Fall is here but home prices haven’t shown much sign of cooling off.
Home prices live in a supply & demand world. And just a few days ago, the National Association of Realtors® Chief Economist, Lawrence Yun says there will be an expected seasonal decline in new listings in the coming fall and winter months, which could accelerate home prices. No big surprise.
Housing Supply: Where are the Homes?
Housing supply measures how many months it would take to sell all the houses currently listed for sale, at the current pace of home sales. For example, if there are 600 homes currently listed for sale, and an average of 100 homes are selling each month, there would be a 6-month housing supply. This is because it would take 6-months to sell all the homes currently listed for sale.
A buyer’s market is anything more than 6 months. A seller’s market is anything less than 6 months.
Housing supply has been running below 6 months across the US since 2012. The Dallas metroplex is running an anemic 2.7 months inventory – which indicates an extremely strong seller’s market. Buyers are competing with multiple offers… in some cases dozens of offers on the same house. This tells us that home prices are poised to continue going up in the next several months.
Housing Demand: What’s the Trend?
“Dozens of offers” on the same house gives you a clue. Housing demand tends to slow down in the fall because most people want to move during the spring and summer while school is winding down. Not so this year. Housing demand is expected to remain strong because the economy is doing okay and people have jobs in most parts of the country.
According to the Texas Workforce Commission*, non-agricultural jobs grew by 21,400 and 2900 government jobs were added in the month of August. Year to date, the Dallas metroplex has experienced a 3.5% job growth. With scores of companies continuing to move into the Dallas metroplex, demand will continue to remain hot.
Home Prices: Where are they Headed?
The national median existing-home price for all housing types was $240,200 in August, up 5.1% from a year ago. It’s even more for the Dallas metroplex market where the median home prices hit $285,000** (scratching my head, home prices that low are hard to find!). In the South, which includes Texas, home prices are up over 6% from a year ago.
In addition, the Realtors® Buyer Traffic Index indicates Texas remains a great market. The map below represents data collected July – August 2016 and shows an expectation of price growth for Texas at 3% – 4% over the next year. The August report indicated more respondents viewed home buyer traffic conditions as “strong” rather than weak. The report reflects the level of home buying demand which may result in a contract to purchase within 2 to 3 months.
With housing supply at a paltry 2.7 supply level and likely to remain low, coupled with strong employment growth (which is the prerequisite to demand), continued upward movement in home prices over the fall months is highly probable.
Please contact me for specific information on housing supply, housing demand and home prices in your local area.
*Texas Workforce Commission, TLMR, Sept 2016
**Real Estate Center, Texas A&M Univ, Housing Activity Report