As Interest Rates Increase, Housing Market to Remain Hot

Just the Facts

Frisco May Get Dallas Cowboys

The Dallas Cowboys reportedly are in final talks to move from Valley Ranch to Frisco.   Irving has been the Cowboys home for 28 years, but Frisco has the space and financial incentives to move the team north.   It appears the new facility will be part of the Frisco Station project, on the northwest corner of Warren Parkway and Dallas North Tollway.  Houston-based Hines Development recently unveiled plans to develop office, shopping and residential on the 317-acre site.  Preliminary indications are the Cowboys would make the move before the start of the 2016 season.

-          Dallas Morning News, July 23, 2013

Stellar Year for Home Sales in DFW

Dallas needs more housing as the market continues to be very tight.   Over 104,000 jobs have been created in the DFW area in the past 12 months, and based on that number new construction should be double what it currently is.   All of this makes for continued home price increases and quick turnaround of inventory.   The three hottest markets in North Texas based on the shortest time to sell continue to be The Colony, 32 days; Coppell 36 days; and Grapevine 37 days.    When calculated for only the moderate price ranges in Coppell and Grapevine, the time to sell drops below 21 days.

-          Dallas Morning News, July 19, 2013

As Interest Rates Increase, Housing Market to Remain Hot

Economists are not worried that higher interest rates will undercut the housing recovery.  Mortgage rates are still at historically low levels, and home prices remain relatively affordable despite the price increases of the past year.  In addition, higher mortgage rates will encourage potential buyers to come off the sidelines and purchase homes before rates rise further.

-          Dallas Morning News, July 23, 2013

First Time Homebuyers Drop to 28% of Market

For the last several years during the Great Recession, first-time homebuyers typically made up 40% of all buyers, peaking in 2009 at 50% of buyers.   With the improving market that percentage has changed considerably.  As more repeat homebuyers are now selling their homes and buying a larger home, the move-up buyer is now the largest segment of the housing market – for the first time since 2006.   The first-time homebuyers are still strong, and in fact their numbers have not dropped.  It is just that the increased number of buyers have come from the move-up demand.

-          Dallas Morning News, July 23, 2013

As Interest Rates Rise…… …Those Low FHA & VA Interest Rate Loans Are Assumable ……….and Valuable

As Interest Rates Rise……

…Those Low FHA & VA Interest Rate Loans Are Assumable

……….and Valuable

Not many buyers have assumed a mortgage in the past 25 years. Most people think it was because FHA and VA in the late 80’s began to require that buyers qualify for the assumptions. Not having to qualify for a mortgage would certainly benefit certain buyers. 

If a homeowner must qualify for an assumption like a new loan, they'll generally choose the mortgage with the lower interest rate.  Over the past 25 years, rates have been trending down but it appears that rates have bottomed out and will gradually increase.   As they continue to rise, the lower rates on the FHA and VA loans created in the last few years will appeal to buyers even if they do have to qualify for the assumption.

There are significant advantages to assuming one of these government insured mortgages if the current interest rate on a new loan is higher:

1. Mortgage is further into amortization schedule
2. Lower interest rate loans amortize faster than higher interest rate loans
3. Lower closing costs than a new mortgage
4. Easier to qualify than on a new mortgage
5. No appraisal required

FHA assumptions are only allowed as owner-occupied residents. The borrower must meet current FHA guidelines for borrowers. The total debt ratio including house payment to be assumed cannot exceed 41% of borrowers’ monthly gross income.
VA loans are also assumable with buyer qualification. However, in order for the veteran Seller to have their eligibility reinstated, the buyer must also be a veteran with eligibility.

A 1% difference in the current rates and a lower assumable mortgage rate begins to make it very attractive to assume a mortgage. When the differential becomes even greater, assumptions will become more prevalent than they’ve been in over twenty years.

-          Pat Zaby

Surging Interest Rates Will Not Slow Market

Just the Facts

Rates Will Have to Pass 7% Before Housing Slows

The rise in interest rates may only accelerate the market as buyers on the fence begin to buy, feeling the pressure of rising interest rates.  Major economists agree that rates will have to surpass 7% before there is a slow-down in the real estate market.  And even then with the pent-up demand, the market should continue briskly.   History shows that when rates went from 7% to 18% in 1979-1981, the housing market showed no signs of slowdown until about 12%.

-          Dallas Morning News, June 21, 2013 (excerpts)

Surging Interest Rates Will Not Slow Market

Surging mortgage rates may have little effect on the housing market, at least in the near term, housing experts say.  Mortgage rates rose sharply last week following comments from Federal Reserve Chairman Ben Bernanke that the Fed will begin tapering off its assets purchases later this year if incoming data continues to show the economy is on the mend.  The average cost of a 30-year fixed-rate mortgage loan increased to 4.36% on June 21^st, from 3.94% on June 14^th, and a record low of 3.36% in December according to Bankrate.com.

-          Inman News, June 24, 2013

Which Real Estate Brand Comes to Mind?

The Texas Boom is Here to Stay!

Just the Facts

The Texas Boom is Here to Stay!

Texas Net Job Gain:  1,068,900

The Other 49 States Net Job Gain:   1,244,700

The Texas boon has only begun.  Virtually all economists agree that Texas has so many things going for it that the extraordinary growth of Texas will continue for many years.  Our governor touts the Texas story all over the nation, much to the chagrine of numerous other governors.  But the facts are clear.  Low taxes, low regulation and a balance budget brings jobs, not to mention the pro-business, can-do attitude in Texas.   And jobs bring people.

-          Facebook, June 15, 2013

The Texas Housing Rebound to Continue

The Texas housing rebound shows no sign of letting up, but the rapid rise in home prices could taper off, according to a new report by the Federal Reserve Bank of Dallas.  “Stronger-than-average employment growth and consistent in-migration should continue boosting demand for homes,” business economist D’Ann Peterson said in the Dallas Fed’s Southwest Economy quarterly report.

-          Dallas Morning News, June 15, 2013

DFW Area Gains One Million Every 7 Years

The U.S. Census reports that the DFW Metro, now the 4^th largest in the nation, is set to have a net gain of over one million people every seven years.   This is expected to continue for the next 25 years.

-          U.S. Census

America’s Highest Earning Cities

America’s Highest Earning Cities

Survey of 562 cities, population over 50,000

Congratulations to Flower Mound, Frisco and Allen

There are 16 cities in the United State with populations over 50,000 where more than 50% of the households in the city earn more than $100,000 per year.  California and Texas dominate this list of high-earners.  Most of these cities are well-to-do suburbs of large metro areas, including Dallas-Ft Worth, San Francisco, Atlanta and Chicago.

Rank	City/CDP	Larger metro area	Percentage of households making over $100,000	Percentage of households making less than $100,000	Percentage of households making $100,000 to $149,999	Percentage of households making $150,000 to $199,999	Percentage of households making $200,000 or more
1	San Ramon, California	San Francisco	63.50%	36.50%	22.10%	16.40%	25.00%
2	Flower Mound, Texas	Dallas-Fort Worth	62.80%	37.10%	28.30%	15.90%	18.60%
3	Pleasanton, California	San Francisco	59.80%	40.00%	22.80%	14.70%	22.30%
4	Yorba Linda, California	Los Angeles	58.80%	41.20%	23.50%	16.70%	18.60%
5	Carmel, Indiana	Indianapolis	58.40%	41.60%	20.90%	14.30%	23.20%
6	Palo Alto, California	San Francisco	57.80%	42.10%	17.70%	11.90%	28.20%
7	Newton, Massachusetts	Boston	55.40%	44.60%	18.00%	11.70%	25.70%
8	Naperville, Illinois	Chicago	54.80%	45.10%	18.50%	13.50%	22.80%
9	Frisco, Texas	Dallas-Fort Worth	53.70%	46.30%	25.70%	14.70%	13.30%
10	The Woodlands CDP, Texas	Houston	53.40%	46.70%	24.70%	13.40%	15.30%
11	Johns Creek, Georgia	Atlanta	52.10%	48.00%	21.20%	10.40%	20.50%
12	Ellicott City CDP, Maryland	Baltimore	51.70%	48.30%	16.80%	16.40%	18.50%
13	Allen, Texas	Dallas-Fort Worth	51.20%	48.90%	24.50%	16.10%	10.60%
14	Lake Forest, California	Los Angeles	50.70%	49.30%	26.70%	13.70%	10.30%
15	Highlands Ranch CDP, Colorado	Denver	50.50%	49.40%	25.60%	12.70%	12.20%
16	Arlington CDP, Virginia	Washington, DC	50.30%	49.80%	18.10%	12.90%	19.30%

Data was obtained from the U.S. Census. 562 cities were included in this analysis.

-          NerdWallet, April 29, 2013

Benefits of Buying New Construction

Benefits of Buying Now

If you are considering buying a newly constructed home, now is the perfect time. According to data from the Census Bureau and Department of Housing and Urban Development's 2011 American Housing Survey, the National Association of Home Builders (NAHB) found that buyers can purchase a higher-priced, newer home and achieve the same annual operating costs as an older, existing home.
NAHB's study first looked at how utility, maintenance, property tax, and insurance costs vary depending on the age of the structure. It found that homes built before 1960 have average maintenance costs of $564 a year, while a home built after 2008 averages $241. Similarly, operating costs average nearly 5 percent of the home's value for pre-1960 structures, while they average less than 3 percent when the home was built later than 2008.
The study then compared the first-year, after-tax cost of owning a home by the year the house was built, taking into account the purchase price, mortgage payments, annual operating costs, and income tax savings. This data showed that a buyer can afford to pay 23 percent more for a new house than for one built before 1960 and still maintain the same amount of first-year annual costs.
While mortgage payments may be greater with the higher purchase price of a newly built home, the lower operating costs mean the home buyer will have annual costs that are about the same as if they'd bought a lesser-priced, older home with a smaller mortgage payment and higher operating expenses.
Many factors determine the choice between a new or existing home. While newly constructed houses often include open-space floor plans, abundant storage options and home entertainment centers, houses in established neighborhoods may feature mature landscaping and trees, handcrafted built-ins and distinctive exteriors. The decision is unique for each home buyer.

DFW Area Home Resales Set All-Time Record

Just the Facts

Area Home Resales Set All-Time Record

The sale of pre-owned homes in North Texas were up 23% in May from 2012 levels.  Real estate agents sold 9,197 pre-owned single family homes in May – the most ever in one month.  The number of new listings rose 8%.  But the total number of houses for sale in the metro area is still down 22% from May 2012.  “With sales remaining strong and inventory remaining very low, I think we will continue to see increasing prices this year,” said David Brown, president of the Metrostudy Inc. Dallas office.  The median price of pre-owned homes sold by Realtors in North Texas rose in May to a record $180,000.   This 11% increase over May 2012 brings the area’s median price of homes to about 16% higher than the peak in mid-2007, before the Great Recession.

-          Dallas Morning News, June 11, 2013

RE/MAX DFW Associates Up 55%

RE/MAX DFW Associates was up 55% in May, which broken down was a 37% increase in closed units and an 18% increase in average sold price.     According to NTREIS, the North Texas area was up a combined 34%, which was a 23% increase in homes closed and a 11% increase in home sale prices.

The Housing Boom is Nationwide

-          65% - percentage of sales in Miami close with all cash, no financing

-          50 offers  – the average number of offers per new listing in San Francisco

-          $100,000 cash – the amount over list in Boston for numerous home sales

It is unprecented in U.S. history.   The housing recovery continues unabated across the nation, and the pent-up demand could last for three years.   What is unique to this housing boom is that it is nationwide – all areas of the nation are seeing rapid home price increases and a dwindling available inventory.

-          New York Times, June 9, 2013

Housing Prices Nationwide Rise 12.1% in April

The housing boom is nationwide.  The monumental change represents the biggest year-over-year increase since February 2006 and the 14^thconsecutive monthly increase in prices nationally.  And on a month-to-month bases, home prices increased 3.2% in April over March.  The western states are averaging 20% or more annually in home price increases, with 24.6% increase in Nevada, 19.4% increase in California and 17.3% in Arizona.

-          RISMedia, June 7, 2013

Are We Headed For Another Bubble?

In Texas, absolutely not.   The home prices in Texas average about 20% less than nationwide due to our expanse of available land.  This housing recovery is sorely needed for Texas and other middle America states so that home prices can rise to appropriate levels.  However, East Coast and West Coast may be a different story.   West Coast has a history of rapidly escalating home prices, and then a free fall when the economy or housing market change.    California seems to be known for the “bubble.”

-          Inman News, May 2013 (excerpts)