Home Sales Increase by More Than 10%

But don't go popping corks on the Veuve just yet. While it may be true home sales have risen to their highest level in 2.5 years the experts accurately state that this jump in sales was due to many buyers having already been under contract before the first time home buyer tax credit was extended to April of 2010. That being said, we are likely to see stagnant sales over the winter and then they will ramp up as we near the April 2010 tax credit deadline. From the omniscient experts,

Experts forecast that prices will fall again. Most say they will hit a new low next spring, perhaps falling another 5 to 10 percent, as more foreclosures get pushed onto the market.

I've already expressed my concern about the threat of rising and/or continuing foreclosures. And it looks like the experts agree.

A record-high 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September, the Mortgage Bankers Association said last week.

What this means to you, Dear Reader, is that if you are in a neighborhood full of short sales and foreclosures, you may have to wait until 2011 before you see a turn around in prices. If your neighborhood doesn't have that many short sales or foreclosures your home value will still feel the indirect effects of a lousy economy laden with foreclosures. So sit tight. Update that kitchen or the master bath, beef up your landscaping and enjoy your home. And if you get relocated and have to sell then at least your home will be in great selling condition.

NAR Has Fun With Numbers

Feel free to read this somewhat wordy article released today by NAR. Here are some of the highlights.

Existing-home sales are expected to rise 13.6 percent in 2010.

The 30-year fixed-rate mortgage will average 5.3 percent in the fourth quarter, rising gradually to 5.8 percent by the end of next year.

Home prices should rise between 3 and 5 percent in 2010.

The unemployment rate is close to peaking and is projected to ease to 9.5 percent by the end of next year.

All Realtors should be thrilled with the increase in home sales. However, I wouldn't expect Dallas to live up to the price appreciation forecast. We tend to lag behind whatever the country is trending towards. I expect Dallas to remain stable and possibly depreciate 0% to 1% in 2010 mainly due to flushing out the bulk of the foreclosures and short sales.

And finally, I'm not sure what is meant by the unemployment rate "easing to 9.5%" means. Is it going up, down? This, IMHO, is the major factor in determining the future success of Dallas real estate. Many people are forced to foreclose because of a job loss. They have no savings, mortgaged to the hilt, credit cards are maxed and then BAM! They get laid off. Ninety days later the house is foreclosed on. So until people can be secure in their jobs I wouldn't expect 2010 to be all roses. But it also won't be all doom and gloom. There are many deals to be had out there and smart buyers are taking advantage.

Man with Spinny Driving Wheel Camera Makes Good Sense

I could not agree more with this guy. I came across his video over on Inman.com. It has always amazed me how many agents - and companies - claim they are "numero uno". That's not to say they aren't telling the truth. But statistics can be manipulated to make them prove your own claims. Anyone can be No. 1 if you narrow the field down enough.

So just remember, you too can be the number one agent in Dallas!*

*sales between $451,000 and $452,000 on Northaven Rd. for the month of November 2009

RE: It's All About Perspective

I got this comment from a DREB reader about this post. Thanks to the anonymous poster because I appreciate this type of feedback and dialogue. Also thanks to him/her for clarifying the stats for me.

The 78% drop is volume, not price. Also, there may not be 60% appreciation in one year, but there are areas that have experienced very high appreciation. That makes the overall DFW market more difficult to analyze. There are some ZIP codes that will see depreciation.

I could not agree more that there are some zip codes that will see depreciation. I've said that many times and even on T.V. But I must disagree that some areas have seen "very high appreciation". First, what does that mean? And second, the only areas that will ever appreciate around 25% will be Preston Hollow and Park Cities and maybe some parts of Lakewood or around White Rock Lake. If any other area appreciates by this much then there are other forces at play such as big time developers scooping up land or apartments in a smaller city.

University Park Sales Stats

My one and only DREB reader other than my mother, Jim, asked for some UP stats so here you go. Note: All of these numbers apply to homes over $1 million. There are currently 96 homes on the market over $1 million. Of the 46 homes on the market built after 2005 only 2 are resales and the other 44 have never been lived in or purchased.

Eight homes sold in November (only 1 built after 2005) which at that rate would take 11 months to deplete the current inventory on the market.

Now for some sales numbers year-over-year. I used median instead of averages since there can be some huge sales that can throw off the averages.

2005 - No. of homes sold: 108 over $1 million
Median sales price: $1.369 million
Median DOM: 50 days

2006 - No. of homes sold: 122 over $1 million
Median sales price: $1.399 million
Median DOM: 30 days

2007 - No. of homes sold: 146 over $1 million
Median sales price: $1.498 million
Median DOM: 40 days

In 2005, 16 homes built that same year sold. In 2006, 16 homes built that same year sold. Currently in 2007 only 10 homes built this year have sold. (And we know there are at least 7 homes still on the market built in 2006)

So what does this mean for the UP market? The good news is 26% more homes over $1 million have sold this year than in 2005 and the median sales price has increased by 9% since 2005. Some people might be wondering where the double digit price appreciation is? My explanation would be since there is a large number of homes for buyers to choose from and more homes selling each year, the supply is keeping demand down which keeps prices from sky rocketing. Is that a good thing? Probably. Just as long as supply doesn't get so large demand diminishes far enough to start pushing prices down.

Preston Hollow Has a Few Vacancies

Seriously builders. Stop! Right now in MLS Area 11, AKA Preston Hollow to area Realtors, there are 140 homes available that were built in 2005 or after. Moreover, there are 213 homes available over $1 million. The kicker is that only 15 sold last month. My fuzzy math tells me that is almost 15 months of inventory currently sitting on the market which is muy malo. But that's great compared with the 33 months of inventory that was available in September. Yes, you heard that right. What's even more disturbing is that 106 of the homes currently available were built in 2007, 22 homes built in 2006 have never sold to anyone and 5 homes built in 2005 have still not sold. That means that only 7 homes (give or take) actually have real owners that need to sell. Every other home is builder owned and most likely sitting there vacant.

The law of supply and demand says, and I repeat, when inventory is on the rise, prices go down. I have personally sold a few homes in Preston Hollow where the sellers have taken a loss at closing. In November of '05, '06 and '07, 119, 187 and 227 homes were available over $1 million, respectively. That is a 64% increase in the number of $1 million homes available since November 2005. With that said, prices should be going down, right?

In 2005 the average sales price for homes over $1 million was $1.614 million and in 2007 the average sales price is $1,898,966. That's about a 15% rise in sales price over 2 years. What does this mean for the future? I think unless some of these builders scale back, poor Preston Hollow's $1 million and up new and resale market is going to tank. (It already has if you ask some of the current sellers whose asking price is below what they paid in 2001) My advice to buyers right now would be to check out some of the 130 new construction homes and throw offers at these builders. Those carrying costs start to add up after 2 years sitting vacant!

Special Feature: Market Statistics for Your Enjoyment

So I've decided to start posting statistics from different market areas such as average sales price, price per square foot, inventory currently on the market, how many homes are pending, sold, etc.

I'll be giving my interpretation of the data but I'd love to hear how others interpret the numbers as well.

Enjoy!

What I Learned in Class: Part I

The purpose of the class I attended last week was to help agents price their client's listings according to the market they are in using classic economic supply and demand logic. When inventory trends downward, consumers push prices up. Which means the opposite is true or when inventory trends up, consumers push prices down. Eric Celeste over at Frontburner blogged this earlier today by way of the DMN and Steve Brown which is a prime example of real estate "experts" not giving the full picture. Here are a couple graphs taken from Trendgraphix using NTREIS statistics from all North Texas areas to form charts and graphs so people like me can look at pretty pictures and learn at the same time.






So what market are we in here in North Texas? According to these graphs the number of home sales is down from the previous year (6,583 in 11/06 to 5,157 in 11/07) but sales prices are up from $184K in November '06 to $204K in November '07. That is approximately a 10% rate of appreciation. Not too bad. But how can inventory be up AND prices rise? Hmmmm. So what does this mean and where are we headed? How do we interpret the fact that less homes are selling than the previous year, inventory is rising slightly yet home values are increasing?

No, we're not defying the laws of economics. I believe we are at a tipping point of sorts. The laws of economics do apply to our market but we don't fluctuate as much as other states including the outlandish California and Flordia real estate markets. With that said, inventory will continue to increase and prices may drop in certain areas due to overbuilding, short sales, foreclosures in the subprime market, etc. But I believe we will simply see a flattening market meaning prices won't go up, but they won't go down either. Inventory will not reach astronomical levels like the 29 months worth of inventory in some California cities.

In closing, these numbers are for ALL OF NORTH TEXAS AND NOT YOUR NEIGHBORHOOD! Many areas in North Texas will see price appreciation and will always see price appreciation no matter what regional statistics say. So talk with a local Realtor who knows your neighborhood before you start spreading doom and gloom to your friends.

Dallas Still One of The Strongest Metros in U.S. for Real Estate

Sixty-one percent (or 19) of the Top 31 "core based statistical areas" saw price declines from September 2006 to September 2007. Dallas was not one of these and rounded out the Top 10 major metros to see a rise in sales prices during this time period. Texas represented by having 4 out of the Top 10 cities to see price growth. Another reason why Texas is better than every other state.

Thanks to Top Producer for linking to the Inman News article that you would otherwise have to subscribe to.

Listen to Frontburner. They're Smart.

The DMN's Steve Brown strikes yet again perpetuating national real estate doom and gloom. "U.S. home sales will hit 5-year low in 2007", ugh. That may be true but how does that apply to Dallas/Ft. Worth? Oh, that's right, it doesn't. Brown even writes "[Housing analyst, John Tucillo,] agreed that market conditions vary dramatically by city.” Brown obviously disagrees with this assessment. I mean, is he trying to give Jim Schutze over at the Observer a run for his money by being such a muckraker? Publisher and editor of D Magazine, Wick Allison, takes Brown and the DMN editors to task on Frontburner for his incessant prattlings about how the real estate boat is sinking faster than the Titanic. (A big thanks to Frontburner and Wick for linking to my blog post about how Dallas/ Ft. Worth real estate is on track to have the 2nd best year in real estate sales ever.) And then I stumble upon this article by Brown that reluctantly tries to take a positive spin on our local market using many of the same statements and stats from the doom and gloom article referenced earlier. I think I can actually feel him squirming as he lifts his pen to write something positive about our local real estate market. He references how Realtors have largely blamed the media for our real estate woes but quickly gets his revenge by ending the article with a nice jab by making sure Realtors take part of the blame as well. I don't know Steve Brown personally but I'm not sure where all this negativity is stemming from? I mean seriously, did you have a bad real estate experience back in the day? What I do know about Steve Brown is that when you drive by his East Dallas home it looks like his yard hasn't been trimmed in ages and is literally trying to eat his house. Honestly. The fence is leaning, the trees haven't been trimmed since 'Nam and forget about actually using the detached garage as, well, a garage. I'm not saying this to be (completely) vindictive but our Dallas/Ft. Worth real estate columnist is responsible for swaying our city's opinions and has a honest-to-goodness “tear down” that looks as though it is uninhabitable and certainly not up to city code by a long shot. The irony of this is not lost on me. So my challenge to Mr. Brown would be to either 1. Start talking about LOCAL real estate issues and numbers or at least put our market into perspective with California and Vegas; or 2. Clean up your yard and maintain your house. Because why should we listen to what you say about real estate when you can’t even take care of your own.

Texas Surpasses National Home Appreciation Rate

Just came across this bit of information from the Real Estate Center at Texas A&M University. California, Florida and Las Vegas are VERY jealous.

COLLEGE STATION (Office of Federal Housing Enterprise Oversight, Real Estate Center) – According to recent figures from the Office of Federal Housing Enterprise Oversight, home prices in Texas increased 6.8 percent during first quarter 2007, well above the 4.3 percent national average.

“Despite the national slowdown, Texas is still strong,” said Dr. James Gaines, research economist with the Real Estate Center at Texas A&M University. “There’s no reason prices shouldn't continue to rise despite the increase in foreclosures and the slowdown in transactions, construction and new home starts.”

By comparison, home appreciation slowed to 1.2 percent in California and 3 percent in New York. Nevada price increases virtually disappeared at just .6 percent. Even rapidly growing Florida and Arizona reported value increases of 4.3 percent and 5.2 percent, respectively.

Within Texas, there is a wide variation in appreciation rates in the 25 metropolitan areas. Among the state’s large metro areas, Austin and San Antonio are seeing the strongest rate increases at more than 10 percent.

Meanwhile, the energy industry is fueling strong housing markets in some smaller metros. Home prices are up more than 21 percent in Midland and 16 percent in Odessa. Victoria prices are up 8.3 percent.

Some border communities are on fire as well, thanks to a surge in government hiring and business activity. Laredo is up 16.6 percent, while El Paso is up 11.2 percent.