I know “housing shortage” should sound very ominous, but really, we should be celebrating! Thanks to a growing job market, Texas is adding more workers faster than it can build housing for them. According to this story in Bloomberg News, there are bidding wars all over Texas, with some sellers turning down cash offers that would have seemed ample just a few years ago.
While the Bloomberg story is a bit general and doesn’t show that in some neighborhoods homes sit on the market for 90 days or more depending on location and price, it sheds an interesting perspective on why Texas wasn’t hit so hard when the housing bubble burst and why home builders are slow to meet brisk demand:
Values also didn’t inflate as much because builders could move quickly to meet demand given the state’s abundance of land and relatively easy zoning requirements. Texas home prices fell about 2.5 percent from a peak in 2007 to a trough in 2011, according to the Federal Housing Finance Agency.
The state’s homebuilding industry, which fell into hibernation during the recession, awoke to a rebound that it was unprepared for. Developers, constrained by banks reluctant to make construction loans, had few lots in its backlog, and many homebuilders closed or downsized. Trade workers left for jobs in the energy industry as oil prices surged.
You have to read some of the anecdotes in the story, too, which we’ve heard some version of from Realtors in the Dallas area. In the story, CoreLogic economist Sam Khater says that Texas’ surge in prices “begins to defy fundamentals,” noting that the swing from moderately brisk to frenzied isn’t driven by normal market forces. Instead, Khater wages, it is driven by investors.
Which brings up another point: Are investors driving up prices too much? According to Trulia’s “Bubble Watch,” Dallas, Austin, San Antonio, and Houston residential real estate markets are becoming “overvalued.”
Interesting to see these cities among locations such as Orange County, Calif., Los Angeles, San Jose, San Francisco, and Portland, Oregon. And while Dallas is experiencing a surge in both demand and prices, it’s heartening to know that we came in last.
Still, these numbers and observations seem a little too general for me, as residential real estate is best gauged looking from home to home within a neighborhood, rather than comparing areas as disparate as Portland to Dallas.
So, what do you think? Are these Texas cities poised for another bubble? Or will low inventory and high demand maintain the market for the foreseeable future?