According to a report from the Dallas Federal Reserve, the steady arrival of out-of-state transplants, along with the stronger than average employment growth, should keep the housing and apartment sectors in Texas going strong.
Using data from the Census Bureau, D’Ann Petersen and Christina Daly, authors of the report, stated that Texas is the number one state for domestic in-migration. Excluding babies and international migration, Texas saw a net of 140,888 new arrivals from July 2011 to July 2012. In 2012, Houston, Austin, and Dallas attracted close to 38,000 new transplants, which put them in the top five cities for new arrivals.
The demand for apartments strengthened and occupancy rates were above 90 percent in major Texas markets. This demand created the need for more rental construction causing multi-family buildings to rebound above prerecession levels.
After reviewing data from Multiple Listing Services and the National Association of Realtors, the report stated that existing home sales in Texas and in major metro areas increased by more than 33 percent since early 2011. In addition, homeowners are receiving multiple offers, which is driving up the prices of homes. Texas is one of 10 states where prices have surpassed their prerecession highs.
At the end of the first quarter of 2013, home prices in the state were seven percent above the prerecession peak recorded the last quarter of 2007. On a national level, prices remained at 13.8 percent below their 2007 peak. On the other hand, hard-hit states such as Nevada are still at 50 percent below their previous high.
According to the report, Texas home prices are facing less of a threat from shadow inventory and underwater homes. Citing data from the Mortgage Bankers Association, the report concluded that only 1.5 percent of Texas homes are in foreclosure, when compared to the national average of 3.6 percent in the first quarter of this year. Additionally, the number of seriously delinquent mortgages (loans that are past 90 days or more) are at 3.8 percent which is also below the national average at 6.6 percent.
The home inventory in Texas is also low. According to the report, if inventory drops below supply of 6.5 months, historically, prices tend to increase. In April 2013, the supply of homes in Houston dropped to 3.4 months, and fell to 2.6 months in Austin, while national inventory was at 5.1 months.
A couple of great things about Texas is the abundance of land and fewer building restrictions. This allows the state to build quickly enough to meet demand. Once new supply starts getting added to the housing market, price increases will start to ease.