Texas Housing Insight-REC TAMU


James P. Gaines, Luis B. Torres, Wesley Miller, and Bailey Cuadra (Feb 6, 2018)

2017 Annual Summary
The Texas housing market held steady as sales rose 4 percent, maintaining the current four-year average. Demand remained robust, particularly in the resale market as buyers searched for affordable housing. Rapid home price increase and stagnant wages pared Texas’ affordability advantage, presenting a growing problem throughout the state. Supply conditions showed signs of improvement but failed to relieve pronounced market imbalances, particularly for homes priced below $300,000. Marked shortages will likely continue unless builders shift construction toward this price cohort, a difficult task amid rising land cost and skilled-labor shortages.

In 2018, single-family housing sales are projected to reach 6.6 percent growth before moderating in 2019. Economic acceleration and employment growth in Texas bodes well for housing demand. Price pressures are projected to ease slightly as homebuilders stretch to increase production in the entry- and first move-up markets, where houses generally range between $150,000 and $250,000.

Supply*
The Texas Residential Construction Cycle (Coincident) Index, which measures current construction activity, accelerated 3.8 percent annually as residential construction values and industry employment advanced. Growth in weighted building permits and housing starts pushed the Texas Residential Construction Leading Index (RCLI) up 3.6 percent, signaling increased residential construction activity in early 2018.

In response to market imbalances, developers accelerated building activity at the earliest stage of the construction cycle. The number of vacant developed lots (VDLs) in the Texas Urban Triangle reached its highest level since 2011, continuing a four-year climb after bottoming out in 2014. In Dallas-Fort Worth (DFW) and Austin, the number of VDLs increased 6.1 and 6.6 percent, respectively, as builders scrambled to satisfy housing demand. San Antonio VDLs reached 2010 levels during steady 3.3 percent growth. Houston also posted 3 percent growth amid a fourth quarter recovery following Hurricane Harvey. Despite recent increases, VDLs were nowhere near pre-recessionary levels in actual or per capita terms.

Similarly, Texas single-family housing construction permits (unweighted) grew 8.2 percent annually but lagged well below their 2006 peak. Permits in Dallas and Fort Worth increased 12.1 and 26.3 percent, respectively, after marginal gains in 2016. Austin recorded similar permit growth at 12 percent. San Antonio permits slid in the fourth quarter but maintained 16.3 percent annual growth. Houston remained the national leader in single-family permits issued, despite more moderate 3.4 percent growth.

Upward trending supply factors supported 4.6 percent growth statewide in single-family private construction values. The boost in VDLs and single-family permits materialized into 11.4 and 7.6 percent growth in Austin and DFW construction values. A sluggish fourth quarter weighed on San Antonio, but early gains led to 6.4 percent growth annually. Houston single-family construction values stabilized, ticking up 1.2 percent after two straight annual contractions. Residual building stimulus from the hurricane recovery should support further growth into 2018.

After dipping in 2016, total Texas housing starts finished the year up 3 percent—slightly above the 2.4 percent national rate. Market forces pulled construction activity from the saturated multifamily sector to the undersupplied single-family industry. At the national level, housing starts fell 9.3 percent for multifamily homes, while rising 8.4 percent in single-family construction. In DFW, the building boom continued as single-family starts rose 10.8 percent, the sixth-straight year of double digit growth. Single-family starts in San Antonio and Houston posted their strongest gains since 2014 at 10 and 8.2 percent, respectively. After spiking 29.5 percent last year, Austin maintained elevated single-family start levels, leading the state in per capita terms. Despite these supply-side shifts, builders struggled to fully satisfy single-family demand amid rising costs and skilled-labor shortages.

Growth in supply factors did not keep pace with housing demand, thereby magnifying market imbalances. The Texas months of inventory (MOI) settled at 3.7 months after a 9 percent slide in the second half of the year; a MOI around six months is considered a balanced housing market. Fewer active listings combined with constant demand pressure prevented inventory levels from expanding. The MOI remained particularly constrained for homes priced under $300,000, where the supply of active listings bottomed out around three months, marking the closest resemblance to stabilization this decade. Consequently, rampant demand spilled over to the higher-end markets, where inventory levels were more sustainable.

Inventories stabilized in both the new and existing home market. The Texas MOI for existing homes ticked up to 3.4 months, its first annual increase since the data series began in 2011. In the new home market, the MOI held steady around its three-year trend of five months. However, the current balancing could be transitory as inventories in trended downward in both markets during the second half of the year.

Statewide, North Texas observed the tightest housing supply. Fort Worth maintained the lowest inventories at 1.9 and four months for existing and new homes, respectively, followed by Dallas at 2.1 and 4.4 months. Austin inventories showed signs of improving, surpassing 8 percent growth for both resale (2.1 months) and new home MOI (4.7 months), respectively. In contrast, inventory levels continued to decline in San Antonio to 3.1 and 4.5 months in the existing and new home markets, respectively. The supply of resale homes was similarly constrained in Houston at 3.4 months, while the new home MOI remained at more balanced levels above five months.

Demand
Total Texas housing sales managed 4 percent annual growth, outpacing the national rate for the second straight year. Sales increased uniformly across the state, rising between 3 and 4 percent in all the major metros except Houston. Sales in Houston slowed abruptly during the summer months and after the hurricane but recovered enough to match last year’s growth rate at 2.6 percent.

In the new home market, disappointing fourth quarter sales volume drove Houston’s annual growth rate below zero for the third straight year. On the other hand, positive year-end performance in DFW and San Antonio pushed annual new home sales up 12.7 and 6.1 percent, respectively. In Austin, new home sales activity decelerated but maintained 6.1 percent annual growth.

Rapid price increase and supply constraints shifted the sales distribution away from the lowest price cohort (homes priced under $200,000), where sales accounted for 41 percent of homes sold through a Multiple Listing Service (MLS)—down from 68 percent in 2011. Every other price cohort posted double-digit annual growth, led by homes priced $300,000–$400,000 at 16.3 percent.

After sinking to a record low last year, the homeownership rate in Texas and the nation ticked up to 63.8 and 61.7 percent, respectively. The recent rise in home purchases by Millennials relieved some of the downward pressure associated with an aging population. Of the Texas major metros, San Antonio maintained the highest homeownership rate at 62.3 percent, followed by Dallas at 61.8 percent. Homeownership in Austin and Houston dwindled to record lows of 55.6 and 58.9 percent, respectively.

Texas housing demand remained robust as the average days on market (DOM) hovered at 58 days for the third consecutive year. Homes priced $200,000–$300,000 sold the fastest, averaging 52 days on the market, while homes under $200,000 averaged just over 60 days. Demand was softer in the top price cohort (homes priced above $500,000), where homes sold on average after 88 days, down from 118 days in 2011.

Resale demand reached an all-time high as homebuyers searched for lower-priced alternatives. The existing home days on market remained historically low at just 52 days. Rising prices pulled many prospective buyers into the resale market. In Dallas and Fort Worth, the resale DOM settled at 32 and 34 days, respectively, amid soaring home values. In San Antonio, the average existing home sold after 50 days, nearly half the average in 2011. In contrast, the resale DOM in Austin and Houston expanded for the second straight year to 43 and 48 days respectively, indicating a slight softening of demand.

New home demand balanced on a three-year trend in Texas, averaging 90 days on the market. The lack of new home inventory and rising prices challenged the Austin market, holding the DOM at 99 days. Despite higher inventory levels in Houston, new home demand was also soft with an annual DOM of 95 days. New home demand eased in San Antonio, particularly late in the year, pushing the DOM up to 86 days. New homes sold fastest in Dallas and Fort Worth, averaging 82 and 76 days on the market, respectively.

Interest rates closed the year on a high note after U.S. legislators passed tax legislation, and the Federal Reserve raised the federal funds rate for a third time in 2017. Investors sold off bonds in expectation of rising inflation and further interest rate increases. The ten-year U.S. Treasury bond yield increased nearly half a percent annually, settling at 2.33 percent. As expected, the Federal Home Loan Mortgage Corporation 30-year fixed-rate ticked up similarly to 3.99 percent, mirroring changes in the ten-year bond yield. Rates remained low by historical standards but showed signs of trending upward.

Prices
The health of the Texas economy combined with housing supply constraints elevated home prices to record levels. The median sale price increased by more than $13,000 to an annual average of $222,106, with home values appreciating across the state. Most of the price pressure occurred in the resale market, where the statewide median jumped 6.8 percent to $211,844. The resale median price was highest in Austin at $291,904, but North Texas posted the largest percentage growth. In Dallas ($266,775) and Fort Worth ($210,100), the median resale price rose 9.3 and 11.9 percent, respectively, as single-family demand boomed. Price increase was more modest in Houston and San Antonio, but they also recorded annual records with a median resale price of $216,467 and $199,583, respectively.

Softer demand and more sustainable inventory levels held new home prices to moderate growth. The median price for new homes sold through an MLS ticked up only 1.4 percent to $290,662. Similarly, new home prices in the major metros increased modestly compared to the resale market. Dallas maintained the highest median price at $351,559, up 2.2 percent over the year, while the Fort Worth median approached $300,000. The median price for new homes in Austin rose to $316,088, just $15,000 higher than the resale median. In Houston and San Antonio, new home prices actually depreciated, falling to $305,422 and $257,635, respectively.

In terms of price per square foot (ppsf), the new home median rose 3.2 percent as homebuilders reduced square footage amid rising land costs and burdensome regulations. The median lot size for new homes fell for the third consecutive year to 2,373. In contrast, the statewide median ppsf for existing homes accelerated 6.3 percent, surpassing $106 for the first time in series history.

At the metro level, Austin led the state in median ppsf for both new and existing homes at $140.94 and $145.04 ppsf, respectively, and was the only major metro to pay a premium for existing-home square footage. However, the median ppsf for existing homes in Dallas jumped 9.3 percent to $123.87, a little less than six dollars below the new home ppsf. The spread between new and existing ppsf was wider in the remaining metros but continued to converge. The median new home ppsf settled at $121.15 and $119.23 in Fort Worth and San Antonio, respectively, while the resale ppsf rose to $108.04 and $104.79. The median ppsf was lowest in Houston at $116.03 and $100.21 for new and resale homes, respectively.

The Texas sale-to-list price ratio hovered around 0.96 in both the new and resale home market. New home ratios inched down in all major metros except Houston, indicating slightly weaker demand. For existing homes, Dallas and Fort Worth recorded sale-to-list price ratios around 0.98 as homes continued to fly off the market. Austin and Houston posted slight dips to 0.97 and 0.95, respectively, but remained historically high. In general, elevated sale-to-list price ratios across the state indicated a continuing sellers’ market across the housing spectrum.

Texas housing affordability remained favorable compared to other stats but continued the steady decline that began in 2013. Rapid price increase, fueled by shortages of homes priced under $300,000, challenged Texas buyers. Stagnant wages failed to keep pace with home values, driving the Real Estate Center Affordability Index to 1.5, its lowest level since the housing crisis. The index indicated that a family earning the median income could afford a home 50 percent more than the median sale price. For much of the past decade, Texans enjoyed the capability of affording homes priced twice that of the median. Fort Worth and Houston boasted the highest affordability conditions at 1.8 and 1.7, respectively, but had substantial declines over the past year. In Austin and Dallas, affordability fell below 1.5 amid rampant home price increases. San Antonio fared similarly with a significant drop in the affordability index from 2.4 to 1.6.

Furthermore, the Explosive Behavior Map indicated a misalignment in North Texas home prices relative to their fundamental-based normative values. This behavior stretched south into Waco and College Station-Bryan. Recent price movements in the remaining major metros, as well as in Midland, also warrant careful attention

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Thermal Imagining Camera

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We help find hidden problems that can save our clients’ money and time with our new Thermal Imaging Service!

Our infrared imaging camera measures and photographs the non-visible infrared radiation that is emitted by all objects. With this, we can visualize and document minute gradients in the surface temperatures of materials, such as walls and ceilings. This technology helps detect moisture issues (even before they become visible to the eye), insulation and air infiltration deficiencies and electrical component malfunctions. Hancock Inspections is trained and qualified to perform thermal scans in conjunction with your commercial or home inspection or as a stand-alone service.

Infrared inspections are a non-destructive, non-contact and cost-effective way to detect and document defects.  Whether it is a time-sensitive emergency, preventative measure, or general inspection, our Thermal Imaging service will help you stay on track and avoid those hidden problems.

 

“Well, well, well”—All’s well that ends well

“Well, well, well”—All’s well that ends well

An image of a oil well with a dramatic blue sky background.SAN ANTONIO – Despite challenges facing the oil and gas industry, advances in technology and improvements in efficiency continue to drive well costs down and keep the industry competitive.

That is according to executives who spoke at the Society of Petroleum Engineers’ Annual Technical Conference and Exhibition in San Antonio.

Drilling and completion costs are down about 40 percent from the peak of the oil boom, which came in mid-2014 at $107 per barrel before crashing to $26 by early 2016.

New wells in the first 90 days produce 4½ times the amount of oil—in the same area—as wells drilled five years ago.

Also, real-time monitoring of wells means that companies know exactly what’s going right or wrong at a particular well site.

National oil production in 2018 is expected to reach around 9.9 million barrels per day, and the Energy Information Administration expects the U.S. to become a net exporter of natural gas in 2017.

 

Read more at the San Antonio Express-News

10 Quick Home Maintenance Tips

10 Quick Home Maintenance Tips
Excerpted from the Popular Mechanics book When Duct Tape Just Isn’t Enough, published by Hearst Books/Sterling Publishing.

Home maintenance isn’t restricted to repairs. In fact, certain tasks–when performed regularly–may actually prevent things from breaking in the first place. But when things do go wrong (and it’s inevitable that they do), we have some backup plans that you can try before you grab the phone to call for pro. Appliances and plumbing are the most frequent offenders, but they also often can be the simplest to care for. From the gutters to the living room carpet, there’s a reliable method for keeping every part of your home clean, safe, and well maintained.
MUST-DO MAINTENANCE:
The quickest fix is to not have the problem in the first place. Here’s a checklist of items every homeowner should get to regularly.

1. Test your garage door opener monthly to ensure that it reverses when it hits an obstruction or when its sensor beam is interrupted.

2. Vacuum the clothes dryer’s exhaust duct at least once a year. If the duct is plastic, replace it (it’s a fire hazard). Rigid sheet-metal ducting is best.

3. Replace furnace filters quarterly, or as recommended by the furnace manufacturer.

4. Test all GFCI (ground fault circuit interrupter) outlets monthly. Press the test button and use a voltage tester to make sure the power goes off.

5. Clean leaves and debris from the condenser of a central air conditioner seasonally.

6. Once a year, vacuum the refrigerator coils underneath the appliance.

7. Have the fireplace chimney inspected and cleaned annually.

8. Inspect window and door caulking and weather stripping yearly.

9. Replace the batteries in smoke detectors yearly. And remember, even recent hard-wired smoke detectors have backup batteries that must be replaced. If you have never checked yours, do so.

2:23 || GUTTERLY SIMPLE:
Cleaning your gutters is the chore you abhor.

THE QUICK FIX

Make gutter cleaning easier–and safer (no ladder required)–with a long spray wand made from a 1/2-in.-diameter by 10-ft.-long PVC pipe. Cut two 6-in. lengths of pipe. Then use PVC cement to join these short sections and two 90-degree elbows with what is now a 9-ft.-long pipe, forming a J-shaped hook. At the short end of the hook, glue on a solid endcap. Drill three 1/8-in.- diameter holes in the cap. Glue a threaded adapter onto the opposite end of the pipe and attach a garden hose. Place the short end of the J-shaped hook inside the gutter and turn on the hose. As you walk along the house, high-pressure streams of water will rinse the gutter clean.

Texas home sales, prices up 7 percent

Texas home sales, prices up 7 percent

By Bryan Pope, Associate Editor, Real Estate Center at Texas A&M University
Sept. 28, 2015/Release No. 02-0915

COLLEGE STATION, Tex. (Real Estate Center) – Latest Multiple Listing Service (MLS) data show Texas home sales had a 7 percent year-over-year increase in August while the median price was up 7.4 percent.

“Generally speaking, the market’s still going strong,” said Real Estate Center Chief Economist Dr. Jim Gaines. “However, we are seeing some slowdown in demand in areas most affected by the decline in oil prices and weakness in the energy sector.”

Last month, 29,685 homes were sold statewide, almost 1,900 more than a year ago but about 1,500 fewer than in July. Gaines said the decline from July is the typical seasonal slowdown in sales.

Gaines said the state’s low housing inventory — 3.7 months in August, well below the 6.5 months that Center economists consider a balanced market — continues to elevate prices.

Last month’s median price was $203,300 compared with $189,300 a year ago and $204,700 in July.

Here’s how the state’s major metros fared in August.


August 2015 home sales data for most Texas MLSs are online athttps://www.recenter.tamu.edu/data/housing-activity/.

Funded primarily by Texas real estate licensee fees, the Real Estate Center at Texas A&M University was created by the state legislature to meet the needs of many audiences, including the real estate industry, instructors, researchers and the general public. The Center is part of Mays Business School at Texas A&M University

Texas Housing Market on Track for Second Best Year Ever

Texas Housing Market on Track for Second Best Year Ever

By Bryan Pope, Associate Editor, Real Estate Center at Texas A&M University Oct. 24, 2014/Release No. 4-1014 COLLEGE STATION, Tex. (Real Estate Center) –

This year will end as the second best year ever in Texas in terms of existing home sales, said a housing market expert with the Real Estate Center. “Last year was the second best year ever in the state of Texas for home sales volume,” said Center Research Economist Dr. Jim Gaines. “It was second only to 2006, which was at the height of the housing boom and all the easy financing. And 2013 wasn’t that far off from that. This is going to become the new second best year ever. We are having a really terrific year.” The latest Multiple Listing Service (MLS) data show that sales of existing single-family homes in Texas were 7 percent higher last month than in September 2013. About 24,640 homes were sold last month, over 1,600 more than the same month last year, but almost 2,800 less than in August. Gaines said the August-to-September downturn is the normal seasonal falloff. So far this year, 217,690 homes have been sold, about 1 percent more than this time last year. “We’re getting exactly what we thought we were going to get, and that’s a slowdown in the rate of increase,” Gaines said. “Last year sales went up about 16 percent. It was a big, big jump. This year it’s a little jump. Home prices are doing a very similar kind of thing. There’s been a step-up in prices the last five years, and we’re still seeing that step up. But the rise of the step isn’t quite as high. “As our prices have been going up progressively here in Texas, incomes really haven’t been going up at the same pace percentage-wise. Home prices going up faster than income means that ultimately affordability and what people can afford to pay becomes an issue.” Gaines said homebuyers getting hit the hardest are those on the lower end of the home-price spectrum. “Very few homebuilders are building homes under $200,000 or $250,000 in most of our markets,” he said. “So there’s no increase in supply on that low-priced end.” In addition, credit tightness is affecting first-time buyers and first-time move-up buyers much harder than older buyers at higher income levels. “The good news for Texas is that our prosperity is, in general, still continuing,” Gaines said. “On the horizon, it appears that it will continue. The only cloud on that horizon is what’s happening in the energy sector. In the last couple of weeks, the price of oil has dropped appreciably. When the trend is downward in the price of oil, you start looking ahead and saying ‘okay, just how far can this trend go before it really becomes a problem?’ Right now it doesn’t appear to be, but it’s one of those things we’ve got to keep our eye on.”

Our Team is Growing! Help us Welcome Zane!

Just this past week Hancock welcomed a new team member into our fold. Zane Koltermann was hired as an all-around office assistant and looks to be a very valuable addition to our staff. Zane’s immediate duties will include administrative tasks associated with home inspections in Austin / San Marcos as well as New Braunfels / San Antonio offices.  Coordinating office and field personnel will be a priority.

Zane will also have phone duties, so don’t be surprised when you hear a new voice the next time you call!

We are very excited to have Zane on board!

A Peaceful Home Buying Experience

Hancock’s Guide to a Great Home Inspection

 

“Will the house pass the inspection??” is a very common question I get from prospective home buyers. These folks are usually in the very center of the stress-filled cyclone that is the typical home buying process.

It does not have to be this way.

If you are a prospective home buyer conducting research or if you are in the middle of contract negotiations and under a 10 day option period, the following information is definitely for you.

A thorough home inspection is a critical part of the home buying process and, if performed correctly, will provide the home buyer with comfort, understanding and peace of mind.  No house can ever ‘fail’ an inspection.  This usually only happens as a result of fear of the challenges that are present on any given property.  This fear can be dissolved into confidence. This comes with knowledge and understanding the big picture associated with every problem item.

Great! How can this accomplished?

Most people strive to understand and control most of the critical aspects of their lives. This is certainly true with the purchase of a home.  To obtain this peace of mind, the inspector must work to instill confidence that comes with understanding the truth behind the problem items they identify.

This can be accomplished if three criteria are met:

The inspector must be independent from any conflict of interest that could influence the report.

  1. The inspector must be independent from any conflict of interest that could influence the report.
  2. The inspector must take a comprehensive approach to their reporting process.
  3. The inspector has to provide an education-first approach to how they relay the information to their client.

If the home inspector takes on the responsibility of acting as an advocate for their client, they and their clients will quickly find themselves in a student-teacher relationship. A verbal report should be presented on sight and a written report with photographs should be provided at a later time as well.  The inspector should be patient and answer questions fully. At the end of the inspection process the client should have as much information as they need in order to feel comfortable meeting the challenge of any problem item identified on the report. Finally, the inspector should remain accessible throughout the process; even after the report is presented.

If the inspector utilizes an education-first approach to providing peace of mind to their clients, no property can ever ‘fail’ an inspection.  The specific deficiencies with a property may be more challenging than the client wants to accept for a given sale price, but fear should never be a factor in the decision to purchase a home or to move on.

The goal for any inspector should be for their client’s home buying decision to be based on a complete understanding of the challenges associated with the property.  If this comfort level can be achieved, the stress associated with the home buying process will be greatly reduced.

You deserve a peaceful home buying process.  After all, it’s a great feeling to know your home!

 

Regards,

 

Wade Hancock

Professional Inspector

Hancock Consulting & Inspections, PLLC

New Braunfels, TX

(830) 608-1200

TREC #20451

 

www.hancockinspections.com

 

 

Forbes: Austin is No 2 City for Future Job Growth

Forbes: Austin No. 2 in U.S. for future job growth
(7/28/2014)
AUSTIN – Austin ranked second in Forbes’ list of best U.S. cities for future job growth over the next three years and was one of five Texas cities to make the cut.

With projected annual job growth of 4.1 percent and the unemployment rate at 4.1 percent, Austin is proving to be an attractive option for companies that want to take advantage of the strong local workforce.

The Lone Star capital boasts the third-highest net migration rate in the U.S. during the past five years, Forbes reported. The median household income is $58,932.

Other Texas cities that made it to Forbes’ list of best cities for job growth include: McAllen at No. 3, Dallas at No. 5, Houston at No. 9 and San Antonio at No. 10. Naples, Florida ranked No. 1.

Read more at the Austin Business Journal.

See Forbes for the full report.