Texas’ housing market rebounded in September as homebuyers rushed to take advantage of historically low mortgage rates. Existing homes sold through Texas Multiple Listing Services increased 10.7 percent from August and are running 2.6 percent higher relative to the first three quarters of 2019.
“Many prospective homebuyers who were planning to purchase next year have been pulled into the market early as their affordability has suddenly improved,” said Dr. James Gaines, chief economist for the Real Estate Center at Texas A&M University. “This pull factor contrasts the pent-up demand that drove the summer sales surge.”
Home-purchase mortgage applications have increased within Texas despite tightening lending standards, according to a news release from the Real Estate Center. “Loan-to-value and debt-to-income ratios are falling, while credit scores for qualifying applicants are rising as lenders acknowledge the current state of economic uncertainty,” said Gaines.
Aggressive fiscal and monetary policies in response to the coronavirus crisis have helped buoy housing demand, but the effect of those stimulants may be short-lived. Center Research Economist Dr. Luis Torres said consumer purchasing power has been affected since the onset of the global pandemic.
“Texas’ real income per capita increased 8.1 percent year over year during the second quarter, explaining much of the housing markets’ resiliency. This income growth, however, was driven purely by an increase in transfer payments, like the stimulus checks widely distributed at the beginning of the pandemic. Net earnings and dividends/interest/rent components of the real income calculation decreased as expected. Congress is still debating the extent of the next round of stimulus,” said Torres.
In addition to this uncertainty, supply-side factors present a growing challenge to the housing outlook, according to the Real Estate Center. The number of new listings hitting the market have not kept pace with the sales rebound, diminishing housing inventories that were already at record lows. Texas’ months of inventory for existing homes fell to less than 2.1 months in September. Housing shortages are even more pronounced in the major metropolitan areas.
The combination of stimulated demand and dwindling supply have pushed housing prices upward. Texas’ median home price hovered around $260,000, a double-digit percentage increase compared to September 2019. Some of this home-price appreciation is due to a change in sales composition, as inventory constraints are more severe at the lower end of the market. The Texas Repeat Sales Index, however, accounts for compositional changes and has suggested real price growth closer to five percent.
Around the country, sales of existing homes climbed 9.4% in September, the National Association of Realtors said Thursday, the latest sign that the housing market remains red hot despite the coronavirus pandemic.
On a seasonally-adjusted rate, the selling pace of existing homes climbed to 6.54 million annualized units. That is the highest level for that metric since February 2006, at the peak of the previous housing bubble. The figure was well above economists’ expectations as well.
The median selling price of a home also climbed to $311,800, up 15% from a year earlier, according to NAR. This is largely because of low inventory of existing homes. Housing inventory fell to only 2.7 months of home inventory on the market. That’s a record low for that metric since NAR started tracking that data in 1982. Homes are moving off the market quickly as well, due to the lack of inventory, with a median home on the market only 21 days.
September is typically when home buying slows as the market enters into the fall and winter. But because of the pandemic, the spring home buying season was delayed a few months and pushed the bulk of the home buying season into the mid-to-late summer.
Regionally, the strongest market was Northeast, with existing home sales up 16.2% from a year earlier. Much of the Northeast was heavily impacted by the coronavirus pandemic, which caused many families to look for homes in the suburbs or out of major urban centers as they readjust to the possibility of working remotely for the foreseeable future.
Existing-home sales grew 7.1% in the Midwest to an annual rate of 1,510,000 in September, up 19.8% from a year ago. The median price in the Midwest was $243,100, a 14.8% increase from September 2019.
Existing-home sales in the South increased 8.5% to an annual rate of 2.80 million in September, up 22.3% from the same time one year ago. The median price in the South was $266,900, a 13.0% increase from a year ago.
Existing-home sales in the West rose 9.6% to an annual rate of 1,370,000 in September, an 18.1% increase from a year ago. The median price in the West was $470,800, up 17.1% from September 2019. – FWBP Contributed to this report