By David S. Jones, Texas A&M University Real Estate Center
Texas single-family home sales should increase 6.6 percent in 2018, say researchers for the Real Estate Center at Texas A&M University. The experts’ overall 2017 housing recap, however, shows an industry struggling to meet the need for affordable housing.
While demand for Texas housing, particularly existing homes, continued strong in 2017, researchers say pronounced shortages likely will continue unless builders find ways to build homes priced less than $300,000.
“That’s a difficult task,” said Research Economist Dr. Luis Torres, “considering rising land cost and skilled-labor shortages.
“The state’s economic acceleration and employment growth bode well for housing demand. Prices should ease slightly as homebuilders stretch to build more entry-level and first move-up homes, generally priced from $150,000 to $250,000.”
Houston leads nation in permits
Texas single-family housing building permits increased 8.2 percent in 2017, but that was well below its 2006 peak. Permits in Dallas and Fort Worth increased 12.1 and 26.3 percent, respectively. Austin recorded similar permit growth at 12 percent. San Antonio permits slid in the fourth quarter but maintained a 16.3 percent annual growth.
Houston remained the national leader in single-family permits issued, despite posting more moderate growth at 3.4 percent.
Housing starts up slightly
Texas housing starts finished the year up 3 percent—slightly more than the 2.4 percent national rate.
In DFW, the building boom continued as single-family starts rose 10.8 percent, the sixth straight year of double-digit growth. San Antonio and Houston posted the strongest gains in single-family starts since 2014 at 10 and 8.2 percent, respectively.
“After spiking 29.5 percent last year, Austin maintained elevated single-family start levels, leading the state in per capita terms. Despite these supply-side shifts, builders struggled to meet single-family demand,” said Torres.
Housing tightest in North Texas
Researchers note that market imbalances were especially evident in the months of inventory. A 9 percent drop in inventory in the second half of 2017 left only 3.7 months inventory available at year’s end. Center researchers consider about six months a balanced market.
Homes priced less than $300,000 were particularly in short supply, with an inventory hitting three months.
The overall Texas monthly inventory of existing homes ticked up to 3.4 months, its first annual increase since the Center’s data series began in 2011. The new home inventory held steady around its three-year trend of five months.
North Texas has the tightest housing supply. Fort Worth maintained the lowest inventories at 1.9 and four months for existing and new homes, respectively. Dallas followed at 2.1 and 4.4 months. Austin inventories showed signs of improving, surpassing 8 percent growth for both resale (2.1 months) and new home monthly inventories (4.7 months), respectively.
In contrast, inventory levels continued to decline in San Antonio to 3.1 and 4.5 months in the existing and new home markets, respectively. The supply of resale homes was similarly constrained in Houston at 3.4 months; the new home inventory remained more balanced at more than five months.
Despite hurricane, Houston sales match 2016
Total Texas housing sales managed 4 percent annual growth, outpacing the national rate for the second straight year. Sales increased uniformly statewide, rising between 3 and 4 percent in all the major metros except Houston. Sales in Houston fell during the summer months and after the hurricane but recovered enough to match 2016’s growth rate of 2.6 percent
“In the new home market, disappointing fourth quarter sales volume drove Houston’s annual growth rate below zero for the third straight year,” said Torres. “On the other hand, positive year-end performance in DFW and San Antonio pushed their annual new home sales up 12.7 and 6.1 percent, respectively. In Austin, new home sales activity decelerated but maintained 6.1 percent annual growth.”
Rapid price increase and supply constraints shifted the sales distribution away from homes priced less than $200,000. Homes in that price range accounted for 41 percent of homes sold through Multiple Listing Services. Every other price range posted double-digit annual growth, led by homes priced between $300,000 and $400,000 at 16.3 percent.
Existing home demand hits all-time high
Texas housing demand remained robust. For the third straight year, the typical Texas home sold after 58 days on the market. Homes priced between $200,000 and $300,000 sold the fastest, averaging 52 days. Homes less than $200,000 averaged just over 60 days. Demand was softer in the top price range (homes priced more than $500,000), selling on average after 88 days, down from 118 days in 2011.
Demand for existing Texas homes reached an all-time high in 2017. Existing home days on the market remained historically low at 52 days. In Dallas and Fort Worth, the resale days on market was even lower at 32 and 34 days, respectively.
San Antonio’s average existing home sold after 50 days, nearly half the average time in 2011. In contrast, the resale markets in Austin and Houston expanded for the second straight year to 43 and 48 days, respectively.
“New homes averaged 90 days on the market. The lack of new home inventory and rising prices challenged the Austin market, holding the new homes at 99 days. Despite higher inventory levels in Houston, new home demand was also soft at 95 days. New home demand eased in San Antonio, particularly late in the year, pushing them to 86 days. New homes sold fastest in Dallas and Fort Worth, averaging 82 and 76 days on the market, respectively,” said Torres.
Austin’s $266,775 resale median price tops in Texas
The health of the Texas economy combined with housing supply constraints to elevate home prices to record levels.
The median sale price increased by more than $13,000 to an annual average of $222,106, with home values appreciating across the state. Most of the price pressure occurred in the resale market, where the statewide median jumped 6.8 percent to $211,844.
The resale median price was highest in Austin at $291,904, but North Texas posted the largest percentage growth. In Dallas ($266,775) and Fort Worth ($210,100), the median resale price rose 9.3 and 11.9 percent, respectively, as single-family demand boomed.
Price increase was more modest in Houston and San Antonio, but they also recorded annual records with a median resale price of $216,467 and $199,583, respectively.
Read the Real Estate Center’ 2017 housing recap and 2018 projections in the latest edition of Texas Housing Insight.
The Explosive Behavior Map shows a misalignment in North Texas home prices relative to their fundamental-based normative values. This behavior stretches south into Waco and College Station-Bryan. Recent price movements in the remaining major metros, as well as in Midland, also warrant careful attention.
Funded primarily by Texas real estate licensee fees, the Real Estate Center was created by the state legislature to meet the needs of many audiences, including the real estate industry, instructors, researchers and the general public. The Center is part of Mays Business School at Texas A&M University.
Media contact Senior Editor David S. Jones at 979-845-2039 or email@example.com. Or Associate Editor Bryan Pope, 979-845-2088 or firstname.lastname@example.org.