|Quick points on Harvard's housing study||Quick points on Harvard's housing study||Josh Roberson||Roberson||2018-06-19T05:00:00Z||Economy|
|Harvard’s Joint Center for Housing Studies released its 30th Annual State of the Nation Housing Report today. Although their analysis is primarily national in scope, here are just a few key points and their relevance to the Texas housing market.|
Homeownership across the country is at a historic low. This has not been the case for Texas. While homeownership rates both nationally and in Texas (currently at around 64 and 62 percent, respectively) have been in decline since the Great Recession, Texas is far from its most recent low point—in the early ‘90s when homeownership dipped to the upper 50 percent range.
Immigrant households will play a larger role in growing housing demand. Texas is one of only a few larger states benefitting from positive net migration, which means more people are moving in than out. While much of this migration comes from households moving from other states, that source has tapered down while international households continue to provide steady growth (see figure).
Lower-cost neighborhoods (those with homes priced at or below 75 percent of the median home price) in higher-priced metros (those with median home prices at or above $250,000) have realized the highest growth rates over the past five years. This is certainly the case within the Austin and Dallas metros. The map highlights a handful of Austin neighborhoods that fit this description. For more on Dallas housing prices, check out my recent article “Dallas’ Affordability Puzzle.”
Overall multifamily housing rent growth is cooling. Much of this is due to falling demand for higher-priced units while lower-priced units remain steady. Like the single-family market in Texas, inventory of lower-priced units is becoming scarcer with much of the new construction pipeline focused on the higher-priced market. For a wealth of information about the apartment market near you, check out the multifamily resources under market research on our website.
|Youthful Texas weighs on homeownership||Youthful Texas weighs on homeownership||Wesley Miller||Miller||2018-06-19T05:00:00Z||Economy|
The newest report by Harvard University’s Joint Center for Housing Studies (JCHS) reflects on the evolution of the nation’s housing market over the past 30 years. While the quality of the housing stock improved, serious structural issues developed in the aftermath of the 2007 housing crash, such as the sluggish supply-side response and diverging incomes and home prices. These challenges similarly plague the Texas market and were discussed in a previous blog post, “Housing Bubble’s 10th Burst-Day.”
The JCHS study dives deeper into demographic trends that underlie housing demand. Aging baby boomers helped stabilize the U.S. homeownership rate around 64 percent after a decade-long decline. In fact, the 65-and-older age group was the only cohort with higher homeownership rates relative to 1987. As a result of steady domestic and international migration, Texas’ population mix is younger than the national average (Table 1). While this benefits the state’s economic dynamism, it also weighs on homeownership rates. The Lone Star State continually lags the nation by about 2 percent despite relative housing affordability.
The state’s diverse population presents a similar challenge as racial and ethnic homeownership disparities persist (Table 2). For example, Texans of Hispanic descent represented 31 percent of total housing units, but only 28 percent of those units were owner-occupied in 2016. The gap is even larger for black homeownership and has widened since the Great Recession. These imbalances conflict national consumer surveys on renters, which suggest the desire to own a home transcends racial boundaries.
The impacts of today’s housing hurdles, however, are widespread and stretch to all corners of the market. Rising home prices and rental rates are straining Americans’ budgets and living standards. If left unaddressed, diminishing housing affordability could reverberate through the economy and substantially hinder our well-being. With real income levels stubbornly stagnant, attention is directed toward reducing construction costs. The JCHS suggests improvements in federal policies to protect those most vulnerable while addressing the long-run structural issues. Whatever the solution, action is needed before housing affordability becomes a Texas-sized crisis.
|What a difference a hurricane makes||What a difference a hurricane makes||David Jones||Jones, D.||2018-06-14T05:00:00Z|
Rent growth is slowing nationally, according to a new report from Apartment List. This slowdown in rent growth is partially attributable to an increasing supply of new rental inventory in many markets.
Their estimates show that annual rent growth rates at the national level have been trending downward for the past few years. Although rent growth has slowed, it remains in positive territory. Rents are still increasing, just at a slower pace.
While Apartment List's national index provides a valuable overview of high-level trends, there is significant variation across cities. The table ranks the nation's 25 largest cities from fastest to slowest rent growth for each of the past four years.
City rankings change substantially from year to year.
Houston ranked last in rent growth rankings last year, with a 2.8 percent decline in prices, but the city now ranks second with a 3.4 increase over the past year.
Houston presents a unique example, notes the study. The devastation of Hurricane Harvey damaged or destroyed a substantial number of homes in the city last August. Before Harvey, Houston had one of the nation's highest vacancy rates but now has a shortage of available rental units.
Although many landlords froze rents in the immediate aftermath of Harvey, Apartment List data show a sharp spike in rents in Houston through the winter months, a time when rent prices normally fall. More recently, prices seem to have stabilized.
It will be interesting to see where Houston rents are a year from now.
Want to know more? The Real Estate Center has several recent articles related to the impact of Hurricane Harvey on Houston.
|Renovate, replace, recoup?||Renovate, replace, recoup?||David Jones||Jones, D.||2018-06-06T05:00:00Z||Housing|
Unusually low home inventories and the high cost of new housing have put move-up homeowners in a bind. Many are turning to remodeling as a way of adding amenities and value to their current housing. However, the recently released Cost vs. Value Report for 2018 from Remodeling magazine notes many of the 20 most popular remodeling projects aren't generating the resale value they once did.
Craig Webb, editor-in-chief of Remodeling magazine, says the report tells what consumers can expect to pay to have a pro do one of the common remodeling projects and how much money real estate experts say you can expect to get back from a project when your home is sold.
This year's report covers 149 U.S. metros. Not surprisingly, the nationwide cost for all projects is up at least 2 to 5 percent from last year. “At least" is important because the cost data were compiled before Hurricane Harvey, fires, and some other national disasters. The report doesn't take into account the shortages of building materials in damaged areas, which sent prices soaring. Meanwhile, the value real estate pros gave went up for only about two-thirds of the projects studied.
Texas remodeling numbers are reported in the West South Central Region of the report. Metro-specific data is included for Austin, Beaumont, Corpus Christi, Dallas, El Paso, Houston, McAllen, San Antonio, and Temple. In the table, yellow numbers include Texas. U.S. numbers are gray.
Some of the biggest national decreases in value were for some of the most expensive projects, such as the addition of a master suite or a major kitchen remodel. That's a turnaround from 2017 when big-ticket items showed some of the biggest gains.
The average cost recouped nationwide for the 20 projects was 57 percent, about 1 percent lower than for the same projects last year. In 62 of 100 U.S. markets, at least one project returned more than 100 percent of the cost. Five of the top six projects with the biggest bang for the buck were for work done on the outside of the house.
Garage door replacement led all projects nationally with 98.3 percent cost recouped. In the Texas region, manufactured stone veneer was tops with 93.4 percent.
In the Texas region, only four projects recouped more this year than last: bathroom addition, bathroom remodel, deck addition (wood), and window replacement (vinyl).
The report notes a big difference between replacement and remodeling jobs.
“If you have to choose between them, pick the replacement work," said Webb. “It's always had a bigger payback than remodeling, and that's even more the case this year. Replacement jobs had a payback of 76 percent. That's 20 percent more than the cost recouped for remodeling.
“Of course, many remodeling projects aren't done solely to boost the home's value, and if you're not planning to move, knowing the current cost-value ratio won't do you much good. Instead, just focus on the cost side of the cost-value report."
Remember, local costs vary. Seek the advice of reputable remodelers and real estate professionals.
|Building materials are 25 percent of new home sales price||Building materials are 25 percent of new home sales price||David Jones||Jones, D.||2018-05-24T05:00:00Z||Housing|
The news this week about how much rising land prices add to the cost of a new home is only part of the story. Building materials themselves, particularly lumber, are going up as well.
According to a new Bank of America Merrill Lynch report discussed in builderonline.com, prices for homebuilding materials increased 3.6 percent annually from 1982 to 2017. During that time, building materials in a median-priced house went from $23,073 to $80,566.
Materials constitute roughly 25 percent of the sales price of a new home. The report — “Who Builds the House" — puts the total annual cost for building materials in new U.S. single-family residences at $55 billion.
“Again, nobody builds to an average or aggregate, so for different geographical markets, different square footages, different customer segment specs, different national and local deals and installation nodes, these figures can become far from precise when it comes to applying them to specific projects," writes John McManus, director for the Residential Group at Hanley Wood.
The Builder article notes lumber prices have trended higher since duties of more than 20 percent were applied to Canadian softwood lumber in 2016. Imports from Canada declined from 16 billion board feet in 2016 to 14 billion in 2017.
Earlier this year, the Wall Street Journal reported lumber was in short supply and prices rising as wildfires destroyed prime forest:
“Material prices now rival labor shortages as builders' main concerns, a National Association of Home Builders survey showed in January. Prices for common building varieties like spruce and southern pine are at or near records, according to price-tracking publication Random Lengths. March-dated lumber futures at the Chicago Mercantile Exchange hit a record of $532.60 per 1,000 board feet last week after climbing more than 50 percent in 14 months."
|Which Texas metros are best for real estate agents?||Which Texas metros are best for real estate agents?||Gerald Klassen||Klassen||2018-05-16T05:00:00Z||Center News|
Personal-finance website WalletHub released a report recently on "2018's Best Places to be a Real Estate Agent." They compared 179 U.S. cities on 18 key indicators of a healthy housing market. Each metro was measured by "job opportunity and competition" and "real estate market health."
Ranking 27th nationally, Austin was named the best city overall in Texas to be a real estate professional.
But hold on just a second. Can data alone determine which city is best for you to practice real estate?
There is a lot more to the equation than sales stats. WalletHub's methodology doesn't begin to answer the question because the best location for an agent depends on their own goals and needs.
If you are a career agent, you aren't going to be chasing the latest hot markets. You want to be in a stable place with long-term growth prospects, which might be different from the current hot markets.
If you are a mobile, single millennial looking for fast wealth, then you probably want to go to one of these "hot" markets with plenty of deals to go around with clients who just want transaction execution, not a relationship with their agent.
WalletHub's methodology is totally based on short-term or current metrics. Many of the high-ranking places now were the worst places from 2008-10. What type of property or transactions are you interested in doing? That's a career choice that may lead you somewhere other than one of the mainstream markets.
I don't know if agents do any strategic planning, but I would always recommend that they engage in some deep introspection and strategic planning before picking a market. They need to figure out if the chosen market will meet their personal goals and needs.
I spoke with a land broker near the coast last week. He came to the Center for an education program many years ago. It was where the Center brought in several experts from outside for a few days. He said the most important thing he learned was how to do strategic planning. It wasn't a technical thing related to appraisal but critical for the success of his business.
Keep following the Real Estate Center. You may see more about how to succeed with strategic planning.
|Everything's 'funner' in Texas||Everything's 'funner' in Texas||Hayley Rieder||Rieder||2018-05-09T05:00:00Z||Demographics|
Texans already know how fun it is to live in the Lone Star State, but a WalletHub study backs us up, ranking Texas as the seventh most fun state in the nation.
Texas tied for first with California, Florida, and New York for number of restaurants per capita. The state also ranked high in number of movie theaters per capita, tying for first with California and New York. Texas ranked fifth in number of fitness centers per capita.
But what else does Texas have to offer?
Texas doesn't disappoint when it comes to football. According to the NFL's 2017 rankings, the Dallas Cowboys are the most popular team in the U.S. (sorry, Texans fans). AT&T Stadium in Arlington is also the fifth largest in the NFL by capacity.
If college football is more your speed, Texas A&M's Kyle Field in College Station and the University of Texas' Darrell K. Royal–Texas Memorial Stadium in Austin are the third and eighth largest in the NCAA, respectively.
Do you prefer music? Austin is known as the "Live Music Capital of the World." The city's music scene has produced legends like Janis Joplin, Stevie Ray Vaughn, and Willie Nelson. According to Forbes, Texas has the fourth most music festivals per year (13).
Popular amusement park chain Six Flags got its start with Six Flags over Texas in Arlington. Other properties owned by the chain are Six Flags Fiesta Texas and White Water Bay in San Antonio and Hurricane Harbor in Arlington.
Everything is bigger in Texas, including our fairs. The State Fair of Texas welcomed over 2.4 million visitors in 2016, making it the largest by attendance in the U.S.
Big Bend National Park in West Texas has national significance as the largest protected area of Chihuahuan Desert topography and ecology in the country. It contains over 1,200 species of plants, 450 species of birds, 56 species of reptiles, and 75 species of mammals.
Of course, Texas has many other amazing attractions, state parks, and more, but we'd be here all summer if we went through them all.
|Texas housing affordability waning||Texas housing affordability waning||Luis Torres||Torres||2018-05-03T05:00:00Z||Housing|
March data show Texas' housing affordability remained favorable compared to other states but hovered around a decade low. Rapid price appreciation, fueled by shortages of homes priced under $300,000, challenged Texas homebuyers. Stagnant wages struggled to keep pace with home values, holding the Texas Housing Affordability Index at 1.5.
The index shows a family earning the median income in Texas could afford a home 50 percent more than the median sale price. For much of the past decade, Texans enjoyed the capability of affording homes priced twice that of the median.
Affordability issues persisted in Austin and Dallas, with indices around 1.5 and 1.4, respectively. The Houston index extended a year-long trend at 1.7, while San Antonio ticked up to 1.6. Fort Worth boasted the highest affordability conditions at just above 1.7, despite observing some of the largest home price appreciation.
The Texas median home price balanced around $231,600 amid mixed movements in the new- and existing-home markets. The median price for resale homes reached a record-high $223,675—a $15,000 increase since March of last year. Softer demand simmered the price for new homes, holding the median around $293,000.
Price pressures picked up in North Texas after a moderate start to the year. The median price rose 1.7 percent YTD in both Dallas and Fort Worth to $286,200 and $230,200, respectively. Austin maintained the highest median home price at $298,100 but had a 2.1 percent decrease YTD.
Suppressed new-home values in Houston, a trend that pre-dates last year's hurricane, offset steady appreciation for resale homes and held the aggregate median price around $230,000. San Antonio offered the lowest median price at $220,700 but maintained a clear upward trend.
The statewide median price per square foot (ppsf) rose for the tenth consecutive month, surpassing $115. The combination of regional economic growth and scarce land lifted the Austin and Dallas ppsf above $154 and $132, respectively.
Fort Worth posted the largest percentage increase in median ppsf at 10.5 percent YOY, reaching a record high $117.48. In San Antonio, the median ppsf rose 5.9 percent YOY to $112.37 and could soon surpass the statewide level. Houston maintained the lowest ppsf at $107.41 and the smallest annual growth at 3.3 percent, thereby widening its price gap from the other major metros.
For more, read the Real Estate Center's latest Texas Housing Insight.