2020: Expecting Another Banner Year for the DFW Market

Experts are Expecting Another Banner Year for the DFW Market

Featured image: Ryan Michalesko / Staff Photographer for DMN

The Texas housing market had a “banner year” in 2019, and looks to be heading for another one, a top economist said at a recent seminar at the Federal Reserve Bank of Dallas.

Nine years after the housing market’s downturn, housing sales in Texas have returned to their pre-recession peak, said Jim Gaines, chief economist at the Real Estate Center at Texas A&M University.

“That prior peak was back right before the Great Recession,” Gaines said. “It was very artificial. It’s pretty easy to have a lot of home sales when anybody who could walk into a bank and fog a mirror got 110 percent financing.”

The Real Estate Center is predicting an increase in home sales in Texas of about 6 percent in 2020, which would beat the 4 percent increase in 2019, Gaines said. Home prices statewide are predicted to rise 5 percent to 6 percent in 2020, after increasing about 3 percent in 2019.

“We’ve had an outstanding decade, and the market is still really strong,” he said.

Population projections for the next 10 years call for the addition of 5.2 million Texans, including 1.6 million in Dallas-Fort Worth, 1.7 million in the Houston metro area, 622,000 in Austin and 563,000 in San Antonio, and the population and job growth are driving the housing market, Gaines said.

Last year, job growth weakened slightly in Texas, from 2.4 to 2.2 percent, as the energy industry declined and labor market constraints continued to suppress job growth, Gaines said. This year, less trade uncertainty is a positive, although the energy sector will remain a drag, he said. Election uncertainty may restrain business investment, he added.

Texas unemployment is at 3.5 percent, a tick lower than the 3.6 percent national rate, Keith Phillips of the Federal Reserve Bank of Dallas said at the seminar. The low national rate is making it harder for Texas companies to lure workers from other states, Phillips said.

“It’s a great time to be a worker,” Phillips said. “Not so much to be an employer.”

Article source: Dallas Business Journals

How the Housing Market Benefits with Uncertainty in the World

How the Housing Market Benefits with Uncertainty in the World

It’s hard to listen to today’s news without hearing about the uncertainty surrounding global markets, the spread of the coronavirus, and tensions in the Middle East, just to name a few. These concerns have caused some to question their investment plans going forward. As an example, in Vanguard’s Global Outlook for 2020, the fund explains,

“Slowing global growth and elevated uncertainty create a fragile backdrop for markets in 2020 and beyond.”

Is there a silver lining to this cloud of doubt?

Some worry this could cause concern for the U.S. housing market. The uncertainty, however, may actually mean good news for real estate.

Mark Fleming, Chief Economist at First American, discussed the situation in a recent report,

“Global events and uncertainty…impact the U.S. economy, and more specifically, the U.S. housing market…U.S. bonds, backed by the full faith and credit of the U.S. government, are widely considered the safest investments in the world. When global investors sense increased uncertainty, there is a ‘flight to safety’ in U.S. Treasury bonds, which causes their price to go up, and their yield to go down.”

Last week, in a HousingWire article, Kathleen Howley reaffirmed Fleming’s point,

“The death toll from the coronavirus already has passed Severe Acute Respiratory Syndrome, or SARS, that bruised the world’s economy in 2003…That’s making investors around the world anxious, and when they get anxious, they tend to sell off stocks and seek the safe haven of U.S. bonds. An increase in competition for bonds means investors, including the people who buy mortgage-backed bonds, have to take lower yields. That translates into lower mortgage rates.”

The yield from treasury bonds is the rate investors receive when they purchase the bond. Historically, when the treasury rate moves up or down, the 30-year mortgage rate follows. Here’s a powerful graph showing the relationship between the two over the last 48 years:

How might concerns about global challenges impact the housing market in 2020? Fleming explains,

“Even a small change in the 10-year Treasury due to increased uncertainty, let’s say a slight drop to 1.6 percent, would imply a 30-year, fixed mortgage rate as low as 3.3 percent. Assuming no change in household income, that would mean a house-buying power gain of $21,000, a five percent increase.”

Bottom Line

For a multitude of reasons, 2020 could be a challenging year. It seems, however, real estate will do just fine. As Fleming concluded in his report:

“Amid uncertainty, the house-buying power of U.S. consumers can benefit significantly.”

How to Avoid a Gender Gap When Investing in the Housing Market

How to Avoid a Gender Gap When Investing in the Housing Market

When buying a home, we all want to feel like we’re making the right decision, paying a fair price, and making the best investment of our lives. According to a recent gender-based study, men and women can unknowingly walk away with very different financial outcomes when the deal closes. Thankfully, if you follow some simple ways to arm yourself with the information you need to prepare in advance, you’re more likely to feel like you’ve won when the keys to your new house are in your pocket.

Kelly Shue and Paul Goldsmith-Pinkham of the Yale School of Management showed in their recent study The Gender Gap in Housing Returns, when single women invest in the housing market, they’re generally losing out compared to their male counterparts. The report explains,

“We find that single men earn one percentage point higher unlevered returns per year on housing investment relative to single women…The gender gap grows significantly larger after adjusting for mortgage borrowing: men earn 6 percentage points higher levered returns per year relative to women. Data on repeat sales reveal that women buy the same property for approximately 2% more and sell for 2% less.”

On National Public Radio (NPR), Kelly Shue elaborated by saying,

“Women are losing about $1,370 per year relative to men because they tend to buy the same house at a higher price and sell for a lower price.”

In the grand scheme of things, $1,370 a year could be as much as an entire month’s mortgage payment for many households in the United States.

How can you make sure this doesn’t happen to you?

The good news is, it doesn’t have to be this way for anyone, regardless of gender. Here are a few tips on how to make sure you’re prepped and ready to enter the housing market with your best foot forward.

1. Work with a Trusted Real Estate Professional

You need someone on your side who’s going to have your best interest in mind and support your unique homeownership goals. Hiring an agent who has a finger on the pulse of the market will make your buying experience an educated one. You need someone who’s going to tell you the truth, not just what they think you want to hear.

2. Understand the Homebuying Process

Know the key homebuying steps in advance, so you have the best context for how the process works from pre-approval to budgeting, inspections, and more. Have a price range in mind that you can realistically afford, too, so you’re ready to make an offer that positions you for success. Ask your agent questions along the way, and partner together so you feel confident and prepared at every turn.

3. Research the Current Market

Make sure you know the current trends and insights of the housing market as well. When you find a home that’s the perfect fit, determine what other homes are selling for in the neighborhood. These numbers can vary over time based on market conditions such as inventory, appreciation, and many other economic factors. A great agent will provide you with this information and guide you through every step from start to finish.

Bottom Line

When you have a trusted advisor on your side and you’re confident you know exactly what’s happening in the market, you’ll be in a great position to negotiate effectively. Let’s get together today to make sure you’re ready to win the homebuying deal.

First-Time Buyers Are Searching for Existing Homes This Year

First-Time Buyers Are Searching for Existing Homes This Year

In the latest Housing Trends Report, the National Association of Home Builders (NAHB) measured the share of adults planning to buy a home over the next 12 months. The report indicates the percentage of all buyers that will be first-time buyers looking to purchase a home grew from 58% in Q4 2018 to 63% in Q4 2019.

The results revealed,

“Millennials are the most likely generation to be making plans to purchase a home within a year (19%), followed by Gen Z (13%) and Gen X (12%)…Prospective buyers in the youngest two generations are primarily first-time buyers:  88% of Gen Z buyers and 78% of Millennial buyers are reaching out to homeownership for the first time in their lives.”

With a high demand from first-time homebuyers and a shortage of inventory in the current market, selling your existing home this year might be your best move. Why? Because when homebuyers begin their search, they’re not all looking for new construction. Many are eager to find a little charm and character in a place to call home – possibly yours.

In fact, according to the same study, there is a significant demand for existing homes:

“In terms of the type of home these prospective home buyers are interested in, 40% are looking to buy an existing home and 19% a newly-built home. The remaining 41% would buy either a new or existing home.”

With showing activity up among buyers and more new construction coming to market, as a homeowner, you have the opportunity to sell your existing house now and move up into a new one, or downsize into a home that better fits your current and ever-changing needs.

Bottom Line

Not all buyers are looking for a newly built house. If you’re ready to take advantage of low mortgage rates and a high demand for your existing home, let’s get together to determine how we will market the charming details of your current house to potential buyers.

The #1 Reason It Is Difficult to Find Your Dream Home

The #1 Reason It Is Difficult to Find Your Dream Home

The headlines in real estate today all revolve around one major point: there is a shortage of homes available for sale. Price appreciation is accelerating again because there is a shortage of homes available for sale. First-time buyers are taking longer to purchase a home because there is a shortage of homes available for sale in the lower price points. Boomers are staying in their current homes longer because there is a shortage of homes available for sale to which they would move. In certain markets, affordability is becoming more challenging because there is a shortage of homes available for sale.

What’s the major reason for this lack of housing inventory?

The issue was examined in a recent article by the National Home Builders Association (NAHB). In the article, Robert Dietz, Chief Economist for NAHB, explained:

“Home building in the 2010s was a story of the Long Recovery. After the Great Recession, the number of home builders declined significantly, and housing production was unable to meet buyer demand…Years of population and household formation growth, combined with relatively reduced levels of home building, have left the market with a critical supply shortage.”

Here are the single-family home construction starts by decade for the last six decades:

The #1 Reason It Is Difficult to Find Your Dream Home

Obviously, there’s a current shortage of homes for sale because not enough houses were built over the last ten years. To add to the challenge, the U.S. population expanded by more than 20 million people during the 2010s.

Below is a graph showing the number of starts per every million in population. The last decade shows that starts per population were less than half the average of the previous five decades.

The #1 Reason It Is Difficult to Find Your Dream Home

There’s good news coming!

The NAHB article explains that there is light at the end of the tunnel.

How confident home builders are in the housing market is a great indicator of how much building is about to get started. The NAHB/Wells Fargo Housing Market Index (HMI) gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair,” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average,” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as “good” than “poor.”

Here are the HMI readings going back to 2008:

The #1 Reason It Is Difficult to Find Your Dream Home

The 2019 confidence reading of 76 was the highest since 1999. The January 2020 index came in one point lower at 75. These readings indicate we should see an increase in new residential construction in 2020. Just last week, NAHB Chairman Greg Ugalde stated:

“Low interest rates and a healthy labor market combined with a need for additional inventory are setting the stage for further home building gains in 2020.”

The increase in housing starts has already begun. According to the January report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, single‐family housing starts were up 11.2% and attained the highest level in thirteen years.

Bottom Line

Whether you’re a first-time buyer or a seller thinking of moving up or down, 2020 could be your year with more new construction homes coming to market.

Related article:  The Biggest Issue Facing Housing This Year

2020 Luxury Market Forecast

2020 Luxury Market Forecast

By the end of last year, many homeowners found themselves with more equity than they realized, and at the same time their wages were increasing. When those two factors unite, it can spark homeowners to think about making a move to a larger or more expensive home in the luxury space. That said, now is a perfect opportunity to take a look at the forecast for the 2020 luxury market.

Three Things to Think About in the 2020 Luxury Housing Market

1. Prices

The U.S. economy is strong today, with buying opportunities throughout the luxury end of the market. Thomas Veraguth, Strategist at UBS Global Wealth Management, says in Barrons.com,

“There’s a good link between luxury real estate prices and [economic] growth.”

Available inventory is a key element that can impact home prices. At the upper range, the inventory is greater in comparison to the entry-level market, making moving up to a luxury home a growing reality for many buyers right now.

2. Activity in the Market

With more buying opportunities at the higher end, we should start to see an increase in activity. The same article states,

“Affluent homebuyers will start to come out of the woodwork as they find rising luxury rents less appealing and sellers get even more negotiable on price.”

Buyers looking in the luxury market are taking the opportunity to negotiate on price in a segment where there are more choices, too. According to the Luxury Market Report, homes sold for an average of 96.94% of the list price in December.

Buyers are also getting more for their money with greater purchasing power due to the current low interest rates.

3. Buyers Are Coming Back

Keep in mind, buyers are often sellers too, especially those looking to move up. Homeowners with an entry-level home can take advantage of the inventory shortage at the lower end of the market, thus driving higher sales prices for their current homes. Combined with growing equity in the homes they’re listing, it’s a great time for those who are ready to make a luxury move.

The extra equity and greater purchasing power are bringing many buyers back to the market. The same article mentioned that,

“We’ve already seen buyers who’ve been on the sidelines for two years tread back into the market.”

Bottom Line

If you’re considering entering the luxury market, 2020 is shaping up to be a great year for those who are ready to make that move. Let’s get together to set your real estate plan for the year.

The 2020 Real Estate Projections That May Surprise You

This will be an interesting year for residential real estate. With a presidential election taking place this fall and talk of a possible recession occurring before the end of the year, predicting what will happen in the 2020 U.S. housing market can be challenging. As a result, taking a look at the combined projections from the most trusted entities in the industry when it comes to mortgage rateshome sales, and home prices is incredibly valuable – and they may surprise you.

Mortgage Rates

Projections from the experts at the National Association of Realtors (NAR), the Mortgage Bankers Association (MBA), Fannie Mae, and Freddie Mac all forecast mortgage rates remaining stable throughout 2020:

Since rates have remained under 5% for the last decade, we may not fully realize the opportunity we have right now.

Here are the average mortgage interest rates over the last several decades:

  • 1970s: 8.86%
  • 1980s: 12.70%
  • 1990s: 8.12%
  • 2000s: 6.29%

Home Sales

Three of the four expert groups noted above also predict an increase in home sales in 2020, and the fourth sees the transaction number remaining stable:

With mortgage rates remaining near all-time lows, demand should not be a challenge. The lack of available inventory, however, may moderate the increase in sales.

Home Prices

Below are the projections from six different expert entities that look closely at home values: CoreLogicFannie Mae, Ivy Zelman’s “Z Report”, the National Association of Realtors (NAR), Freddie Mac, and the Mortgage Bankers Association (MBA).

Each group has home values continuing to improve through 2020, with four of them seeing price appreciation increasing at a greater pace than it did in 2019.

Is a Recession Possible?

In early 2019, a large percentage of economists began predicting a recession may occur in 2020. In addition, a recent survey of potential home purchasers showed that over 50% agreed it would occur this year. The economy, however, remained strong in the fourth quarter, and that has caused many to rethink the possibility.

For example, Goldman Sachs, in their 2020 U.S. Outlook, explained:

“Markets sounded the recession alarm this year, and the average forecaster now sees a 33% chance of recession over the next year. In contrast, our new recession model suggests just a 20% probability. Despite the record age of the expansion, the usual late-cycle problems—inflationary overheating and financial imbalances—do not look threatening.”

Bottom Line

Mortgage rates are projected to remain under 4%, causing sales to increase in 2020. With growing demand and a limited supply of inventory, prices will continue to appreciate, while the threat of an impending recession seems to be softening. It looks like 2020 may be a solid year for the real estate market.

The Biggest Issue Facing Housing Next Year

The Biggest Issue Facing Housing Next Year

This coming year the housing market will be defined by 3 things- inventory, interest rates, and appreciation. But the biggest issue the housing market will face in 2020 is an inventory shortage. There aren’t enough homes on the market for buyers, especially on the lower end of the market. This is a topic that has come up frequently within the past several months.

Based on what is forecasted, we know that interest rates are projected to remain low and that appreciation is expected to continue as we move into 2020. Additionally, the upcoming election will provoke many unique perspectives on the health of the US housing market. The challenge will be understanding what is actually happening and how you can best position yourself if you are thinking of buying or selling your home.

Here are several perspectives to consider on the inventory issue facing housing next year:

According to realtor.com:

Despite increases in new construction, next year will once again fail to bring a solution to the inventory shortage that has plagued the housing market since 2015. Inventory could reach a historic low as a steady flow of demand, especially for entry level homes, and declining seller sentiment combine to keep a lid on sales transactions.

Diana Olick at CNBC:

Inventory has been falling annually for five straight months, after it recovered slightly toward the end of last year, due to a spike in mortgage rates. Rates began falling again by spring of this year. Homebuilders have been increasing production slowly, but it’s not enough to meet the increasingly strong demand.

George Ratiu, Senior Economist with realtor.com

As millennials — the largest cohort of buyers in U.S. history — embrace homeownership and take advantage of this year’s unexpectedly low mortgage rates, demand is outstripping supply, causing inventory to vanish. The housing shortage is felt acutely at the entry-level of the market, where most millennials are looking to break into the market for their first home.

Bottom Line

The most important thing you can do is understand what is happening in your local market. You may not be able to avoid some of the issues brought on by low inventory, but you can be educated and prepared. Let’s connect and discuss the options that make the most sense for you and your family.

Holiday Gifts Are Not the Only Hot Things Right Now

Holiday Gifts Are Not the Only Hot Things Right Now

Black Friday is behind us and holiday gifts are flying off the shelves in stores and online. Unlike last year, however, there’s another type of buyer that is very active this winter – the homebuyer.

Each month, ShowingTime releases their Showing Index, which tracks the average number of appointments received on active U.S. house listings. The latest index revealed:

“Traffic was more active once again compared to 2018, as the nation saw its third straight month of higher year-over-year showing activity…The 5.5% increase in showings nationwide was the largest jump in activity during the now three-month streak of year-over-year increases vs. 2018.”

The same report indicates showings increased in every region of the country:

  • The South increased by 10.8%
  • The West increased by 8.6%
  • The Northeast increased by 3.8%
  • The Midwest increased by 1.5%

Why is the traffic more active?

One of the main reasons buyer traffic has increased year-over-year is that mortgage rates have fallen dramatically. According to Freddie Mac, the average mortgage rate last December was 4.64%. Today, the rate is almost a full percentage point lower!

Bottom Line

There are first-time, move-up, and move-down buyers actively looking for the home of their dreams this winter. If you’re thinking of selling your house in 2020, you don’t need to wait until the spring to do it. Your potential buyer may be searching for a home in your neighborhood right now.

What is the Best Investment for Americans?

What is the Best Investment for Americans?

Some are reporting that there is trepidation regarding the real estate market in the United States. Apparently, the American people are quite comfortable.

Porch.com, a major network helping homeowners with their renovation projects, recently conducted a survey which asked Americans:

“What do you believe is the safest investment over the next 10 years?”

U.S. housing came in at number one, beating out other investments such as gold, stocks, bonds, and savings.

Here is a graph showing the top five investments Americans selected:

The findings of the Porch.com survey also coincide with two previous surveys done earlier this year:

The Federal Reserve Bank’s 2019 Consumer Expectations Housing Survey reported that 65% of Americans believe homeownership is a good financial investment, and that the percentage has increased in each of the last four years.

The Gallup survey showed that Americans have picked real estate as the “best” investment for six straight years.

Bottom Line

Based on all three surveys done this year, we can see that Americans still believe in homeownership as a great investment, and that feeling continues to grow.