Higher home prices and a better economy bringing buyers back

admin Dallas Luxury Real Estate for Sale Leave a Comment

STEVE BROWN The Dallas Morning News Real Estate Editor
Published: 22 January 2013 09:09 PM

RelatedDallas-Fort Worth new home prices heading higher
LAS VEGAS — Higher home prices and low mortgage rates are just what’s needed to get consumers off the fence when it comes to homebuying.

The increases in home sales and values that began in 2012 should continue through this year, top economists agree.

Home prices are up nationwide, and in North Texas prices were more than 6 percent higher last year.

“And it’s been the trigger for the demand to return,” said Dave Crowe, chief economist of the National Association of Home Builders.

Crowe and other economists were on hand Tuesday at the industry’s annual exposition in Las Vegas, where as many as 70,000 builders and vendors are expected.

After more than five years of declines, builders are finally more upbeat because the housing market is on the mend in most parts of the country, including the Dallas-Fort Worth area.

“We’ve finally seen national house price increases,” Crowe said. “That’s been the weak part of the market.”

Now that prices are rising in most neighborhoods, consumers are ready to buy again, he said.

“They feel comfortable that if they buy a house, it will continue to appreciate and not depreciate,” Crowe said.

Nationwide, new home starts rose almost 30 percent in 2012 and are expected to show more gains this year, the builders’ industry forecasts.

“We are not going to see an acceleration of growth, but a continuation of growth,” Crowe said.

But it’s enough that the housing sector is once again one of the fastest-growing segments of the economy.

“We are building more houses and doing more remodeling, and that has created jobs and economic activity,” Crowe said. “Housing is finally doing its job in the overall economy.

“It has taken 31/2 years of a recovery for that to happen,” he said.

Along with a modest uptick in prices in most U.S. home markets, the near record low mortgage rates have also given the housing market a boost.

The low rates are likely to continue in 2013, economists promise.

“We have mortgage rates remaining well below 4 percent for all of 2013,” said Frank Nothaft, chief economist at mortgage giant Freddie Mac. “The important stimulus in the housing demand has been the decline in mortgage rates.”

Nothaft said that the weakest housing markets are those left with high inventories of unsold homes — particularly foreclosed houses.

Defaults decline

While foreclosures will drag on, the rate of homeowner defaults has declined, he said.

“With more housing demand, the share of sales that are distressed properties has come down sharply,” Nothaft said. “It’s at the lowest level in more than five years.”

Texas cities, including the D-FW area, have the fortune of being among the healthiest U.S. housing markets coming out of the recession, analysts say.

“The housing market is getting stronger almost everywhere, but it is getting much stronger in certain parts of the country,” said David Berson, senior vice president and chief economist for Nationwide Insurance.

He said that housing demand in states including Texas and North Dakota is outpacing the rest of the nation.

D-FW thrives

With almost 32,000 home starts through November last year, the D-FW area was second only to Houston in total home construction in 2012.

And Texas had twice as many home starts as any other state.

D-FW is expected to see more strong home construction gains this year.

“Dallas should be in the 25 percent area as long as sales continue,” said Dr. James Gaines, an economist with the Real Estate Center at Texas A&M University. “It still won’t get us up to what we call recovered, but it will be another major step in the right direction.”

Lending too tight

The housing sector recovery in Dallas and across the country would pick up speed if residential lenders would loosen their purse strings and lighten tough lending standards, Berson said.

“We were way too loose in the housing boom and are too tight now,” he said. “We need to move back to the middle.

“We expect home sales and housing prices to pick up this year and in coming years, but eventually you will run out of people with 750 credit scores.”

Eventually, mortgage rates will rise from their near rock-bottom level, Berson predicts.

Interest rates

He said that long-term home loan rates of near 3.5 percent “aren’t sustainable over the long run.

“What is sustainable? Mortgage rates around 6 percent,” Berson said. “We will get there, but not next year.”

Those higher rates won’t happen until the nation’s economy is growing faster.

“That will be with an economy with an unemployment rate below 6 percent — one that can better handle higher mortgage rates,” Berson said. “If you have to choose between lower mortgage rates or higher job growth for a healthy housing market, the job growth is almost always more important.”

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.