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RECON for January 14, 2022RECON for January 14, 20222022-01-14T06:00:00Z2022-01-14T06:00:00Z
RECON Texas Real Estate Research Center
House with sold out stamp
According to an informal survey by the Texas Real Estate Research Center, low inventory was the biggest pain point for real estate professionals in 2021. Center Research Economist Dr. Luis Torres said potential homebuyers may want to "be patient to find their dream house." Read more in today's RECON. (Photo from Center files.)
January 14, 2022

TRERC researcher: homebuyers must 'be patient'

COLLEGE STATION (Texas A&M Today) – Mortgage rates will increase in the coming year, easing housing demand during a time of low supply, according to an economist at the Texas Real Estate Research Center at Texas A&M University.

"It’s a sellers’ market right now and the housing sector is really strong," Dr. Luis Torres told Texas A&M Today. ​"The pandemic has increased the preference for home ownership, but supply has been lagging behind since even before the pandemic. So the problem right now is that you have really strong demand facing weak supply and that’s pushing up prices at a very high rate."

Torres said potential homebuyers may want to "be patient to find their dream house."

"If you find a house you really want and you’re in a position to buy, go for it, but don’t overpay because you don’t want all your money going into a mortgage payment each month," he said.

According to Torres, demand should weaken as the Fed's monetary policy increases mortgage rates. "And there’s possibly two rate hikes in the coming year due to inflation," he said. "When inflation is higher, nominal interest rates increase. That will put the brakes on housing demand. 

"Also the high prices we’re seeing are going to price some people out and that will decrease demand as well. So we’ll possibly be going back to more normal trends than we saw during the pandemic."

Affordability remains an issue.

"In Austin, home prices are up 30 percent over the last year, Dallas-Fort Worth, 20 percent, and Houston and San Antonio, 18 percent," said Torres. "And that’s happening all around Texas, not just the major cities—​we have double digit price growth throughout the state."

The average home price in Texas in January 2020 was $277,945 before hitting $388,555 in June 2021. In November 2021 it fell just slightly to $382,862.

“It’s really hard to find a house to buy right now,” Torres said. “Not only are the prices high, the competition is greater. You may put in a bid for a house and multiple other people do, too."

Torres said the supply problems contributing to the shortage began happening before the pandemic due to factors such as increasing lumber prices, constrained land development, and changes to laws and regulations rolled out in the wake of the 2007-08 housing crisis.

He said when the pandemic happened, the housing market was one of the sectors that benefited. Add historically low mortgage rates to the equation, and the preference for homeownership grew.

The current shortage and high prices are also affecting renters, Torres said. Nationwide, the average rent for a single-family home rose 10.2 percent in September 2021, the fastest year-over-year increase in more than 16 years.

Torres said there is no "housing bubble" like there was in the early 2000s crisis.

"At that time, there was lax oversight and loose lending standards," he said. "The supervising institutions weren’t doing their jobs and allowing all sorts of this malpractice. Also, many people were buying multiple houses as investment properties to flip. But that’s not happening right now. People are buying just a house to live in and prices are not going down. For nominal housing prices to fall, that’s a really rare occurrence."

As far as high home prices in Texas, Torres said, "We’re not California yet, but look out in 20 years or so."
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Texas housing manufacturers prepare for sales surge despite ongoing supply-chain disruptions

COLLEGE STATION (Texas Real Estate Research Center) – Manufactured housing sales were relatively flat in 2021, but the industry is optimistic about demand and expects Texas activity to accelerate in 2022.

Seven months of production growth have improved the backlog of manufactured homes, according to the latest Texas Manufactured Housing Survey (TMHS).

"The long backlogs that the industry experienced throughout 2021 and the near continuous rise in materials and labor costs limited manufacturers’ ability to take in new orders when delivery times were running in the 40-week range," said Rob Ripperda, vice president of operations for the Texas Manufactured Housing Association.​

"Manufacturers continue to pull those backlogs down through capital investments in their existing plants, bringing new plants online, and expanding their labor force. These measures should open up the order-flow spigots. Housing demand has remained strong, and investors are planning the greenfield development of several new manufactured-housing communities across the state in 2022."

The TMHS capital expenditure index increased for the 19th consecutive month with additional investment projected on the horizon. The employment index expanded similarly despite skilled-labor shortages that have driven wages and salaries upward. Ongoing supply-chain disruptions continued to contribute to inflationary pressure.

"The sudden surge in cases of the COVID-19 Omicron variant is again dampening optimism about smoothing the supply chain," said Dr. Harold Hunt, research economist at the Texas Real Estate Research Center at Texas A&M University. "Although less severe than the Delta variant, employers may still see significant employee absenteeism from Omicron in the weeks ahead."

Despite these headwinds, Texas manufacturers noted less uncertainty and an improved outlook for the first half of 2022.
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Survey: Inventory biggest hurdle for real estate professionals in 2021

COLLEGE STATION (Texas Real Estate Research Center) – Inventory was the biggest problem Texas real estate professionals faced last year, according to an informal survey conducted by the Texa​s Real Estate Research Center. 

The survey asked respondents what their biggest real estate "pain points" were in 2021. 

Low inventory and keeping up with demand were the main hurdles for 21.5 percent of the 121 respondents. 

Other issues real estate professionals faced include retaining talent (17.4 percent), inflation and supply-chain issues (14 percent), finding and retaining clients (10.7 percent), and the COVID-19 pandemic (8.3 percent).

​​Over half (56.2 percent) of respondents were directly involved in residential real estate, followed by 8.3 percent who were in commercial real estate.
Texas Weekly Leading Indicator
The Texas Weekly Leading Index increased for a third straight week the week ending Dec. 11, pointing toward higher future economic activity as the economy continues to recover from the pandemic. Read more in our latest report.

Houston office absorption at highest total since 2017

HOUSTON (NAI Partners) – Local office absorption was 649,022 sf in fourth quarter 2021, the highest quarterly positive return for over 15 quarters, according to NAI Partners. 

The market recorded 2.6 million sf of leasing activity in the fourth quarter. ​

Office availability has climbed to 29 percent as of year-end 2021. Overall vacancy rate rose 1.5 percent to 25 percent.​​​​​​

Construction is at nearly 2.5 million sf with 1.6 million sf available for lease and almost 1.9 million sf delivered. Inventory is at 244.8 million sf. 

The average asking full-service rent is at $29.32 per sf, down slightly from last year at this time. Class A and B office space average $33.93 and $22.50 per sf, respectively.
Happy MLK Day I have a dream
The Texas Real Estate Research Center will be closed on Monday, January 17, in observance of Martin Luther King Jr. Day.

272K-sf shallow-bay industrial portfolio sold in Irving

IRVING (JLL) – Pegasus Real Estate has purchased a two-property, shallow-bay industrial portfolio totaling 271,100 sf within the DFW Airport industrial submarket.

The portfolio includes a fully leased, 92,051-sf building at 4040 Royal Ln. and a 12-building, 93 percent-leased Commerce Center at 4823-4845 W. Royal Ln. and 8400-8432 Sterling St. 

Completed between 1981 and 1999, the shallow-bay assets have clear heights from 12 to 18 ft, seven dock-high doors, two drive-in ramp doors, 39 ground-level doors, and high office finishes.

JLL Capital Markets marketed the property on behalf of the seller, Fort Capital, and arranged acquisition financing.​
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San Francisco investment firm acquires $182M project

HOUSTON (REBusiness Online) – Fowler Property Acquisitions has purchased The Kirby Collections, a mixed-use property at 3200 Kirby Dr., for $182 million.

Built in 2018, the property has a 25-story, 199-unit apartment tower and 291,000 sf of commercial space, including​ a 182,000-sf office building and 60,000-sf retail building.​

Fowler plans to implement a capital improvement program and rebrand the development as Arrive Upper Kirby.
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Blueprint Hospitality picks up second CPS Energy building, plans hotel

SAN ANTONIO (San Antonio Business Journal) – Blueprint Hospitality has purchased a ten-story office building at 145 Navarro St. from CPS Energy. 

Blueprint will​ transform the ​211,352-sf building into a hotel. 

The company bought the adjacent CPS Energy office and parking building at 146 Navarro St. last year. Renovations begin in February 2022 and will be complete in January 2023. 
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Material herein is published according to the fair-use doctrine of U.S. copyright laws related to non-profit, educational institutions. Items attributed to sources other than the Texas Real Estate Research Center at Texas A&M University should not be reprinted without permission of the original source. To send news items for consideration, e-mail Hayley Rieder Wiley. The Texas Real Estate Research Center is part of Mays Business School at Texas A&M University in College Station - the heart of the Research Valley.

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