TEXAS HOUSING INSIGHT

TEXAS HOUSING INSIGHT JAMES P. GAINES CHIEF ECONOMIST WESLEY MILLER RESEARCH ASSOCIATE PAIGE WOODSON RESEARCH INTERN LUIS B. TORRES RESEARCH ECONOMIST TECHNICAL REPORT 2 1 2 0 JUNE 2018 TR

Contents April 2018 Summary... 4 Residential Construction Coincident and Leading Indicator... 7 Net Residential Loans... 7 Single-Family Housing Construction Permits... 8 Texas Housing Construction Permits... 8 Major Metros Single-Family Housing Construction Permits... 9 Housing Starts Per Capita... 9 Total New Private Single-Family Construction Value... 10 Total Months of Inventory... 10 Texas Months of Inventory by Price Cohort... 11 Texas Current Months of Inventory by Price Cohort... 11 Texas Existing and New Home Months of Inventory... 12 Major Metros Existing Home Months of Inventory... 12 Major Metros New Home Months of Inventory... 13 Demand... 13 Housing Sales... 13 Texas Housing Sales by Price Cohort... 14 Major Metros Housing Sales... 14 Texas Homes Days on Market... 15 Texas Home Days on Market by Price Cohort... 15 Major Metros Existing Homes Days on Market... 16 Major Metros New Homes Days on Market... 16 30-Year Mortgage Rate and 10-Year Treasury Yield... 17 Prices... 17 United States Existing and New Home Median Sales Price... 17 Texas Existing and New Home Median Sales Price... 18 Major Metros Existing Home Median Sales Price... 18 Major Metros New Home Median Sales Price... 19 Texas Home Median Price Per Square Foot... 19 Major Metros Existing Home Median Price Per Square Foot... 20

Major Metros New Home Median Price Per Square Foot... 20 Texas Home Sale Price to List Price Ratio... 21 Major Metros Existing Home Sale Price to List Price Ratio... 21 Major Metros New Home Sale Price to List Price Ratio... 22 2

About this Report Real Estate Center economists continuously monitor many facets of the global, national, and Texas economies. Texas Housing Insight is a summary of important economic indicators that help discern trends in the Texas housing markets. All monthly measurements are calculated using seasonally adjusted data, and percentage changes are calculated month-over-month, unless stated otherwise. This monthly publication provides data and insights on the Texas housing markets. We hope you find them useful. Your feedback is always appreciated. Send comments and suggestions to info@recenter.tamu.edu. Dr. James Gaines, Dr. Luis Torres, Wesley Miller, and Paige Woodson Data current as of May 30, 2018 2018, Real Estate Center. All rights reserved. 3

April 2018 Summary Housing supply factors flattened as Texas builders grappled with rising production costs. In response to structural imbalances in the single-family market, investment poured into multifamily structures to capitalize on the state s population growth. Relentless demand for homes priced under $300,000 augmented single-family home shortages. On a positive note, home price appreciation moderated following a multiyear stretch of outpacing income growth. The gap between Texas income and home-price growth must continue to narrow to reverse waning affordability conditions. Supply* The Texas Residential Construction Cycle (Coincident) Index, which measures current construction activity, reached its highest level since 2008 as industry employment and construction values accelerated. This momentum should continue through the summer months as the Texas Residential Construction Leading Index (RCLI) extended its upward climb. Increases in multifamily building permits and housing starts offset the slacking single-family market, pushing the RCLI up almost a quarter of a percent year over year (YOY). First quarter private bank loan data indicated sustained levels of residential construction investment in Texas. Developers invested record amounts in the apartment market, pushing multifamily loan values above $7.6 billion. Multifamily loans offset a slight decrease in one-to-four unit residential loans, which dipped 1.1 percent to $7.2 billion. After abnormally large spikes during winter, the number of statewide single-family housing construction permits (unweighted) stagnated for the third consecutive month with 10,627 issued (nonseasonally adjusted). Permit activity typically peaks in the spring season. Texas still led the U.S. in permits issued, accounting for 15 percent of the national total. Houston remained the national metropolitan leader, issuing 3,596 nonseasonally adjusted permits this month and amassing 15.2 percent YOY growth. DFW ranked second in the nation with 3,072 monthly permits, led by growth in Tarrant County. Permit activity extended a yearlong stagnation in the Dallas-Plano-Irving metropolitan division. Austin held sixth place in the national ranking with 1,676 monthly permits after lagging last month. San Antonio permits fell back to 660 after last month s temporary spike. Total Texas housing starts jumped to 18,135 units, the most since 2006. Unlike last year s early boom, the single-family market accounted for most of the increase despite sluggish building permits and loan values. The uptick in housing starts failed to boost single-family private construction values, which slid 8.6 percent on the year. Construction values dropped 19.1 and 18.8 percent year to date (YTD) in Austin and DFW, respectively, followed by San Antonio at 13.3 * All monthly measurements are calculated using seasonally adjusted data, and percentage changes are calculated month over month, unless stated otherwise. 4

percent. In Houston, the reconstruction-related stimulus after Hurricane Harvey waned as singlefamily construction values decelerated from 13.6 to 3.1 percent YTD growth. The Texas months of inventory (MOI) inched up to 3.5 months after reaching a record low in February. Around six months of inventory is considered a balanced housing market. Both the newand existing-home markets experienced marginal relief, ending the month with 3.2 and 4.6 MOI, respectively. Improvements occurred primarily for homes priced above $300,000 where supply is more stable. For homes priced between $200,000 and $300,000, the MOI remained suppressed at 2.9 months, down 2 percent on the year; the MOI for homes priced under $200,000 sank for the eighth consecutive month to 2.7 months. These ultra-constrained price cohorts accounted for 69 percent of homes sold through Multiple Listing Services (MLS), illuminating the broad scope of the housing shortage. All of the major metros except San Antonio exhibited a two-month uptick in housing inventory. Slow first-quarter sales activity lifted the MOI to 2.6 and 2.2 months in Dallas and Fort Worth, respectively. Similarly, decreased new-home sales lifted the Austin MOI to 2.5 months. Despite increased transactions in Houston, upward trending active listings pushed the MOI above 3.7 months. On the other hand, housing inventories tied a record low in San Antonio at 3.2 months amid a seven-month slide. Demand Housing sales picked up 3.4 percent after dropping 2.3 percent in the first quarter. Fort Worth and Houston led the charge with 4.9 and 4.8 percent growth, respectively, after disappointing numbers last month. The lack of available homes priced under $300,000 continued to hinder the Dallas market, extending a five-month sales decline despite healthy demand. While the trend has flattened, YOY sales maintained 2.7 percent growth. Similarly, Austin sales fell 6.7 YTD as housing affordability conditions worsened but upheld 5.6 percent growth YOY. San Antonio s robust resale market pushed YTD sales above 5 percent. In fact, San Antonio sold a record high 2,263 existing homes through an MLS this month, outpacing Austin by over 160 transactions. Total housing demand remained strong as activity shifted from the new-home to the resale market. The average days on market (DOM) dropped to 58 days in Texas after peaking above two months at the end of last year. The DOM fell to 55 days in Austin and 56 days in both Houston and San Antonio. North Texas remained the exception, where homes averaged just 43 and 39 DOM in Dallas and Fort Worth, respectively. Statewide, homes priced from $200,000 to $300,000 flew off the market at an average of 52 days, compared to 87 days for homes priced above $500,000. Homes priced under $200,000 accounted for the largest proportion of sales through an MLS at 38 percent and averaged 60 days on the market. This bottom cohort, however, encompasses a diverse mix of sales across the state with varying market characteristics. For example, homes priced under $200,000 accounted for less than 10 percent of Austin s sales but more than 75 percent in El Paso. 5

Robust economic data and rising inflation expectations supported higher interest rates. The tenyear U.S. Treasury bond yield reached 2.87 percent for the first time since 2013, while the Federal Home Loan Mortgage Corporation s 30-year fixed-rate jumped up to 4.47 percent. Despite remaining historically low, rising mortgage rates threaten to augment housing affordability issues, particularly for first-time buyers. Prices The divergence of Texas per capita income and housing prices challenged affordability conditions. The FHFA Housing Price Index indicated that Texas homes rose 1.7 percent in the first quarter, marking a 53 percent increase since 2007. At the national level, home prices increased just 14.5 percent over the same period. The major metros had even larger price spikes. Over the 11-year period, home prices rose 78 and 68 percent in Austin and Dallas, respectively. Dallas prices, however, ticked up just 0.6 percent in the first quarter, marking the slowest growth since 2011. The Fort Worth and Houston indices increased 3.0 and 1.1 percent, respectively, revealing a 60 percent increase relative to 2007 in both metros. Meanwhile, San Antonio prices crept up 0.4 percent, rising more than 45 percent above 2007 levels. Despite the overall increase, the Texas median home price balanced around $230,000 for the fourth straight month. The median price actually decreased YTD in Austin ($302,255), Dallas ($280,831), and San Antonio ($217,484). In congruence with the FHFA index, the median price in Fort Worth and Houston rose 2.3 and 4.5 percent this year, respectively. A surge of resale activity stimulated the Houston market while pronounced shortages elevated prices in Fort Worth. The statewide median price per square foot (ppsf) rose for the eleventh consecutive month to $115.17. Houston s ppsf rose $3.61 YTD to a record high $109.42, still below the other major metros. On the other hand, Austin maintained the highest ppsf at $152.75 after rising nearly $3.00 through the first four months of the year. Prices moderated in North Texas, ticking down to $131.40 and $117.54 in Dallas and Fort Worth, respectively. At this time last year, the Dallas ppsf was gravitating towards Austin s level but has since moderated to a more gradual trajectory. San Antonio exhibited a similar growth pattern inching up just 1 percent YTD to $112.59. 6

Supply 110 100 Residential Construction Coincident and Leading Indicator (Index Jan 2007 = 100) TX Coincident Index US Coincident Index TX Leading Index 90 80 70 60 50 40 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Note: Trend-Cycle Component. Sources: Real Estate Center at Texas A&M University and Federal Reserve Bank of Dallas 400 350 300 1-4 Family Loans Multifamily Loans Net Residential Loans (Index 1Q07 = 100) 250 200 150 100 50 0 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 Note: Trend-Cycle Component. Source: Federal Deposit Insurance Corporation 7

110 100 Single-Family Housing Construction Permits (Index Jan 2007 = 100) United States Texas 90 80 70 60 50 40 30 20 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Note: Trend-Cycle Component. Sources: U.S. Census Bureau and Real Estate Center at Texas A&M University Oct-10 Mar-11 Aug-11 Jun-12 Nov-12 Sep-13 Feb-14 Dec-14 May-15 Mar-16 Aug-16 Jun-17 Nov-17 160 140 120 Single Family Units 5+ Family Units Texas Housing Construction Permits (Index Jan 2007 = 100) 2-4 Family Units 100 80 60 40 20 0 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Note: Trend-Cycle Component. Sources: U.S. Census Bureau and Real Estate Center at Texas A&M University Oct-10 Mar-11 Aug-11 Jun-12 Nov-12 Sep-13 Feb-14 Dec-14 May-15 Mar-16 Aug-16 Jun-17 Nov-17 8

Major Metros Single-Family Housing Construction Permits (Index Jan 2007 = 100) Note: Trend-Cycle Component. Fort Worth is missing data for Somervell County. Sources: U.S. Census Bureau and Real Estate Center at Texas A&M University 110 100 90 Housing Starts Per Capita (Index Jan 2007 = 100) United States Texas 80 70 60 50 40 30 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jun-12 Nov-12 Sep-13 Feb-14 Dec-14 May-15 Mar-16 Aug-16 Jun-17 Nov-17 Note: Trend-Cycle Component. Sources: U.S. Census Bureau and Bank of Tokyo-Mitsubishi UFJ 9

325 300 275 250 225 200 175 150 125 100 75 Texas Total New Private Single-Family Construction Value (Index Jan 2011 = 100) Austin-Round Rock Dallas-Fort Worth-Arlington Houston-The Woodlands-Sugar Land San Antonio-New Braunfels Note: Inflation adjusted. Trend-Cycle Component. Source: Dodge Analytics 10 9 8 7 Total Months of Inventory (Months) United States Texas 6 5 4 3 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jun-12 Nov-12 Note: Trend-Cycle Component. Months of inventory for the United States is estimated using weights for all existing homes and new single-family homes; new nonsingle-family homes are not included. Texas includes all existing and new homes. For more information, see Months of Inventory. Sources: U.S. Census Bureau, National Association of Realtors, and Real Estate Center at Texas A&M University Sep-13 Feb-14 Dec-14 May-15 Mar-16 Aug-16 Jun-17 Nov-17 10

18 16 14 12 Texas Months of Inventory by Price Cohort (Months) $0-$199,999 $200,000-$299,999 $300,000-$399,999 $400,000-$499,999 $500,000+ 10 8 6 4 2 Note: Trend-Cycle Component. 10 9 8 7 Texas Current Months of Inventory by Price Cohort (April 2018) 9.2 6 5 4 3 2.7 2.9 4.1 4.9 2 1 0 $0 - $200K $200K - $300K $300K - $400K $400K - $500K $500K+ Note: Seasonally adjusted. 11

9 8 Texas Existing and New Home Months of Inventory (Months) Existing Months of Inventory New Months of Inventory 7 6 5 4 3 2 1 0 Note: Trend-Cycle Component. 10 9 8 7 6 5 Major Metros Existing Home Months of Inventory (Months) Austin-Round Rock Dallas-Plano-Irving Fort Worth-Arlington Houston-The Woodlands-Sugar Land San Antonio-New Braunfels 4 3 2 1 Note: Trend-Cycle Component. 12

6.5 6.0 Major Metros New Home Months of Inventory (Months) Austin-Round Rock Fort Worth-Arlington San Antonio-New Braunfels Dallas-Plano-Irving Houston-The Woodlands-Sugar Land 5.5 5.0 4.5 4.0 3.5 3.0 Note: Trend-Cycle Component. Demand 115 110 105 100 95 90 85 80 75 70 65 60 55 Housing Sales (Index Jan 2007 = 100) United States Texas Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jun-12 Nov-12 Sep-13 Feb-14 Dec-14 May-15 Mar-16 Aug-16 Jun-17 Nov-17 Note: Trend-Cycle Component. Sales for the United States include all existing homes and new single-family homes sold through an MLS; new non-single-family homes are not included. Texas includes all existing and new homes. For more information see Housing Sales. Sources: U.S. Census Bureau, National Association of Realtors, and Real Estate Center at Texas A&M University 13

450 400 350 300 $0-$199,999 $200,000-$299,999 $300,000-$399,999 $400,000-$499,999 $500,000+ Texas Housing Sales by Price Cohort (Index Jan 2011 = 100) 250 200 150 100 50 Note: Trend-Cycle Component. 145 130 115 Austin-Round Rock Dallas-Plano-Irving Fort Worth-Arlington Houston-The Woodlands-Sugar Land San Antonio-New Braunfels Major Metros Housing Sales (Index Jan 2007 = 100) 100 85 70 55 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jun-12 Nov-12 Sep-13 Feb-14 Dec-14 May-15 Mar-16 Aug-16 Jun-17 Nov-17 Note: Trend-Cycle Component. 14

110 Texas Homes Days on Market (Days) Existing Home Days on Market New Home Days on Market 100 90 80 70 60 50 Texas Home Days on Market by Price Cohort (Days) 135 125 115 105 $0-$199,999 $200,000-$299,999 $300,000-$399,999 $400,000-$499,999 $500,000+ 95 85 75 65 55 45 15

105 95 85 75 Major Metros Existing Homes Days on Market (Days) Austin-Round Rock Dallas-Plano-Irving Fort Worth-Arlington Houston-The Woodlands-Sugar Land San Antonio-New Braunfels 65 55 45 35 25 130 120 Major Metros New Homes Days on Market (Days) Austin-Round Rock Fort Worth-Arlington San Antonio-New Braunfels Dallas-Plano-Irving Houston-The Woodlands-Sugar Land 110 100 90 80 70 16

7.00 30-Year Mortgage Rate and 10-Year Treasury Yield (Percent) Mortgage Bond 6.00 5.00 4.00 3.00 2.00 1.00 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jun-12 Nov-12 Sep-13 Feb-14 Dec-14 May-15 Mar-16 Aug-16 Jun-17 Nov-17 Note: Seasonally adjusted. Sources: Federal Home Loan Mortgage Corporation and Federal Reserve Board Prices 340,000 320,000 300,000 United States Existing and New Home Median Sales Price ($) Existing Home Median Sales Price New Home Median Sales Price 280,000 260,000 240,000 220,000 200,000 180,000 160,000 Source: Federal Reserve Bank of St. Louis 17

310,000 290,000 Texas Existing and New Home Median Sales Price ($) Existing Home Median Sale Price New Home Median Sale Price 270,000 250,000 230,000 210,000 190,000 170,000 150,000 130,000 320,000 300,000 280,000 260,000 240,000 220,000 200,000 180,000 160,000 140,000 120,000 Major Metros Existing Home Median Sales Price ($) Austin-Round Rock Dallas-Plano-Irving Fort Worth-Arlington Houston-The Woodlands-Sugar Land San Antonio-New Braunfels 18

380,000 350,000 320,000 Major Metros New Home Median Sales Price ($) Austin-Round Rock Dallas-Plano-Irving Fort Worth-Arlington Houston-The Woodlands-Sugar Land San Antonio-New Braunfels 290,000 260,000 230,000 200,000 170,000 135 125 115 Texas Home Median Price Per Square Foot ($) Existing Home Median Price PSF New Home Median Price PSF 105 95 85 75 65 19

160 150 140 130 120 110 100 90 80 70 60 Major Metros Existing Home Median Price Per Square Foot ($) Austin-Round Rock Dallas-Plano-Irving Fort Worth-Arlington Houston-The Woodlands-Sugar Land San Antonio-New Braunfels 155 145 135 Major Metros New Home Median Price Per Square Foot ($) Austin-Round Rock Fort Worth-Arlington San Antonio-New Braunfels Dallas-Plano-Irving Houston-The Woodlands-Sugar Land 125 115 105 95 85 75 20

0.98 Texas Home Sale Price to List Price Ratio (%) 0.97 0.96 0.95 0.94 0.93 0.92 0.91 Existing Home Sale-to-List Price Ratio New Home Sale-to-List Price Ratio 0.90 0.99 Major Metros Existing Home Sale Price to List Price Ratio (%) 0.98 0.97 0.96 0.95 Austin-Round Rock 0.94 Dallas-Plano-Irving 0.93 Fort Worth-Arlington 0.92 Houston-The Woodlands-Sugar Land 0.91 San Antonio-New Braunfels 0.90 21

0.99 Major Metros New Home Sale Price to List Price Ratio (%) 0.98 0.97 0.96 Austin-Round Rock 0.95 Dallas-Plano-Irving 0.94 Fort Worth-Arlington 0.93 Houston-The Woodlands-Sugar Land 0.92 San Antonio-New Braunfels 0.91 22

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