2015 Texas Housing Market Predictions

Texas Housing Market
River walk @ San Antonio by Sarath Kuchi https://www.flickr.com/photos/sarath_kuchi/14173960627/in/photolist-nAvfFv-6RRn6D-p7r5HQ-swzJ2c-5Lx9wj-6RRiQP-9wNo2r-cmrvKh-azEW2P-aU8F22-e4UCKw-6qP4gk-reZeir-sf3jkG-BMRfX-9R7Mpd-bpsqDe-azEJeQ-6ydjYq-6cQcGM-e4YtND-rdnRwY-6FBeQs-9NfXoJ-pAziUB-nGHAJs-atDuve-atGauY-6q8eSg-atGaAC-LKBwX-atGaQ9-atGaLG-9CXvux-aeFs7P-e4YtxK-rzND78-dBSW13-dBSVV1-7eiofd-tBU8Fg-oi7ej-e4P1ft-7eioh1-7eeuYn-rDCTg-cFzmAS-6osbDt-rDD6Z-edxArs/

Unlike the rest of the country, Texas did not see a large drop in home values during the recession. The state saw lower unemployment rates than the rest of the nation, and there was no influx of investors buying up distressed properties simply because there were no excessively undervalued properties available to buy. Right now, the 2015 housing market in Texas is hot. Even though the energy industry is in a bit of a decline, this news has yet to negatively impact real estate. Despite the drop in oil prices this year, the Texas housing market has been able to withstand the economic pressure. Texas is seeing an increase in home prices that are nearly double the national rates according to the National Association of Realtor’s chief economist Lawrence Yun. “I think Texas is diversified enough to withstand the oil price decline.”

North Texas real estate in particular is hitting its stride. For the first time in a long time Texas is seeing a double-digit price appreciation,” says Yun. Home sales are up nearly 4% higher than last year. Both the number of purchases and the sales prices hit a new record. Homes in all of the state’s northern cities are still increasing. In Dallas-Fort Worth median home sales are growing at nearly 10% this year while cities in the southern half of the state haven’t been at nearly the same pace. Houston TX real estate sales, for instance, have been relatively flat and Erin Carlyle of Forbes Magazine claims that homes in Houston are currently overvalued by 18% and that homes in Austin by 19%.

Click here to compare these figures to the 2014 Texas housing market

Texas Housing Market
Source: Flickr


Although home prices are rising home construction in North Texas is still 40% below the level it was in 2006. Why? Chief economist for the National Association of Homebuilders David Crowe says that builders are now almost exclusively selling to the higher end of the housing market instead of the traditional first-time and middle class income buyers. More homes over $400,000 are being sold as opposed to homes under $200,000. Another reason that home construction is down is that land for building sites is in short supply and builders are having to contend with labor shortages. All of these factors drive up prices. “The inventory for sale has been extraordinarily lean,” says Frank Nothaft, chief economist with CoreLogic Inc. “We are seeing a pickup in housing demand with lean inventory, and that’s what’s pushing up prices.”

So because home prices are high, young adults are strapped with too much student debt, and some homeowners are in too much debt on their current properties to sell, home sales in Texas really aren’t at the levels that they should be. “With mortgage rates where they are, things should be booming,” Nothaft says. “But they aren’t booming.” On rental sites such as Homerenter.com, Trulia, and Craigslist Texas is showing rental prices higher than the national average due to high demand. In the Dallas and Houston markets the number of homes being rented has grown 50-60% since the recession because of the higher home prices. But as touched on earlier, southern markets in the state, such as in the city of Austin, is currently viewed as overvalued. The reason? The recent oil boom has seen oil output that has reached levels not attained since 1976. This boom led to a sharp increase in housing costs in many of the state’s metro areas, particularly in the southern portion of the state. Unfortunately, the local economies haven’t kept up with the housing price growth.

Between February of 2011 and the end of 2014 the Gross Metro Product (total output of goods and services within the metro area) grew 24%. This is a healthy increase but well below the 34% appreciation in home values in the same time span. But Stefan Hilts, Director at Fitch Rating’s U.S. RMBS group, says not to worry about Texas being a bubble state. “The issue isn’t that their prices are in a bubble, it’s just that prices grew faster than fundamentals,” says Hilts. He believes that instead of housing prices going down that housing prices will stagnate, allowing the economy to catch up. And with the relatively healthy job market throughout the state this is good news for those looking to buy Texas real estate.

Influencing Factors for the 2015 Texas Housing Market

  • According to Zillow Texas has a Home Value Index of $144,700.
  • Home values in Texas rose 7.4% in the past year. Housing market predictions see that number rising another 4.9% in the upcoming year.
  • Median rent price in Texas is $1,350. Texas has a high number of rental occupants, driving up demand and prices.
  • The percentage of delinquent mortgages in Texas is 3.5%. The national average is 6%.
  • Median list price as of February of this year was $230,000.
  • The Market Health Index measures the current health of a region’s housing market relative to other markets across the country. The Texas housing market is very healthy, scoring an 8.5 out of 10.
  • Homes in Texas spend an average of 61 days on Zillow. This is below the national average and makes Texas currently a sellers market.

Best Places to Live in Texas

Austin TX real estate has the highest average home prices in the state at $261,923. Austin has many things going for it that drive up prices. For one it boasts a 3.6% annual job growth rate, beating the national average of 2%. Plus the Austin metro area’s population grew 8.9% between 2010 and 2013. To compare, the average for markets across the U.S. over the same 3-year span is less than 2%. The city is still struggling to catch up with the demand imposed by this quick influx. The downside of fast population growth is a rapid rise in home prices. But Austin continues to be a sought after market for people to live. The city has a look and a feel that inspired award winning actor and director Ken Webster to come up with the slogan “Keep Austin Cool.” The city is home to a youthful and diverse population that takes pride in having a clean and safe city. Austin boasts a world-renowned music scene that is nearly on par with Nashville, Tennessee.

Dallas TX real estate has a lower home value index than its other North Texas counterparts, which is appealing to potential homebuyers. According to Zillow Dallas TX has a home value index of $126,000, making it an affordable place to live in a real estate market that is in high demand. And on rival website Trulia Dallas neighborhoods Fair Park and Cedar Crest have average listings of $89,800 and $77,732, respectively. With these low prices it’s no surprise the Dallas market is hot. Home prices have jumped 9.3% and only San Francisco and Denver were higher in the same time period according to Standard & Poors Dow Jones Indices. Some wonder about the overvalued housing market but S&P’s David Blitzer thinks that future moderation in home price gains is likely but that the market is solvent. He does not anticipate a crash at a later date. There are fewer inventories to choose from in the city, which is leading to bidding wars on available properties and further inflating prices.

San Antonio TX real estate is an exception to the trend of Southern Texan cities with flat home sales. The San Antonio real estate market is in high demand. Currently there is a limited supply of housing and it is creating a lopsided sellers market. This allows sellers the benefit of taking multiple bids, and usually higher than the original asking price. San Antonio is a sought after market due to the low interest rates, high job growth, and job stability. It is also a popular tourist destination. People flock to the city to visit The Alamo and to stroll down the Downtown River Walk, which highlights the city’s downtown culture.

El Paso TX real estate has a modest home value of $110,400, making it an affordable option for young first time homebuyers. The home values have declined in the past year but it’s been less than 1%. Zillow predicts that these prices will rise 3.7% in the next year. The El Paso market receives a good amount of support from the local economy. Compared to other markets the city’s employment is strong. The 1-year job growth is 2.3%, which outpaced the national average by nearly half a percentage point. El Paso real estate investing benefits from the average amount that homeowners spend on mortgages; homeowners spend less than 10% of their monthly income on mortgage premiums. The rest of the country spends about 15%. So while El Paso isn’t keeping up with the rate increase in home prices like other cities in the state it is still heading in the right direction. Real estate in the city should continue to benefit from a strengthening job market in the upcoming year.

Check out Neighboring Competitors to the Texas Housing Market

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