We are more than halfway through November, with the end of the year right around the corner. So the Home Buying Institute is looking ahead to 2014 with an eye on local housing-market conditions.
This report focuses on the six largest real estate markets in Texas, including Houston, San Antonio, Dallas, Austin, Fort Worth and El Paso. Here are some predictions and trends for each of these markets in 2014.
All Texas Housing Markets Stable in 2014
Let’s start with the statewide trends and then drill down to the metro level. Currently, all of the major real estate markets in Texas look to be stable in 2014. Residents of the state might actually take this for granted, not realizing that home prices are still stagnant or falling in some U.S. cities.
Real estate markets like Austin, Dallas and Houston were largely shielded by the housing crisis. There was very little speculation in these markets during the boom years, compared to the likes of Phoenix, Las Vegas, and Southern California. As a result, home prices in most Texas cities were comparatively stable during the downturn.
The fall season typically marks a slowdown for the real estate industry, as the “summer surge” of home buying tapers off. But not in Texas. Not this year. According to the Texas Association of REALTORS® (TAR), a total of 80,105 single-family homes were sold in the third quarter of this year, statewide. That’s an increase of nearly 19% over the same period last year. That was also the highest quarterly sales volume in Texas since TAR began issuing the report in 2009.
“Demand for Texas homes remains strong and prices are increasing, keeping buyers and sellers in the market,” said TAR chairman Shad Bogany.
According to Realtor.com’s monthly housing summary, the median asking price has risen, year over year, in all Texas metro areas. Houston leads the pack with an annual gain of 12.76%, from September 2012 to September 2013.
According to TAR’s data, average home prices across the state rose by 11.06% from the third quarter of last year to the same period in 2014.
For real estate markets like Houston, Dallas and Austin, inventory was the big story of 2013. It will continue to play a major role in home-price trends in 2014, as well. Austin and Dallas had less than three months of inventory, when TAR published its quarterly housing report for the third quarter of 2013. That’s well below the historical average for supply, and it sets these housing markets up for additional price gains in 2014.
Our real estate prediction for Texas in 2014: The Home Buying Institute expects to see additional price gains next year, for all major metros including Houston, Dallas, San Antonio, Fort Worth, Austin, and (to a lesser extent) El Paso. With that said, the gains will likely be more modest than those seen in 2013, due to eventual supply-side changes.
Houston, We Have Lift Off
According to the real estate information service Zillow, the median list price in Houston rose 26.7% from October 2012 to October 2013. Realtor.com reports a more modest gain of 12.76% during roughly the same period. Different companies, different sets of data. But either way you slice it, the trend is clear. Houston’s housing market made large gains in 2013.
The 2014 outlook for this real estate market is also positive. We expect to see additional price gains in 2014, as the result of inventory reduction that occurred this year.
The total number of homes for sale in the Houston metro area has dropped steadily over the last 12 months or so. In September 2013, the inventory level for this market fell to just 3.2 months of supply, down from 4.7 months at the same time last year.
In October, the Housing Association of Realtors (HAR) reported a 23.5% year-over-year increase in home sales. According to HAR chairman Danny Frank, this metro area “continues to benefit from a confluence of very positive economic forces: strong job growth, low interest rates and reasonable home prices compared to other parts of the country.”
Prediction for 2014: Lower inventory levels, along with rising levels of demand, will push Houston real estate values higher in 2014. We may not see the dramatic changes seen in the last year. But homeowners in this metro area can probably expect a healthy level of appreciation over the coming months.
San Antonio Real Estate Trends and Outlook
What’s in store for the San Antonio real estate market in 2014? Over the past 12 months, housing supply has fallen while demand has risen. This will likely lead to home-price gains over the course of the next year.
According to Realtor.com’s monthly housing report, the total number of homes for sale in San Antonio dropped by more than 9% over the last 12 months. This forces buyers to compete for fewer properties, a market trend that typically puts upward pressure on prices.
Between the 2010 and 2012 U.S. Census counts, San Antonio’s eight-county metro area gained about 91,000 new residents. Population growth will likely continue over the next few years, as well. Meanwhile, the unemployment rate is falling due to continued job growth. These trends bode well for San Antonio’s real estate market in 2014. According to a recent study by CareerBuilder, San Antonio is expected to have “the fastest rate of high-wage growth,” among the 52 largest metro areas in the country.
As a result of population and job growth, there will be a larger pool of home buyers in the market next year. This will increase demand and put upward pressure on home prices.
The median list price for this area (the midpoint for sellers’ asking prices) rose more than 10% in the last year. This is a natural extension of the supply and demand changes described above. Given these trends, it would not be surprising to see annual home-price gains of around 6% to 7% in 2014.
Dallas: Big Home-Prices Gains in the Big D
Dallas is one of 20 U.S. cities included in the S&P/Case-Shiller 20-City Composite, a widely cited home-price index published every month. According to the company’s October report, Dallas home prices were up 9%, year over year.
In October 2013, Realtor.com ranked Dallas, Texas as one of its top 10 “Turnaround Towns” for the third quarter. The ranking was based on the acceleration of home sales and prices within the metro area, along with a year-over-year reduction in inventory.
The Dallas housing market also has the distinction of being one of the few metros in the country where home prices have risen above their pre-crisis peaks. It bears repeating: House values in this metro area are currently higher than they were at the height of the national housing bubble. Less than a handful of U.S. cities can say that.
Some feel the Dallas real estate market is currently overvalued and on the verge of becoming a bubble. According to Trulia’s “Bubble Watch” report for the fourth quarter of 2013, Dallas home prices are overvalued “relative to their fundamental value by comparing prices today with historical prices, incomes, and rent.” On the other hand, inventory has fallen significantly in this market, and that trend will likely continue into the first part of 2014 or beyond. So we just don’t see the bubble in this city.
Our prediction for the Dallas real estate market in 2014 calls for additional, but more modest, price gains. Over the course of the next year, the inventory situation will probably level off, giving home buyers more choices. This could have a cooling effect on the market.
Austin: A Positive Real Estate Outlook for 2014
I lived in the Austin metro area before and during the housing crash, and I can tell you there was very little real estate drama. Yes, home prices dipped a little due to the tightening of mortgage credit and subsequent reduction in buyer activity. But prices quickly stabilized. That’s because the Austin real estate market, like other Texas metros, didn’t have far to fall. There were no speculation-driven price bubbles, as there were in other parts of the country.
Fast forward to today. Over the last year or so, home prices in the Austin real estate market rose by 10% to 12%, depending on the source. According to Coldwell Banker’s latest Home Listing Report, released on November 6, Austin now has the highest average home price in the entire state of Texas, even ahead of the DFW town of Flower Mound (which typically tops the list).
The question is, how long can it last. Will the current level of appreciation continue into 2014? Or, will it level off into more modest gains? Our prediction is that the Austin real estate market of 2014 will look much like the current one, but with a smaller dose of everything. Prices will probably rise through 2014 as they’ve done this year, but the gains won’t be as steep. Inventory may continue to decline into the first quarter of 2014, but it will likely level off by midyear.
Jobs and population growth will continue to drive the housing market in Austin. In August, the unemployment rate for the Austin-Round Rock-San Marcos metropolitan area fell to 5.2%, a full 2% lower than the national average at the same time. This makes the city a haven for job-seekers from all over the country. Along with Denver, Portland and Houston, Austin is now one of the top destinations for millennials (roughly, age 25 – 34). All of this growth will sustain, and likely increase, demand for housing in 2014.
And then there’s the inventory situation. The Austin real estate market is currently stacked in a way that creates fierce competition for desirable properties. There are plenty of buyers in the market, but not enough homes to go around. Realtor.com reports a 10% decline in the number of homes listed for sale, since the beginning of 2013. This comes on the heels of additional declines that occurred in 2012.
According to TAR’s Texas Quarterly Housing Report: “Of the 47 markets included in the report, 10 have less than 3 months of inventory and that includes several large markets, such as Austin and Dallas.”
Many of these trends will carry over into next year. After all, January is right around the corner. Our forecast for Austin’s real estate market in 2014 includes additional, but more modest, gains in home prices. We expect demand for housing to remain strong, partly due to a growing job market that attracts people from elsewhere in the country (and gives them the income stability needed to purchase a home).
Fort Worth: More Modest Gains Expected
Fort Worth’s real estate market is experiencing some of the same trends seen elsewhere in the state, particularly on the supply side. The number of homes for sale in Fort Worth has dropped 11% over the last year or so, according to Realtor.com’s listing data.
But housing demand is not as strong here, when compared to Austin, Dallas and Houston. So the current price gains, while noticeable, are more modest than those seen in the larger Texas metros. According to Zillow, the median sale price for homes in the Fort Worth area rose by 4.5% over the last year.
A prediction for 2014: CoreLogic, a property data and analytics company, expects Fort Worth home prices to be 7.5% higher in the second quarter of 2014, when compared to the same period in 2013. Other forecasts for this housing market have predicted gains of 6% – 8% during 2014.
El Paso: A More ‘Balanced’ Real Estate Market
Supply is currently meeting demand in the El Paso real estate market, which limits home-value appreciation. But demand is strong and may grow over the coming months, putting upward pressure on home prices.
Inventory is not dropping in El Paso, like it is in Dallas, Fort Worth and Houston. In the larger metros, the number of homes for sale has dropped considerably over the last year or so. Inventory within the El Paso real estate market has been more stable. As a result, home buyers will have more choices and face less competition in 2014, when compared to the larger Texas cities. Home prices will have less impetus to rise.
Given the above factors, El Paso will likely experience more modest gains in 2014, when compared to Houston, Dallas and Austin — but gains nonetheless.
Disclaimers: This story contains 2014 predictions and forecasts for key real estate markets in Texas, including Austin, Dallas, El Paso, Fort Worth, Houston and San Antonio. These forward-looking statements are the equivalent of an educated guess and should not be viewed as facts. We make no guarantees about the future of these, or any other, local markets. Data from third-party sources are deemed reliable but not guaranteed.