Two new reports paint a bright picture of the housing market in Midland and Odessa now and for the next three years.

The Local Monitor Reports, released today, cite a 7 percent increase in Midland home prices over the last 12 months, which puts the average home price at $183,463. In Odessa, prices have gone up 5 percent over the last year and the current average home price is $210,980. In the last three years, home prices were up 10 percent in both markets.

The good news doesn’t stop there. Both markets are scored significantly into the “low risk investment” category. The reports predict an 8 percent increase in home values over the next 12 months in Midland—compare that a national average of 4.6 percent. In the second and third years, prices are forecast to increase 9 percent and 9 percent, respectively.

In Odessa, they predict a 7 percent increase in home values over the next 12 months, and 9 percent in both the second the third years.

Why this rosy glow around the Midland-Odessa housing market? One word: Jobs.

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Midland home prices

Photo: Dan Moyle

Two new reports from Local Monitor Report are projecting big increases in home values in Midland and Odessa over the next three years, almost double the national average. Prices are predicted to rise even more.

Home values for Midland are forecast to increase by 8 percent over the next 12 months—compare that to national forecast of 4.6 percent. In the second and third years, values are forecast to increase 9 percent each year, a 26 percent increase in three years.

Midland home prices are projected to increase even more, at 30 percent over the next three years. In the last 12 months, prices have gone up by 7 percent, bringing the average home price in Midland to $183,463.

In Odessa, the report is predicting a 7 percent increase in home values over the next 12 months, and 9 percent in each of the next two years. That’s a total projected increase of at least 25 percent.

Odessa home prices are forecast to increase more, at 29 percent over the next three years. Odessa home prices have increased by 5 percent in the last 12 months, and the average home price is now $210,980.

All this adds up to a “low risk” categorization by Local Monitor Report for real estate investments in both Midland and Odessa, good news for homeowners and investors, alike.

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The Lone Star State isn’t the same place as it was during the big 1980s oil bust, and  is better weathering falling oil prices, but further price plunges and worker layoffs could negatively impact home sales and construction.

This is according to new research by Texas A&M Real Estate Center research economist James Gaines, who published Texas 2015 Housing Market and the Price of Oil last week. The six-page report explains that Texas’ economy has diversified significantly since the 80s bust, relying much more on healthcare, technology, and other sectors.

Here’s the takeaway:

The price of Texas oil and the upstream energy sector is a prime cause of concern for Texas’ 2015 economy and housing market. History shows that Texas’ housing does not depend on high oil prices. In fact, the state’s housing market has thrived at prices within a wide range of oil prices lower than those experienced in 2013 and the first half of 2014.

The saving grace for Texas right now is that the state didn’t go overboard in its response to rising oil prices in 2013 and 2014, a stark contrast to the 1980s, when there was huge overspending and overbuilding, Gaines writes.

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One of the great things about the reports published by the Real Estate Center at Texas A&M University is that you don’t have to be an economist to understand them. Luis Torres, Jim Gaines, and Mark Dotzour all do a fantastic job of breaking down the information into digestible bits. I was very impressed by Torres when I heard him speak at the National Association of Real Estate Editors conference in Houston, and having previously worked with Gaines and Dotzour, I know that they are brilliant.

Of course, as the Real Estate Center publishes its annual outlook, we enjoyed taking a more in-depth gaze at inventory and what the numbers really mean. Months of inventory is a significant indicator for housing demand, and inventory can greatly influence pricing.

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New House under Construction

Recent reports show that new home sales are at their highest since 2008, while prices of existing homes are up year-over-year.

New home sales are up 17 percent from the same time last year, according to Residential Strategies, and new home starts are up 11.4 percent, too, at 6,511. Builders are trying to keep up with demand while also trying to keep new homes affordable for buyers, according to a story from Steve Brown:

“Start activity remains strong as builders maintain healthy sales backlogs and are working to reestablish depleted speculative inventory,” Residential Strategies’ Ted Wilson said in the report. “Robust job formation, in combination with tight housing inventories, has kept builders optimistic about sustained new housing demand.”

Rising new home prices have caused a slowdown in sales for some buyers.

Since 2007 the median price of a new home in North Texas has increased $69,000 – 33 percent – to $275,000.

“Affordability continues to be a primary concern for new home builders,” Wilson said.

“Many are anticipating that at some point down the road, interest rates will increase, and they want to ensure that their housing prices are still within reach of the consumer.”

Additionally, a new report from CoreLogic shows that the Dallas-Plano-Irving area is posting an 8.5 percent increase in home price appreciation according to the firm’s most recent HPI.

“Home prices continue to rise, albeit more slowly, across most of the U.S., ” said CoreLogic CEO Anand Nallathambi. “Major Metropolitan Areas such as Riverside and Los Angeles, California, and Houston continue to lead the way with strong price gains buoyed by tight supplies and a gradual rebound in economic activity.”

In Texas, that means we’re holding steady at our return-to-peak price levels, with no major increases. With new home construction up, a positive outlook for investors in several niche markets, and with prices still on the rise, are you optimistic about the Dallas/Fort Worth real estate market going into Q4 2014?

3958 Clover Front

Let’s just clarify for clarity’s sake: Dallas home prices are breaking records, y’all, and if you want a great home inside the loop, you’re going to pay for it. There was quite a debate in the comments of our Tuesday Two Hundred, a super-cute Craftsman home in Sunset Hill that is priced at $239,000. Some folks felt that was too steep. Others thought the renovation was too modern and not true to the architecture of the home.

Here’s the honest-to-goodness-backed-by-economists truth: Someone is going to buy that house, and considering the state of the market and the desirability of this area compared to the prices of adjacent Winnetka Heights homes in similar condition, the homeowner will probably get within $7 to $10K of their asking price with the right buyer, one who will appreciate the Oak Cliff vibe and the cool people who live there. That’s just based on the fact that home prices in our area are up 10.4 percent year-over-year and there are more buyers out there than sellers, especially with the influx of new workers thanks to our booming job market.

3958 Clover Living

Same thing goes for this adorable Midway Hollow post war traditional at 3958 Clover. It’s not as big as a home you’d find in the northern suburbs, such as Carrollton, for instance. No, it clocks in at a modest but capable 1,524 square feet with three bedrooms and two full baths. But you’re not buying a big home when you move inside the loop in this price range. You’re buying location. You’re buying proximity to work, culture, restaurants and shopping. This home is priced at $299,000, and it’s already under option.

3958 Clover Kitchen Dining

Homebuyers will appreciate the renovations to this home, which include an open floor plan that flows from the living room to the dining area and open kitchen, all of which have gorgeous pine floors underfoot. This home feels light and bright thanks to the remodel, and it places the emphasis on the kitchen and living areas as public spots. I also love the open cabinets and the green paint inside that adds a colorful punch to a monochromatic kitchen. The addition of the island not only brings in more prep space, but it’s an informal dining area and a great spot to connect with kids after a day at school and work.

3958 Clover Kitchen

The master bedroom, like the rest of the home, is modest in size at 18 x 10, but that’s not shrimpy or anything for a home in this neighborhood. I also love the cool master bath, that, while it doesn’t have double sinks, it instead has a massive tub with a huge window to bring in some ambient light.

3958 Clover Master 3958 Clover Master Bath

The backyard is a great size for kids to run around in, and thanks to the pine tree in the center of the yard, you won’t have to worry with a ton of leaves coming down every fall, and you get to benefit from its shade. You’ll also appreciate the cool pergola that, with the addition of an outdoor kitchen, would be my hangout from late March until July.

What do you think?

3958 Clover Backyard 3958 Clover Backyard 2

CoreLogic HPI Jan 14

CoreLogic’s newest HPI report released today showed that Texas real estate professionals have good reason to blame their busy days on the hot market. Home prices in Texas are at new highs (yes, higher than pre-bubble manic market highs!), with January 2014 up 10.1 percent over a year ago, and home prices up 1.2 percent from Dec. 2013 (numbers include distressed sales).

In the Dallas-Plano-Irving MSA, home prices are up 12.2 percent year-over-year including distressed sales, and up 10.4 percent excluding distressed sales. National numbers show home prices up 12 percent year over year for January. This is the 23rd consecutive month that home prices have increased, and Texas is one of only three states that has reached a new peak in home prices after the housing bust. And despite near-record appreciation, Nevada is still 40.1 percent below peak prices, CoreLogic’s report showed. Incredible.

“Polar vortices and a string of snow storms did not manage to weaken house price appreciation in January,” said CoreLogic chief economist Mark Fleming. “The last time January month-over-month and year-over-year price appreciation was this strong was at the height of the housing bubble in 2006.”

So, winter didn’t slow Dallas down, and we’re looking at a brisk spring selling season ahead. Still, real estate prices are a hyper-local economy, and while some areas are seeing hand-over-fist sales and appreciation (we’re looking at you, Lake Highlands and University Park) some areas will only see more modest gains. The key, of course, is pricing a home correctly and being flexible.

Where are you seeing break-neck appreciation and sales pace?

7203 Morton

FSBO

Steve Brown jumped on Tuesday’s Case-Shiller report like a kid with a shiny new bike (pay wall? not sure). The report showed Dallas-area home prices up by the largest percentage in more than a decade

Dallas home prices rose 5.7 percent in November from the same period a year ago in the monthly Standard & Poor’s/Case-Shiller Home Price Index. I will caution you, these are sales from November because by now, end of January, all paperwork is in. And it was the ninth month in a row that local prices were up from 2011. Our Dallas-area increase was slightly higher than the 5.5 percent average price rise in the other 20 major cities that Case-Shiller tracks, so yes, I would say that it is time to be very happy indeed. Get on a new bike and hit the Katy Trail!

But from what I see of the flurry of business agents are up to eyeballs in this month, I say we ain’t seen nothing yet when it comes to price increases.

There is so little on the market: local home inventory levels are at the lowest point since the early 2000s, and the analysts Steve interviewed say North Texas could see even bigger price increases in 2013 because there is, quite simply, less to choose from:

“If the inventory doesn’t improve, we are going to see remarkable price increases this year,” said Dr. James Gaines, an economist at the Real Estate Center at Texas A&M University. “If you own a house and want to sell, it’s probably the best time in years.”

Steve says “the number of pre-owned homes on the market in North Texas last year was down about 20 percent. And inventories of new homes are at the lowest point in more than a decade.” Well, what if everyone reads this and decides to put their house on the market? Herd mentality. Folks back in 2008/2009 pulled back, re-grouped, and got a bad taste for real estate. Now, they start hearing about a few good deals, they will get back in.

And Gaines estimates “that Dallas-area pre-owned home prices were up 7.6 percent in 2012 from 2011.” 2011, if you recall, was the first year of median price increases since before the Great Recession. We were probably the least affected state in the Union during the housing crash, but our values still took a 15 percent hit, which we are making up this year.

If the economy continues to chug along and Washington doesn’t do anything stupid…

The big boys confirm that housing is contributing to the nation’s economic growth, which is so interesting because housing is what spurred the crash.

Who is benefitting the most? Phoenix, prices up 22.8 percent, and San Francisco, prices up 12.7 percent from November 2011. Tell me about it: my son is trying to buy a house there.

You know who’s really happy in Dallas right now: home builders. Steve says home construction is still down here and not expected to return to pre-recession levels for years. Actually, Steve, it never will — there are not that many builders out there and banks still have a tight leash.

Steve talked to Dallas real estate appraiser Chuck Dannis, who said he wouldn’t bet on North Texas home prices rising at double-digit rates in 2013:

“but the laws of supply and demand suggest it could happen. If it does, it will just shock people,” Dannis said. “When we had double-digit inflation in housing prices around here, it was always tied to inflation and not necessarily supply and demand.”

Dannis told Steve that appraisers “will be reluctant to sign off on big price increases unless they can support the figures with data from closed home sales.”

Why? Because lenders won’t lend without appraisals that are as tight as Fort Knox security.

I also think that when buyers see billionaires putting their homes on the market, like the $135 million home of Tom and Cinda Hicks, it encourages more people to stick a toe in the water and make a move. In fact, that’s exactly how the herd mentality starts!