Real estate experts expect the Dallas-Fort Worth housing market to continue to cool down. What they’re not anticipating is a 2008-style housing crash.
“If you’ve been reading the national press and so forth, they’ll tell you the sky is falling,” Jim Gaines, an economist at the Texas Real Estate Research Center at Texas A&M University, told a crowd of real estate agents Friday at the MetroTex Association of REALTORS®’ annual housing forecast. “Well, I’m here to tell you the sky isn’t really falling; it’s raining.”
August home sales sank 10% year over year in August, the third consecutive month of sales declines, according to the Texas Real Estate Research Center and North Texas Real Estate Information Systems data.
Gaines said it is debatable whether the economy is currently in a recession. The country has had two consecutive quarters of negative gross domestic product growth, an indicator of a recession, but the nation and especially Dallas-Fort Worth are still adding jobs. He projects the DFW metro area will have year-over-year job growth 6% in 2022, up from 4.7% in 2021.
He added that even if this is a recession, Texas has been resilient through the last three U.S. recessions. Gaines said the U.S. economy is working to revert to normal after an unhealthy level of inflation. In housing, he said, there will not be a wave of foreclosures and problems unless millions of jobs are lost.
“We’re not going to go through another 2008 downturn because the lenders have not gone hog wild making loans,” Gaines said. ”They’re still employing fairly conservative and rigorous underwriting standards and not making the crazy subprime loans.”
Jessica Lautz, vice president of demographics and behavioral insights for the National Association of REALTORS®, said at the event that the housing market has regained some equilibrium since March. Nationally, homes received an average of 2.5 offers in August, compared with 3.8 offers a year earlier.
“The last few years were really frenzied, they were crazy,” she said. ”They weren’t good, they weren’t healthy.”
This downturn is different from the Great Recession in three ways, according to Lautz: The U.S. housing market has been underbuilt for 15 years, mortgage loans are much more difficult to obtain and there are lots of millennials who want to buy as well as older adults staying in place.
Lautz said sales will be lower in the next 18 months and that mortgage rates will continue to go up, decreasing the amount of buyers. The lack of available housing inventory will keep prices up, she said.
“Moving into next year, yes, [we’ll see] slower sales activity, but home prices are still gaining,” Lautz said.
Phil Crone, executive director of the Dallas Builders Association, described the change in the market in his presentation as “the great normalization” as builders pull back from record levels of construction during the pandemic. He said builders pushed through supply chain challenges, labor shortages and permitting delays to deliver as many homes as they could when demand was sky high, and now they are stuck with a large amount of inventory.
“A lot of them said, ‘You know what, forget about it, we just have to power through it and get this thing done, and do whatever it takes,’ ” Crone said. “Now the sentiment’s starting to change.”
Crone said that as supply chain and labor challenges continue and buyer demand has waned, builders are worried about getting the record number of homes under construction in the area completed and sold. He said anecdotally he’s hearing that builders are seeing a deal cancellation rate of about 15% to 20%. Numbers from housing market data firm Zonda show that windows, doors, garage doors, HVAC equipment and appliances are seeing the most serious shortages. “A lot of builders are very worried right now,” Crone said. “They pushed all their chips in to try to keep up with demand … and now there’s a whole bunch of inventory being built out there.”
Source: Dallas Morning News