Current surge in home buying and price hikes will continue into next year, top Texas economist predicts.
North Texas home sales and prices have surged to record levels in the last three months — one bright spot during the pandemic.
The boom in Dallas-Fort Worth’s housing market is likely to continue through 2021 as the effects of COVID-19 slowly subside, one of the state’s top real estate economists says.
“I think home prices in Dallas are going to be markedly up this year and probably through next year,” said Dr. James Gaines, chief economist with the Real Estate Center at Texas A&M University. “Dallas is still a robust market.
“Dallas is going to continue to do well — probably 2021 is looking similar to this year,” Gaines said in a Friday online presentation.
North Texas home sales during the first nine months of 2020 are running 6% ahead of last year’s record. And median sales prices in September were up 10% to near an all-time high of more than $290,000.
Low mortgage rates and continued moves to the D-FW area are fueling the spike in housing activity.
“Employment is still high,” Gaines said. “Population growth is still coming there. The demand for housing is still being created.
“As the economy opens up more and more and we go back to ‘normal,’ I think you are going to see that market continue on.”
Gaines said the future performance of the Texas economy and housing market will still be affected by COVID-19. “Everything hinges on how the pandemic and the virus are handled,” he said. “If we get the virus under control, I think the market is going to continue to go on.”
The final months of the year are traditionally slower periods for housing, but not in 2020.
Gaines said the current market is being fueled by housing demand that paused during last spring’s pandemic lockdowns as well as future buys from next year.
“The mortgage interest rate has been a magnet pulling forward some of the demand,” he said. “We are beginning to see already early evidence that the fourth quarter is not going to drop off as some of the demand from the future is pulled into this year.”
Local real estate agents agree that the traditional end-of-the-year business downturn isn’t happening so far.
“Things have continued to be steady,” said Linda Callicutt of Coldwell Banker. “Our September-October numbers are still way ahead of last year despite the low inventory.
“The slowdown, if it comes, will probably be closer to the holidays,” she said. “But, as with the rest of the year, who knows?”
Chris Kelly, CEO of Dallas’ Ebby Halliday Co, said his firm could sell more houses if it weren’t for the shortage of listings.
“We have seen a continued trend of homeowners taking advantage of historically low interest rates and trading up from one price segment to the next,” Kelly said. “However, those properties being listed by homeowners trading up are quickly going under contract.
“We anticipate the inventory levels continuing for the foreseeable future, due to the historically low interest rates driving buyer demand.”
Texas’ homebuilding market has been a big beneficiary of the rise in home buying. Homebuilding starts in the D-FW area rose 34% in the third quarter to the highest level in more than a decade
“We are seeing near record levels of construction,” Gaines said. “That is one of the big multipliers in the overall economy — from home construction.”
Texas has fared better than other states during the pandemic-induced recession, Real Estate Center research economist Luis Torres said. He said the current economic downturn is nothing like the Great Recession of a decade ago.
“This is unprecedented — this recession was caused by a health crisis,” Torres said. “It wasn’t caused like the last recession by over-financing.
“The prior recession happened after the housing bust,” he said. “The housing market is doing well.”
Despite housing’s resiliency, U.S. job losses due to the pandemic will create issues for the residential sector at some point. Millions of Americans are still not paying their home mortgages under federal forbearance programs.
“If you are in forbearance because you lost your job, you are going to have trouble making that up,” Gaines said. “We will see more foreclosures than normal sometime in the course of next year.
“I don’t think that is going to happen until at least this time next year,” he said. “I think it will be the second half of 2021.”
And unlike in the Great Recession, when thousands of Americans were underwater on their home mortgages, most homeowners today have built up equity in their properties.
“If you are already well above water on your loan — maybe have 20% to 30% equity on your home — you will be able to sell it rather than go through foreclosure,” Gaines said. “The foreclosures won’t be as prominent.”