Thursday, September 13, 2012

Dallas-Fort Worth’s Rosy Housing Market Has a Few Thorns

   Sales of new and pre-owned houses are rebounding sharply this year, and prices are moving higher again. And real estate agents are reporting that in some cases, they are seeing what amounts to bidding wars for choice properties.
By all counts, Dallas-Fort Worth is seeing one of the strongest housing market turnarounds in the nation, a sharp contrast to the declines this sector saw during the recession.

So what could go wrong?
Like everything else, it depends on jobs, the experts agree. “It’s all about the economy,” said Bernard Weinstein, an economist at Southern Methodist University. “The downside risk is that we slip into a double-dip recession or something like it.”
As long as companies keep adding jobs in the D-FW area and folks keep moving here from California and elsewhere, demand for homes will grow. Uncertainties about the world economy and political catfights in Washington could also hold back homebuying, economists say.
“The risk out there is that the broader economy still hasn’t caught fire,” said Alex Villacorta, director of research and analytics at Clear Capital, a California-based housing analyst. “With the election cycle heating up and unemployment still historically high, it could put a damper on things.”
And Villacorta observes that the double-digit increases in housing activity in some markets, including Dallas, are coming off a very low point and probably won’t last. Pre-owned home inventories have declined to just a five-month supply in North Texas, the lowest level in a decade. And there are just 2,735 finished new homes available, a record low.

A shortage of lots and a potential lack of labor could keep the lid on home construction, Crowe warns. If that happens, prices could spike.

“As long as new homebuilding can respond to demand, house prices cannot rise much faster than cost of supply,” Crowe said. “When demand overwhelms that ability, then you get [what the market saw in] 2004 and 2005.” That was when home prices went crazy and fueled a bust.

Steve Brown 
Real Estate Editor
Dallas Morning News