The median price for homes in the state of Texas hit another all-time high in September 2013 in the four major metros, and demand for homes in the state continues to surge to record levels, increasing home values and rents.
On a statewide basis, 271,839 single-family homes were sold in the last 12 months, up 17% from the previous 12 months. This represents the most homes sold in a single year outside of the boom years of 2005. Additionally, demand in the state was as hot as ever, with 43 out of the 47 markets followed by the Texas A&M Real Estate Center showing an increase in sales year-over-year.
Prices for Texas homes were extremely strong in the second quarter, hitting an all-time high for the quarter. The median price in 2013-Q2 was up 9.98% from the prior year, reaching $177,300. The average price rose 10.44% from the prior year to $235,075. According to the Texas Association of Realtors, those are the highest figures for median and average price ever seen in Texas real estate.
Texas and California continue to lead the nation in job growth with Texas capturing over 40% of all jobs created in the country since 2009. What effect has that had on the local residential markets?
Austin continues to create jobs and has one of the healthiest labor and real estate markets in the state. Although Austin will probably have a record year in resales, the lack of supply of resales and new homes continues to present challenges to buyers. Resale home inventory continues to dwindle, with just 2.7 months supply available, dropping from 3.7 months supply in August. Builders will deliver 9,200 new home starts this year. Builders are happy that demand is outstripping supply, but are scrambling for developed lots to meet demand. Austin has one of the states lowest unemployment numbers (5.2%) and has been creating 22,000 to 30,000+ jobs per year over the last three years. Remember for every two jobs there should be one housing start, so the new home market has to play catch-up for the last few years. Due to the longer entitlement process in Austin, it will be two to three years before lot development catches up to demand, which in a broader perspective is a “good problem” to have.
San Antonio also has strong job and population growth across the metro, accelerating demand for shelter. With one of the largest oil shale plays nearby and an increase in high tech jobs, the market will be challenged to meet demand. Resale inventory is at a six year low with just over 4.5 months supply and most properties selling for near full list price (97+%). Apartment occupancy remains strong at around 95%, even with new units coming to the market. Like Austin, the lack of completed developed lots is a challenge and has led to tremendous activity in large land tract sales to builders and developers.
The Metroplex economy continued to improve this year with 92,000+ jobs created in the last 12 months, led by the professional and business sector with over 21,000 jobs. This strong demand has been tempered by the reduction in forces in the banking and mortgage industry. This surge of quality jobs has created housing demand. Over 13,500 apartments are to be delivered over the next 12 months, with occupancy staying above 93%. The lack of listings is slowing home sales in most Dallas-area residential districts. The inventory of homes being marketed by Realtors has fallen to less than a two-month supply in the Metroplex. In addition, the number of pre-owned single-family home listings in North Texas is down 14% year-over-year, according to data from the Real Estate Center at Texas A&M University. The rest of 2013 and into 2014 should remain strong as developers try to secure as much land as possible for future deliveries.
Houston is the nation’s #1 job creating city. With over 106,000 jobs added in the last 12 months, to say the economy is doing well is an understatement. Houston continues to remain strong with a booming energy market, strong trade, and surging real estate development activity. The level of development in this area is unbelievable. Last time I was in the Woodlands we counted 37 cranes just from 290 to the business district in the middle of the community. West Houston has the same amount of construction. Even with over 10,000+ apartment units being deliver this year, occupancy has stayed steady at 92+%. Resale and new construction struggle with the tremendous demand for inventory, although we saw a slower September. Resale is definitively a sellers market with just a 3.2 month supply. Like the rest of Texas, land developers of residential, office, and retail are quickly securing positions and starting construction to address the demand. If you were to list the strongest markets in Texas, Houston would easily lead.
Bryan/College Station is another bright spot in the Texas triangle that has seen new home and resales improving over 30% and values following. As in the other metros within the triangle, inventory is lower than a year ago and dropped to less then six months this year. Texas A&M’s continued growth should help this areas continued growth through 2014.
Beaumont saw improvement in values and sales over the last 12 months. Beaumont is one of the few Texas markets where the last four years have been a ‘U’ shaped curve due to the loss of jobs and since then improved job creation. Golden Pass LNG’s expansion in Sabine Pass is expected to create thousands of jobs and generate billions of dollars in investments. We have seen the average price for sold homes move dramatically from $143,839 a year ago to $241,162. This was on the heels of a 45.8% decline in June from a year earlier. Thank goodness that energy has brought strength back to the market.
The real estate market in Amarillo has remained flat (literally as well as figuratively) through 2013, mostly due to a lack of job creation. The good news is that it has become more of a sellers market with resale inventory remaining under equilibrium for the last 11 months. Median values have improved to $139,700 with slow employment growth. Amarillo continues to have the same challenge that most of rural America has: population and employment stagnation. An oversupply of resale properties and little to no job growth has kept things slow for 2013 and through 2014
El Paso has maintained strength even with the defense cuts affecting Fort Bliss. Although job creation has suffered this year, the strength of the local market has helped the real estate market continue to move in an upward direction. The median sales price is up 4.9% year to date over last year to $138,600. The number of homes sold has increased 5.3%. The supply of homes on the market has decreased from 8.1 months to 7.3 months. This fast growing population has helped El Paso climb five notches on the Milken Institutes latest Best Performing Cities Index, ranking ninth out of the nation’s 200 metro areas. El Paso did not see the boom price surges as the rest of Texas, so they have seen continued appreciation in new and resales.
In Lubbock closings of new homes increased year-over-year in July, and the market seemed to be hinting at strengthening with a percentage hike more robust than June 2013. The market has been driven by campus enrollment, rather than job creation. There was a 50%+ jump in new home closings from a year earlier. Closings of new and existing homes gained in July after staying steady in June from a year earlier. The average per-unit price of newly sold homes jumped year-over-year to $247,395 in July, up 21.1% from last year. This rise is better than the 10.4% boost in June year-over-year.
Abilene has seen improvement in resales this year, and the natural gas boom has added more jobs for the area and should continue to be beneficial for the local economy. Any boom in real estate, however, is unlikely as Abilene moves back into the sort of slow paced market it has been for years. As in other Texas markets, we saw fewer sales and continued appreciation recently. New and used sales are slow and will continue through 2014.
In the last five years three Texas towns had benefited from the military realignment: San Antonio, El Paso, and Killeen. Fort Hood in Killeen is one of the largest United States military installations in the world. At the top of the market, Killeen was doing about 5,000 sales annually. It has dropped to a good pace of about 2,500 home sales with about 700 new home starts. Although sales are slower, values as in other areas of Texas have maintained and appreciated slightly, because of the lack of available real estate. Again the reduction in force caused by the defense layoffs and the near 17 billion lost from the budget impasse at the start of the year has been covered by the continued good fortune of job creation in surrounding towns.
We should continue to see 5 to 10% appreciation of most residential real estate in Texas’s major metros. While this improvement in sales and values is welcome, areas outside of the major metros and oil/gas boom areas will continue to be challenged.
Most of our state did not have the big price drops we saw in the rest of the country, so to see 10% price increases on top of properties that held value in recent years means we’re seeing even more significant growth in Texas over the next few years.
With such strong demand, the inventory of Texas homes has decreased 32.5% year-over-year, to 3.9 months of inventory. A 6-month supply of homes in a market indicates a balance of inventory and demand. The Texas inventory levels indicates strong demand for homes and a seller’s market.
Texas metros as well as many smaller towns will see price appreciation to the point that waiting to buy does not make sense. Whether this is just a couple of year’s appreciation or a longer cycle for the majority of the state is yet to be seen. However, it is safe to say that buying today is a wise investment.