By Mark Sprague, State Director of Information Capital at Independence Title
Is the local housing market slowing?
Locally, regionally, and nationally, that seems to be a common question / theme. Locally, I can tell you that most of the Texas metros have been on a sustained, positive run, with Austin’s being the longest at over 9 years (6 years being the longest previously).
Real estate values and sales have done well in Texas over the last decade, with most cities achieving their highest values ever. So, why the pessimism? Part of it is so many were unprepared for the 2005 financial disaster and recession as well as the 2009 slowdown. It would be nice to be able to predict when the next one is. That said, so many missed the signs of overdevelopment in the last downturns. So why the questions? Our housing and real estate markets in the Texas metros (except Houston) have been so strong in all channels this year that if a property doesn’t sell right away, it may feel that the market has turned sour.
Despite the mostly good trends, worries are common as to whether or not the housing market has peaked and is ready for a slide. How steep and how fast? After all, existing home sales have fallen every month since June, save one. Additionally, housing starts, traditionally a good leading indicator of potential economic recession, tumbled in June from the prior month. Moreover, many Americans have painful, lingering memories of the home price crash, rising foreclosures, and 10 million net job losses from the housing market bust a decade ago (where over 55% of all foreclosures happened in the sand states, not Texas). Naturally, they want to know if there is even a remote possibility of a housing downturn.
First, what is happening in the market presently appears to be more of a seasonal slowing, prior to school starting. Second, two months is NOT a trend.
To see if the market is slowing, what are the signs? You need to look for lack of GDP growth, lack of job growth, easy mortgage financing (requiring little to no down and easy qualifying), new and resale inventory increasing, other real estate channels showing signs of overbuilding or slowing of values, etc. There are no indications of any of this happening. Quite the opposite, in fact.
The lack of supply and the accompanying real estate and home values rising quickly seem to be the main sources of most market headaches (that, and sellers getting ahead of the market). However, the supply shortage is a much better problem to have, compared to a demand shortage. The current problems do not equate to any meaningful price decline nor an impending foreclosure crisis. Rather, we see all the signs for continued solid home sales growth and commercial growth
In short, it is possible to deduce conclusions incorrectly, or be hypersensitive to small matters. Or, as I said earlier, two months doesn’t make a trend. So what should you do? Have a little more of whatever relaxes you: a couple of beers, a couple of glasses of wine, or in my case, a couple of bowls of Blue Bell. If you’re still concerned, come talk to me in six months if the condition persists.