The DFW Housing Juggernaut Continues

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Dallas-Fort Worth is, once again, breaking a few records when it comes to home sales. According to a recent article in the Dallas Morning News[1], home sales in August 2016 soared, after dipping in July. Furthermore, housing prices increased, while inventory continued low. The article then went on to say that, according to James Gaines, who is chief economist with the Real Estate Center at Texas A&M University, 2016 could end up a record year for housing transactions.

The inevitable question, of course, is whether this state of affairs can continue.

Supply and Demand

It isn’t exactly news that houses throughout the Metroplex are selling at an incredibly rapid clip. There are plenty of anecdotal stories out there about homeowners putting their houses on the market, and receiving multiple offers within hours of the listing going live.

Mike Bowman with Century 21 Mike Bowman Realtors, interviewed for the above-mentioned Dallas Morning News article, told of a condo listing that attracted 20 offers within 48 hours of coming to market.

There isn’t enough product to go around for the simple reason that supply continues to lag behind demand. The monthly supply in DFW is still falling – at last count, inventory stood at 2.9 months, a 6.2% drop from the year before[2]. A housing market in equilibrium has approximately 4-6 months worth of inventory.

Will the supply start to come back? This is difficult to say. Single-housing permitting, which had been on an upward trajectory, dropped over the last few months. We’ve written about the reasons for the drop in previous blogs; these range from stringent zoning requirements to lack of available land.

It also pays to keep in mind that permitting only means that the developer has permission to build on a particular site. Weather, costs and labor shortages all combine to create serious lag time between permitting approval and actual groundbreaking, which doesn’t help the supply situation.

Then There Are Jobs

Needless to say, one of the huge driver of housing is jobs. And, North Texas continues creating them. Texas A&M economist Gaines indicated that the employment numbers are still strong. And they are. But what’s interesting to note is that job growth actually declined from July 2015-July 2016. And while the Metroplex added 110,000 jobs year over year, that total declined, as well.

So . . . Will The Juggernaut Continue?

One might take a look at the job growth rate decline and think housing demand might slack off. But job creation falloff doesn’t mean much, especially with housing supply still scarce. Additionally, with corporations relocating national and regional headquarters throughout North Texas, additional jobs will be generated. New jobs, combined with still-scarce supply, likely will mean continued housing scarcity, and a continued increase in housing prices.

 

[1] Steve Brown (Sept. 12, 2016).” After July dip, North Texas home sales roared back in August.” Dallas Morning News. Retrieved from http://www.dallasnews.com/business/residential-real-estate/20160908-after-july-dip-north-texas-home-sales-roared-back-in-august.ece

[2] Monthly Indicators, NTREIS (July, 2016). Retrieved from http://www.ntreis.net/documents/NTREISSTATS_188201615045.pdf.