New Texas Housing Report: Construction Slow, Inventory Low
By David S. Jones, senior editor, Real Estate Center at Texas A&M University
Dec. 2, 2015/Release No. 6-1215
COLLEGE STATION, Tex. (Real Estate Center
) – Housing demand remains strong throughout
Texas, while new construction is constrained by a shortage of labor and lots, says a new monthly report from the Real Estate Center at Texas A&M University.
"The Texas economy continues to grow but at a more modest pace in the face of a weakening global economy, lower energy prices and a strong dollar. Total employment continues to expand but is weighed down by the manufacturing and oil-and-gas extraction sectors, especially in Houston," said Dr. James Gaines, chief economist and co-author of Texas Housing Insight.
The report examines housing supply, demand and prices.
Statewide Building Permits Flat
"The Texas Residential Construction Leading Index, which signals upcoming directional changes in the residential construction business cycle, registered a strong increase in September," said Research Economist Dr. Luis Torres, who co-authored the report.
"The leading index was positively affected by weighted building permits and housing starts. The Texas residential business cycle (coincident) index that measures current construction activity continues its positive 2015 trend although at a slower pace."
According to the new report, single-family housing construction permits statewide remained flat with recent declines in Austin and Houston. No metro area has reached prerecession permitting levels.
Months of inventory remain low but have registered modest upticks the past couple of months to 3.4 months of inventory in September. Around 6.5 months of inventory is considered a balanced housing market in which neither sellers nor buyers dictate prices.
Housing starts continue to climb in 2015, helping to alleviate the restricted supply.
Homes Selling Faster in Major Metros but Houston
"Housing sales recently passed January 2007 levels," said Gaines. "The growth rate of Texas sales remains ahead of the nation. Four of the five major metros posted solid home sale increases with Houston remaining flat.
"Mortgage interest rates remained below 4 percent. In October, the Federal Home Loan Mortgage Corporation reported a 3.8 percent rate on a 30-year mortgage, while the 30-year bond yield rested at 2.89 percent. Depending on the performance of the national economy, expectations are that the Federal Reserve will raise short-term interest rates in the near term, which could lead to somewhat higher mortgage rates."
The new report notes the number of days an existing home is on the market remains low relative to prior periods statewide. On the other hand, new homes have somewhat longer sales periods, especially in the Austin and Houston metro areas, while Dallas and San Antonio registered shorter sales periods. The average statewide difference to sell a new home versus an existing home was 42 days in October, the largest difference since January 2011.
Dramatically Rising Home Prices
"Average and median sales prices have risen dramatically since 2011 and continue to climb," said Torres. "The constrained supply in conjunction with strong demand accelerated price gains. Austin and Houston have been the housing-price-appreciation leaders followed by Dallas and San Antonio.
"Considering recent trends in the energy sector and the economic slowdown, Houston may record some softening in price growth. Employment growth and a strong services sector caused Dallas to register strong price appreciation."
The Real Estate Center economists said Texas' existing and new home sales prices have steadily climbed in the major metro areas. Since 2011, the median new home price has been 48 percent higher than for an existing home, and the average sales price has been 37 percent higher. This is primarily because of increases in home size for newer homes and markedly increased construction and land costs. The price per square foot for a new home is 20 percent more than for an existing home.
Even with rapid price appreciation, purchasing a Texas home continues to be relatively affordable compared with the United States, but the gap has been closing.
Texas Housing Insight for December can be downloaded free here.
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