prices are not going down. For nominal housing prices to fall, that’s a really rare occurrence."

As far as high home prices in Texas, Torres said, "We’re not California yet, but look out in 20 years or so."

11/30/2021

Texas dominates list of 2022's hottest housing markets

NEW YORK (National Mortgage News) – Austin and Dallas-Fort Worth have landed on National Mortgage News' list of the 12 hottest housing markets in 2022.

The Texas capital ranked fourth with a five-year annual projected population growth in 2022 of 2 percent. Austin also had projected employment and housing growth rates of 2.4 percent and 2.6 percent, respectively.

The report pointed out the number of high-tech companies moving into Austin as a major draw for the city.

Dallas-Fort Worth ranked seventh, particularly for the influx of new jobs and diversity. The metro's five-year annual projected population, employment, and household growth rates in 2022 are 1.4, 1.6, and 1.8 percent, respectively.

The rest of the top 12 rankings are:
• No. 1 Nashville, Tenn.;
• No. 2 Raleigh/Durham, N.C.;
• No. 3 Phoenix;
• No. 5 Tampa/St. Petersburg, Fla.;
• No. 6 Charlotte, N.C.;
• No. 8 Atlanta;
• No. 9 Seattle;
• No. 10 Boston;
• No. 11 Salt Lake City; and
• No. 12 Denver.

11/09/2021

Is the Texas housing frenzy over?

COLLEGE STATION (Texas Real Estate Research Center) – Housing market indicators are signaling the Texas housing frenzy is over, says a research economist for the Texas Real Estate Research Center at Texas A&M University.

"Both housing sales growth and housing price growth have peaked and are slowing," said Dr. Luis Torres. "In addition, months of inventory, listings, and days on market have reached a trough and are beginning to rise."

Torres added, "Texas housing sales accelerated after the pandemic shut down the economy in March and April of 2020. This caused the already depleted inventory of homes for sale to reach historic low levels and led to exuberant home price growth."

Torres attributes the surprisingly strong housing market performance to depressed mortgage rates, an increase in home-purchasing preferences, homebuyers not being affected by the pandemic, and by the federal governments transfer payments and suspension of student loan payments.

"Texas’ single-family sales peaked at the start of 2021," he said. "That’s when San Antonio home sales were highest. Austin, Dallas-Fort Worth, and Houston recorded their highest number of housing sales in the last quarter of 2020."

Torres noted housing sales numbers were hindered by the lack of homes available for sale; therefore, sales are possibly not the best sole indicator of when the housing market started to slow.

"Housing prices are determined by the demand and supply of homes," he said. "Year-over-year price growth peaked in August in Texas, Dallas, and Houston. Fort Worth and San Antonio posted highs in July; Austin’s came in June."

"Some of the price pressures caused by strong demand and weak supply in the housing market have subsided," said Torres.

Months of inventory for the state and its major Metropolitan Statistical Areas (MSAs) hit bottom in May. The same is true for active listings, with the exception of San Antonio, which recorded its low in April.

"New and pending listings reached a trough in February thanks to Winter Storm Uri shutting down the Texas economy," said Torres. "The overall trend for both new and pending listings signals the supply of homes for sale continues to grow."

Days on market, a demand indicator, is another variable that reached a trough statewide and in the four major MSAs in August. Other indicators, such as mortgage home-purchase applications, are slowing statewide.

Torres isn’t surprised that the pandemic frenzy is being replaced by more long-run, sustainable rates of growth. Texas Real Estate Research Center forecasts for 2021 and 2022 included expectations for strong demand, improving inventories, moderate price growth, and slowly rising mortgage rates.

08/24/2021

Texas dominates list of 2021's best real estate markets

WASHINGTON (WalletHub) – The Lone Star State—specifically North Texas—dominated WalletHub's list of the best places to buy a house.

Five Texas cities were in the top ten, and four of them were in Dallas-Fort Worth-Arlington.

Frisco ranked first overall, leading in both the real estate market and affordability and economic environment metrics.

Other Texas cities in the top ten were:
• No. 2 Austin, 2nd in real estate market and 56th in affordability and economic environment;
• No. 4 McKinney, 5th in real estate market and 4th in affordability and economic environment;
• No. 5 Denton, 4th in real estate market and 93rd in affordability and economic environment; and
• No. 6 Allen, 7th in real estate market and 15th in affordability and economic environment.
Grand Prairie, which was 52nd overall, tied with several other U.S. cities for first in lowest foreclosure rate.

The rest of WalletHub's top ten cities were No. 3 Gilbert, Ariz.; No. 7 Durham, N.C.; No. 8 Reno, Nev.; No. 9 Roseville, Calif.; and Nashville Tenn.

To determine the rankings, WalletHub compared 300 cities across two key dimensions using 18 metrics.

08/11/2021

What's ahead for Texas real estate in 2021-22?

COLLEGE STATION, Tex. (Texas Real Estate Research Center) – Researchers at the Texas Real Estate Research Center see a more stable Texas housing market ahead, as soon as pandemic-induced home shortages dissipate.

The Center's 2021 Mid-Year Texas Housing & Economic Outlook was released today. Here are the takeaways.

Supply chain bottlenecks continue

The strong recovery has created supply chain bottlenecks that put upward pressure on prices and raise inflation concerns. Researchers hope the inflation pressures are transitory, but there is some uncertainty surrounding their assessment.

Mortgage rates go higher

Mortgage rates are expected to rise slightly by the end of 2021.
o The period of historically low mortgage rates that existed during the pandemic will probably be over in 2022.
o Mortgage rates could be somewhat higher in 2022 compared to 2021 as a result of changes in the Federal Reserve’s policy and inflation pressures.

Housing demand continues strong

The housing market will continue to be characterized by strong demand with low inventories, accompanied by strong price growth for the remainder of 2021.

Home inventory improves

The inventory of homes available for sale should improve in the coming months as listings seem to have reached a trough and are rising. This will ease some of the price pressures.

Even with homebuilders facing supply shortages of lumber, labor, appliances, and other construction materials, which have driven up prices and costs, new home construction should register strong positive growth in 2021.

Home construction growth slows in 2022

In 2022, new home construction is projected to grow but at a slower rate than the previous two years as the housing market stabilizes. The housing market will move toward a more sustainable long-run path as the pandemic housing market frenzy dissipates.

Demographics fuel Texas housing demand

Economic growth and demographic trends, such as aging millennials and migration from out of state, will help drive Texas housing demand for the remainder of 2021 and 2022.

A more balanced market in 2022

For 2022, researchers expect the supply of home for sale to increase and housing demand to remain relatively strong. This will move the housing market back into balance and cause home price growth to slow.

Foreclosures absorbed

Once forbearance ends in the fall of 2021, even with an increase in delinquencies and foreclosures, the housing market could absorb the foreclosed homes. Researchers say it’s possible homes could be sold with a gain even before they enter foreclosure.

07/27/2021

Texas existing-home sales slow in June, inventory improves slightly

COLLEGE STATION (Texas Real Estate Research Center) – Texas’ existing-home sales were almost flat in June increasing just 1.6 percent over May to 27,000 transactions. Experts say the sales trend is slowing amid constrained inventories.

"Mortgage rates are still hovering around 3 percent, and ongoing demographic trends continue to support housing demand," said Dr. Luis Torres, research economist for the Texas Real Estate Research Center at Texas A&M University.

The average Texas home stayed on the market for just 26 days, the shortest time since the Center began keeping records in 1997.

According to the National Association of Realtors (NAR), national existing-home sales rose moderately in June, rebounding slightly from a four-month slide. Along with the 1.4 percent monthly increase, national sales were up 22.9 percent from last year.

"Standard year-over-year (YOY) calculations should be viewed cautiously due to the effects of the pandemic in June of last year," said Torres.

Along with a June increase in sales, a 9.2 percent increase in new listings pulled Texas’ months of inventory of existing homes to 1.3 months.

"It appears the persistent low level of inventory is easing as more homes hit the market," said Torres. "However, the limited inventory for homes priced less than $300,000 is particularly distressing and is putting pressure on home affordability."

While reaching an all-time high, Texas’ median existing home sales price fell 19.3 percent YOY to $298,000. NAR reported an annual national increase of 23.4 percent to $363,300.

Torres said a shift in the composition of sales toward higher-priced homes due to limited inventory at the bottom price cohorts explains some of the increase in the median sales price.

"Our Texas Repeat Sales Home Price Index accounts for this compositional bias and indicates annual home-price appreciation was closer to 15 percent in June. Although less extreme than the median price metric suggests, the rise in home prices is still impairing Texas housing affordability."

06/23/2021

Texas existing-home sales, prices increase as inventory shrinks faster than ever

COLLEGE STATION, Tex. (Texas Real Estate Research Center) – Texas’ existing-home sales increased 2.5 percent month over month (MOM) to 29,000 transactions in May but remained more than 2,000 sales below peak levels reached at the start of the year.

The average home stayed on the market for just one month, a record-low duration since the series started in 1997.

“Mortgage rates are still hovering around 3 percent, and ongoing demographic trends continue to support housing demand,” said Dr. Luis Torres, research economist for the Texas Real Estate Research Center at Texas A&M University.

According to the National Association of Realtors (NAR), national existing-home sales fell for the fourth straight month in April. Despite the 1.2 percent MOM decline, activity exceeded pre-pandemic levels and increased 46.2 percent from the pandemic’s trough last May.

“Due to the fact that much of the pandemic’s worst impacts registered in April and May 2020, standard year-over-year (YOY) calculations should be taken with a grain of salt,” cautioned Torres. “For example, Texas resale transactions skyrocketed more than 50 percent YOY in May but rose 14.7 percent relative to May 2019 levels.”

Compared with two years ago, existing-home sales elevated just 8.1 percent nationally.

Along with a monthly pickup in sales, a 3.1 percent decrease in new listings during May pulled Texas’ months of inventory to 1.1 months in the state’s existing-home market.

“The extremely low level of supply available is holding back sales,” said Torres. “The limited inventory for homes priced less than $300,000 is particularly distressing and is stressing home affordability.”

Texas’ median existing home sales price accelerated 27.8 percent YOY to $289,900. NAR reported an annual increase of 21.5 percent to $306,000 in the national metric.

Torres, however, said that a shift in the composition of sales toward higher-priced homes due to limited inventory at the bottom price cohorts explains some of the increase in the median sales price.

“Our Texas Repeat Sales Home Price Index accounts for this compositional bias and indicates annual home-price appreciation was closer to 15 percent in May. Although less extreme than the median price metric suggests, the rise in real home prices is still impairing housing affordability within Texas.”

05/21/2021

Constrained inventories, rising mortgage rates, declining affordability slow Texas housing

COLLEGE STATION, Tex. (Texas Real Estate Research Center) – Texas’ housing boom lost momentum in April as existing homes sold through Texas Multiple Listing Services (MLS) ticked down 0.8 percent month over month.

“While Texas housing sales may recover to January peak levels, we do not expect activity to maintain its double-digit annual rate of increase in the long term,” said Dr. Luis Torres, research economist for the Texas Real Estate Research Center at Texas A&M University.

One restriction of the Texas housing market is the severe lack of inventory for sale.

“The number of new MLS listings rose for the second straight month in April, but Texas’ months of inventory remained less than 1.3 months,” according to Torres. “For homes priced less than $300,000, which constitutes three-quarters of total sales, only one month of inventory was available. In the major metros, inventory was even more constrained.”

Torres noted that the median credit profiles of Texas borrowers improved during March, reflecting the fact that only the most qualified housing applicants are able to outbid their competition for their desired homes in a period of exceptionally tight inventories and strong housing demand.

In addition to depleted inventory, national mortgage-interest rates have crept up in the past few months from a series trough of 2.68 percent in December 2020 to 3.06 percent in April.

Torres notes that mortgage rate fluctuations within Texas reflected the trend in national data. Combined with double-digit home-price appreciation, income growth cannot keep up, threatening housing affordability.

“Our Texas Repeat Sales Home Price Index, which accounts for the fact that the sales composition is shifting toward higher-priced homes due to lack of inventory at the bottom price cohorts, corroborated substantial and unsustainable home-price appreciation of 10.4 percent annual growth during 1Q2020,” said Torres. “Meanwhile, the Center’s Home Affordability Index revealed housing affordability declined in Austin, Fort Worth, and Houston over the past three months relative to 4Q2020.”

According to the National Association of Realtors, existing-home sales fell for the third straight month in April, decreasing 2.4 percent. Potential homebuyers across the country are experiencing many of the same challenges Texas buyers face – diminished inventory, rapid median-price growth, and tough competition for what homes are available for sale.

04/23/2021

Texas existing home sales rebound in March, but supply-side constraints persist

COLLEGE STATION (Texas Real Estate Research Center) – The Texas housing market rebounded in March after Winter Storm Uri shocked activity during the previous month. Existing homes sold through Texas Multiple Listing Services increased 9.8 percent on a month-over-month (MOM) basis.

"Texas housing sales continued to trend upward amid historically low mortgage-interest rates and waning effects of the pandemic," according to Dr. Luis Torres, research economist for the Texas Real Estate Research Center at Texas A&M University.

According to the National Association of Realtors (NAR), existing home sales fell 3.7 percent MOM but increased 12.3 percent over March 2020. Annual metrics, however, should be interpreted with caution.

"We have reached the one-year mark of when COVID-19 prompted a nationwide economic halt, which is distorting standard year-over-year measures," said Torres. "It may be more useful to look at higher-frequency data or to make comparisons with 2019 for the next few months."

Existing home sales in Texas were 16 percent higher than in March 2019.

Supply-side activity also rebounded from the February weather shock, with a 16 percent MOM increase in the number of new listings on the market. New listings, however, have failed to keep pace with sales, leading to diminished inventories across the state.

"Texas’ months of inventory sank below 1.3 months for the first time in series history, highlighting the shortage of homes on the market," said Torres. "The lack of supply, particularly for homes priced under $300,000, is one of the greatest challenges to the housing market and, more broadly, the Texas economy."

NAR announced similar constraints at the national level pushed the median existing home sale price up 17.2 percent YOY.

Existing homes in Texas had a similar YOY price increase, reaching a record $279,740.

Torres notes how these explosive growth numbers may be deceptive.

"While the median price is more robust to outliers than the average price, compositional changes in home sales can still cloud real growth in prices," he said. "Our Texas Repeat Sales Index avoids this composition bias, showing annual growth in real housing prices closer to 12 percent. This rate of home-price appreciation, however, is still taxing housing affordability across the state."

03/23/2021

Texas existing-home sales drop 16 percent in February as inventory falls to less than 1.5 months

COLLEGE STATION (Texas Real Estate Research Center) – Texas’ housing market slowed in February after persistently low mortgage interest rates contributed to record sales in the existing-home sector the previous month.

"Sales activity was greatly hindered by February’s unseasonably wintery weather that caused power outages and water disruptions across the state," said Dr. Luis Torres, research economist for the Texas Real Estate Research Center at Texas A&M University.

Existing-homes sold through the Texas Multiple Listing Services declined 16 percent from January, drawing even with year-ago levels. Despite slower sales, the state’s existing-home inventory fell below 1.5 months in February. The number of new listings that hit the market declined for the second straight month to their lowest reading since April 2020, when the state was under a stay-at-home mandate.

"New listings rebounded during the summer amid strong housing demand, but they have trended down since fourth quarter 2020, contributing to the lack of homes for sale," Torres said. "Supply is expected to remain tight in 2021, affecting home sales."

Many analysts point to older homeowners holding onto their houses longer, resulting in a reduced supply of active listings available to the increasing number of millennials becoming first-time homebuyers.

According to the National Association of Realtors, first-time homebuyers accounted for 31 percent of February sales, which overall decreased 4.5 percent relative to January. Compared with year-ago levels, however, activity elevated 8.2 percent. The share of homes sold to first-time buyers was even higher in the new-home market. The February National Association of Home Builders/Wells Fargo Housing Market Index survey indicated 43 percent of new single-family homes sold were to first-time buyers in the last 12 months.

Foreclosure moratoriums are causing fewer homes to be put on the market than otherwise would be expected at the elevated levels of joblessness experienced in the past year.

"During times of economic hardship, foreclosures typically increase, providing additional listings for sale," said Torres. "However, forbearance and the federal foreclosure moratorium have provided help to households during the pandemic. Continued stability in the housing market is essential to Texas’ economic recovery."

The Federal Housing Finance Agency has extended the foreclosure and REO eviction moratoriums for properties owned by Fannie Mae and Freddie Mac through June 30, 2021. Eligible borrowers were also granted an additional three-month extension of forbearance for a total of up to 18 months. The Centers for Disease Control and Prevention’s federal eviction moratorium is set to expire at the end of March.

Rising mortgage rates are another headwind to the Texas home market. The Federal Home Loan Mortgage Corporation’s 30-year fixed-rate ticked up for the second straight month in February to 2.8 percent. Continued increases may soften housing demand.

"The 30-year mortgage rate is closely linked to the ten-year U.S. Treasury bond yield, which looks to increase in the coming months as vaccination rates improve, and the third fiscal stimulus package supports economic recovery," Torres said.

In Texas, Gov. Greg Abbot lifted the mask mandate and increased capacity of all businesses and facilities in the state to 100 percent starting March 10.

"Prospects for Texas’ full economic recovery continue to depend on dwindling COVID-19 cases and hospitalizations and progress on the vaccine front," Torres said, "but optimistic consumer behavior could boost business activity, reduce the number of layoffs going forward, and allow Texans to return to the labor force."

02/02/2021

February 2, 2021
Homebuyer frenzy, limited supply push up Texas home prices

COLLEGE STATION (Texas Real Estate Research Center) – Before COVID-19, Texas’ home price growth was strong but declining to more sustainable rates. Texas Real Estate Research Center Senior Data Analyst Joshua Roberson said last year’s unpredictability led to growth estimates that could be mistaken for data flukes.

Fourth quarter price growth, based on the Center’s Home Price Index, is enough to cause alarm. In Austin, the index jumped over 10 percent above last year’s estimate. At what point will home prices eclipse interest rate savings? Is there a bubble brewing in the housing market?

"In a post-pandemic economy, nothing is really off the table," Roberson said, "but if anyone is waiting for another Great Recession-like housing crash, they may be disappointed.

"During the Great Recession, home demand plummeted along with consumer confidence while home supply was left high and dry. Today, it’s the exact opposite. Homebuyers are in a buying frenzy, but supply is nowhere in sight."

According to Roberson, the end result of that high demand and low supply has been price hikes like those experienced in the past two quarters, and future quarters are likely to follow this trend. Mortgage rates are expected to remain low, which will help sustain demand. Demand for more square footage is also not likely to fade soon.

On the supply side, existing homeowners are staying put, resulting in a massive shortage of listings while builders struggle to keep up with the surge in demand.

While price growth is likely to remain hot this year, the fourth quarter 2020 spike may be a one-time phenomenon.

"Normally during the winter months, the housing market cools and buyers are less aggressive, but this winter things were still heating up," said Roberson. "If 2021 returns to the normal summer-focused seasonality, then next winter may not be as impressive. But until COVID is managed, nothing should be taken for granted."

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