Texas existing-home sales drop 16 percent in February as inventory falls to less than 1.5 months
COLLEGE STATION – Texas’ housing market slowed in February after persistently low mortgage interest rates contributed to record sales in the existing-home sector the previous month.
"Sales activity was greatly hindered by February’s unseasonably wintery weather that caused power outages and water disruptions across the state," said Dr. Luis Torres, research economist for the Texas Real Estate Research Center at Texas A&M University.
Existing-homes sold through the Texas Multiple Listing Services declined 16 percent from January, drawing even with year-ago levels. Despite slower sales, the state’s existing-home inventory fell below 1.5 months in February. The number of new listings that hit the market declined for the second straight month to their lowest reading since April 2020, when the state was under a stay-at-home mandate.
"New listings rebounded during the summer amid strong housing demand, but they have trended down since fourth quarter 2020, contributing to the lack of homes for sale," Torres said. "Supply is expected to remain tight in 2021, affecting home sales."
Many analysts point to older homeowners holding onto their houses longer, resulting in a reduced supply of active listings available to the increasing number of millennials becoming first-time homebuyers.
According to the National Association of Realtors, first-time homebuyers accounted for 31 percent of February sales, which overall decreased 4.5 percent relative to January. Compared with year-ago levels, however, activity elevated 8.2 percent. The share of homes sold to first-time buyers was even higher in the new-home market. The February National Association of Home Builders/Wells Fargo Housing Market Index survey indicated 43 percent of new single-family homes sold were to first-time buyers in the last 12 months.
Foreclosure moratoriums are causing fewer homes to be put on the market than otherwise would be expected at the elevated levels of joblessness experienced in the past year.
"During times of economic hardship, foreclosures typically increase, providing additional listings for sale," said Torres. "However, forbearance and the federal foreclosure moratorium have provided help to households during the pandemic. Continued stability in the housing market is essential to Texas’ economic recovery."
The Federal Housing Finance Agency has extended the foreclosure and REO eviction moratoriums for properties owned by Fannie Mae and Freddie Mac through June 30, 2021. Eligible borrowers were also granted an additional three-month extension of forbearance for a total of up to 18 months. The Centers for Disease Control and Prevention’s federal eviction moratorium is set to expire at the end of March.
Rising mortgage rates are another headwind to the Texas home market. The Federal Home Loan Mortgage Corporation’s 30-year fixed-rate ticked up for the second straight month in February to 2.8 percent. Continued increases may soften housing demand.
"The 30-year mortgage rate is closely linked to the ten-year U.S. Treasury bond yield, which looks to increase in the coming months as vaccination rates improve, and the third fiscal stimulus package supports economic recovery," Torres said.
In Texas, Gov. Greg Abbot lifted the mask mandate and increased capacity of all businesses and facilities in the state to 100 percent starting March 10.
"Prospects for Texas’ full economic recovery continue to depend on dwindling COVID-19 cases and hospitalizations and progress on the vaccine front," Torres said, "but optimistic consumer behavior could boost business activity, reduce the number of layoffs going forward, and allow Texans to return to the labor force."
The Texas Real Estate Research Center has a wealth of economic information online for free.
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