TEXAS' HOME PRICES CONTINUE TO IMPROVE

COLLEGE STATION (Real Estate Center) – When it comes to home price appreciation, Texas is standing strong, said Real Estate Center Chief Economist Dr. Mark Dotzour.

Dotzour was responding to the Federal Housing Finance Agency's (FHFA) second quarter 2010 home price index, which ranked Texas third in the nation in home price appreciation for the year ending June 30, 2010.

FHFA reported a 1.43 percent increase in Texas home prices during that period versus 1.6 percent nationally.

"The strong price trends in Texas are because we didn't have a price bubble in the previous decade," Dotzour said. "For several years, Texans were asking why their homes were increasing only 3 to 5 percent per year, when Arizona was going up 30 percent."

In addition, Dotzour said the credit crisis virtually ended new home construction lending all over the country, abruptly shutting off the pipeline of new supply in 2008 and reducing any chance of heavy overbuilding in the single-family market.

Research Economist Dr. Jim Gaines noted that Texas was one of only ten states that reported increases in home prices during the past year, and it was one of only five states where prices had more than a 15 percent increase over the past five years.

Prices in Texas increased by 15.88 percent since 2005, landing it fourth on FHFA's ranking of states based on five-year price appreciation.

"What that means is that Texas home values fared better than all of the high-appreciation states over the five-year period that included the recession," Gaines said.

Among Metropolitan Statistical Areas (MSAs), Amarillo came out smelling like a yellow rose. It was the only Texas MSA to land on FHFA's list of 20 MSAs with the highest rates of home price appreciation.

That’s great, but who wants to live in Amarillo?

Amarillo ranked 16th with a one-year price increase of 0.42 percent.

HOUSTON (Metrostudy, Houston Business Journal) – Houston’s economy is showing signs of recovery, according to a recent Metrostudy report.

The annual 2009 Census Household survey showed that the Houston-Sugar Land-Baytown area added over 140,000 to its total population, a 2.5 percent increase over one year.

“The continued arrival of people in Texas fuels demand for housing markets,” said David Jarvis, director of Metrostudy’s Houston division. “This, coupled with a more optimistic employment outlook, signals continued stability in the Houston housing market.”

For the 12 months ending in June 2010, the Houston region lost 17,100 jobs. As recently as December, the 12-month loss exceeded 100,000 jobs. By year’s end, year-over-year comparisons are expected to show moderate gains.

Houston ranked tenth among major U.S. metros for high-salary jobs, according to employment website TheLadders.com.

“We’re seeing hiring in the energy (oil and gas) sector,” said TheLadders.com Editor-in-Chief Matthew Rothenberg. “Considering the makeup of the local economy, it is not a surprise that there are a large number of engineering and consulting positions opening in Houston as well."

The Houston housing market has continued to show stability through 2nd quarter 2010. Home starts for the quarter were at 5,942, a more than 12 percent increase over the first quarter. And home closings have outpaced new supply, indicating a higher housing demand and reducing total inventories of homes. At current absorption rates, the level of housing supply stands at 6.1 months.

However, the New Home Buyer Tax Credit should be taken into consideration (see "Weak Home Sales Numbers Not Whole Story" in today's RECON).

WEAK HOME SALES NUMBERS NOT WHOLE STORY

COLLEGE STATION (Real Estate Center) – Home sales statistics are likely to paint a picture of a weakening market through the end of 2010 and the first half of 2011. While it’s tempting to attribute the bleak numbers to a deteriorating housing market, an economist with the Real Estate Center at Texas A&M University said that doesn’t tell the whole story.

“The year-over-year decline in existing home sales will be the result of comparing months when there was no tax credit with those from a year earlier, when the tax credit was artificially increasing sales,” said Dr. Mark Dotzour, the Center’s chief economist.

The $8,000 tax credit for first-time homebuyers went into effect in January 2009 and was planned to expire in November 2009. Home sales gradually started to increase after the tax credit was announced, after bottoming out in January at an annual rate just above 4.5 million sales.

Existing home sales gradually increased in 2009 as buyers and real estate agents became more familiar with the program. Sales topped an annual rate of five million in July 2009 for the first time since September 2008.

As the tax credit deadline approached, home sales spiked in September, October and November 2009. November 2009 was the peak at an annual rate of almost 6.5 million.

The tax credit was extended late in 2009 to include sales with contracts written until April 30, 2010, and closed by June 30 (extended to September 30). Initial homebuyer response to this extension was tepid, but sales picked up substantially in March, April and May 2010, when sales were up 18 percent, 28 percent and 18 percent, respectively, over the same months in 2009.

Then the process reversed itself. Pending home sales fell dramatically in May 2010, the month after the tax credits expired. This was followed by a significant drop in home sales in June and July. In Texas, July 2010 sales were down approximately 25 percent from July 2009.

Dotzour said August figures may not be much better since many buyers purchased homes before the tax incentive expired.

“When you ‘bring forward’ sales through tax incentives, sales will be lower after the tax credit ends,” he said.

Unless Congress creates a new tax credit this fall, Dotzour said monthly sales for 2010 will likely exhibit significant variance from 2009, and a true reading of housing market conditions may not be possible until June or July 2011.

The average price of single-family homes in July was $224,764, up 2.7 percent compared to one year earlier. That is the highest pricing level since June 2008. At $160,880, the median sales price for single-family homes slid 0.7 percent versus July 2009. That is the highest price since July 2009. The national single-family median price reported by NAR is $184,200, illustrating the continued higher value and lower cost of living that consumers enjoy in the Houston market.

HAR also breaks out the sales performance of existing single-family homes throughout the Houston market. In July 2010, existing home sales totaled 3,626, a 24.6 percent decline from July 2009. The average sales price edged up 1.4 percent to $207,644 compared to last year while the median sales price of $150,000 declined 3.2 percent from its July 2009 level.

What home price classes are the hottest selling in Houston through May YTD? 

The following table indicates by price class the top ten hottest selling price ranges in Houston in 2010:

As you can see from the table above, Houston’s hottest selling home prices range from $80,000-$399,999.  What is also interesting to note is that the months of inventory, on even the hottest selling price classes has risen slightly from last month. This is once more an indication that sellers should stay tuned to activity in their market area, and consider price adjustments to stay competitive.

Houston – Best Homebuying Opportunity is Now.

Who would have known?  Immediately following the buying flurry before the April 30^th deadline, interest rates dropped dramatically in May, giving home buyers that were too late for the tax credit thousands of saved dollars over the life of a loan and dwarfing the tax credit incentive.  The Houston real estate market now has the best home buying opportunity not only due to lower interest rates but also, as you can see in the table below, more homes available from which to choose.  The 17% higher inventory is also a motivator for sellers’ to become more competitive in their asking price. 

Many economists agree that current positive economic indicators may cause the Fed to raise interest rates in the not too distant future.  Clearly, there is a window of opportunity in the market that savvy home buyers will capitalize on before it is too late.

Prudential Gary Greene, Realtors® #1 in Houston in

1. Total number of listings – 47.5% more listings than the next highest broker!
2. Total number of listings sold in Houston
3. Total number of buyer representation sides and
4. Total number of homes sold year-to-date over any other broker.

2010 Good News on the Houston Homefront

With less than one month to go before the 2010 Homebuyers’ Tax Credit expires on April 30* –there are encouraging economic signs on the Houston home front. Buying a home would be a good investment. Why?

1.       Houston population growth in 2009 and

2.     Unemployment rates are declining and

3.     Home sales in Houston [see chart below] show value retention and ample supply.

Houston Population Growth:

Houston and Dallas–Fort Worth received the largest influx of residents in the country in 2009, according to the U.S. Census Bureau.

Houston had the second-highest population growth last year, with 140,784 people pouring into the metro area, a 2.5 percent increase that pushed the region’s total population to 5.86 million.  Dallas – Fort Worth [two large metros combined] have 6.45 million people as of July 1, 2009 and added 146,530 people. It marked a 2.3 percent increase from 2008.

Houston and Dallas-Fort Worth grew in population in 2009 more than any other region in the nation. Population growth plays a large factor in homes sales and home value retention.

Houston has the sixth-highest population in the United States, according to the U.S. Census Bureau.

Houston Employment and Unemployment:

The Houston-Sugar Land-Baytown Metropolitan Statistical Area gained 10,300 jobs from January to February, according to estimates released today by the Texas Workforce Commission. That’s the largest one-month gain since November ’08.

Unemployment receded from 8.8 percent in January to 8.5 percent in February—not a statistically significant movement, but encouraging nonetheless. Unemployment here remained well below the 10.4 percent national rate. (Rates are not seasonally adjusted.)

The number of initial unemployment insurance claims in the 13-county Gulf Coast Workforce Development Area in February was 17 percent less than in February ’09, Workforce Solutions reports. While we’ve seen month-to-month ups and downs, the moving three-month average for initial claims has declined every month since May ’09, and now stands 19 percent below that peak—definitely a movement in the right direction.

Employment is the single most important factor to rising home sales and we see Houston getter stronger as we move through 2010.

Houston compared to other Texas Cities:

Houston experienced more home sales than any other city in Texas including Dallas-Fort Worth combined, Houston experienced 370 more sales than Dallas-Fort Worth. The chart below gives a year-over-year comparison of Texas cities. Houston has a balanced supply of homes on the market, value retention and sales have been trending toward positive territory since February 2009.

Here is how select Texas cities fared in February (data current as of March 25, 2010):

 Summary:

These encouraging economic indicators, along with the 2010 Homebuyers Tax Credit and favorable interest rates make the next 30 days a prime time to invest in a home in the Houston Metropolitan area. 
*2010 Homebuyers Tax Credit – home buyers must have a binding written contract in place by April 30, 2010 with a closing date no later than June 30, 2010.- go to http://www.realtor.org/home_buyers_and_sellers/extended_home_buyer_tax_credit_how_to for details], 

First-quarter real estate sales indicate Houston has pulled out of a negative sales position and displays the beginning of very positive trends. The latest market metrics correlate very closely with news from the Texas Workforce Commission that Houston-area employers added 10,300 jobs from January to February, an increase of 2,000 real job gains than is atypical for the season.  Employment is the single largest driver of home sales.

Last year in February 2009, Houston experienced a 24% decline in year-to-date sales over 2008.  Every month following February, sales declines began to decline and the year ended with 7% fewer home sales than 2008. 

1. First Quarter 2010 sales are equal to those found in First Quarter 2009 however,
2. Dollar volume sales are up by 13% for a total of $2,183,412,127. 
3. The average sales price is up 13% at $204,191 and the median sales price is up 8% at $149,900. 
4. The average price per square foot is up 10% and now stands at $87. 
5. Homes on the market are up by 3% with 28,793 listings, certainly not a supply that would impact home values.  The best news of all is that
6. Days-on-Market, the average number of days it takes to sell a Houston home is down by 16%. Days-on-Market are 81.

Previously, we mentioned the rise in upscale homes as a rationale for a rise in average and median price in the overall Houston market during the First Quarter.  These were attributable to only 23% of all sales in Houston.

What home price classes were the hottest selling in Houston through First Quarter?  

The following table indicates by price class the hottest selling price ranges in Houston in 2010:

 As you can see from the Top Ten Selling Price Classes in Houston for 2010, hot selling prices ranged from $80,000-$399,000. These price classes are expected to be hot in Houston at least through June 30^th because of the time-contingent 2010 IRS Home Buyer Tax Credit.  Setting aside this temporary demand incentive, these price classes are also more aligned with historical price class demand in Houston.

These attributes will spark demand through June, but what about the rest of the year?  While no one has an accurate crystal ball, Dr. Barton Smith of the UH Center for Public Policy remarked,” A year ago, I thought we’d be dragging behind the parade but we’re just not doing that.”

Houston Hotness Index Report for March 2010

A total of 21 Katy ISD schools have been recognized by the National Center for Educational Achievement (NCEA) for the 2010 Just for the Kids Campaign for Higher Performing Schools in Texas.

The Just for the Kids list is compiled annually by the NCEA. The analysis included student test results from spring 2007, 2008, and 2009.

The list is based on two factors: academic growth and college and career readiness. Schools recognized for growth achieved better improvement rates for their students compared with other schools with similar demographics.

Schools recognized for college and career readiness are the top 5 percent of schools in the state, based on the percentage of students scoring at or above NCEA’s career readiness targets.

Katy ISD Higher Performing Schools include:

• Taylor, Seven Lakes and Cinco Ranch high schools;
• Beck, Beckendorff and McMeans junior high schools; and
• Alexander, Rylander, Kilpatrick, Nottingham Country, McRoberts, Mayde Creek, Katy, Exley, Hayes, Schmalz, Williams, Pattison, Griffin, Fielder and Winborn elementary schools.