Dallas Area Market Trends
Home price appreciation in the Dallas area and across the country continued to slow in June as more homes were listed for sale.
Prices of preowned homes in the area rose 8 percent from a year earlier — the slowest growth rate in 12 months, according to the latest Standard & Poor’s/Case-Shiller Home Price Index released Tuesday.
Home prices rose an average of 8.1 percent in 20 big cities tracked by Case-Shiller. Prices nationwide were up 6.2 percent in a new monthly index that previously was only published quarterly.
Market analysts had expected appreciation to slow after months of double-digit increases. Dallas-area home price gains topped 10 percent earlier this year.
Home price gains are a key indicator of economic health, reflecting growing consumer confidence, increased spending, strong job growth and the interstate movement of people. This month, U.S. consumer confidence hit its highest point in nearly seven years, the Conference Board reported Tuesday.
“Home price gains continue to ease as they have since last fall,” said David Blitzer, chairman of S&P’s Index Committee. “For the first time since February 2008, all cities showed lower annual rates than the previous month.”
The biggest year-over-year price gains among the 20 cities were in Las Vegas (15.2 percent), San Francisco (12.9 percent) and Miami (11.5 percent) — all areas where the housing market was hit hard by the recession. Cleveland saw the smallest gain (0.8 percent).
“An 8 percent appreciation rate is a sign of a hyperactive housing market that doesn’t have enough inventory to meet demand,” Mark Dotzour, chief economist for Texas A&M University’s Real Estate Center, said about Dallas. “And a huge labor shortage will make it tough to build enough homes.”
Low housing inventory has driven up prices. The number of homes for sale on the Multiple Listing Service has been below 3 months’ worth since the start of 2013, according to data from Texas A&M. The Dallas area has not seen its historical norm of 6.5 months of inventory since mid-2011.
However, supply appears to be loosening a bit, which may be driving down price appreciation. The Dallas area’s inventory rose from a low of 2.1 months in January to 2.5 months in June.
Texas A&M data also shows that the average price of a Dallas-area house sold through the MLS was $271,200 in June. That month, 6,383 Dallas-area homes sold — the most since June 2006.
Another factor is mortgage rates, which are still very low today at 4.1 percent for a 30-year fixed rate. But “bargain-basement mortgage rates won’t continue forever,” Blitzer said. “Recent improvements in the labor markets and comments from [Federal Reserve Chairwoman] Janet Yellen and others hint that interest rates could rise as soon as the first quarter of 2015.”
As rates rise, they’ll “further dampen price gains,” but it won’t be catastrophic, Blitzer said. He estimates mortgage rates will rise a quarter percentage point to a half percentage point.
Industry analysts say other upbeat housing indicators, such as starts and existing home sales, point to a return to a more normal housing market. Researchers at Case-Shiller and CoreLogic Inc., a real estate research firm, predict that annual appreciation will slow to a more sustainable pace of about 4 percent for Dallas and the nation by year’s end.
Still, home prices have hit new all-time highs in Dallas and Denver, while the 18 other Case-Shiller cities are still below their 2006-07 peaks, Blitzer said. Moreover, Dallas-area prices are 25 percent higher than the bottom of the recession in February 2009.
What distinguishes Dallas? “The underlying growth in the Texas economy is better than the nation,” Blitzer said. He also explained that Dallas didn’t rise as high in the pre-recession boom, so it didn’t fall as far. Also, the area’s diverse economy wasn’t overly dependent on real estate, as it was in Phoenix.