Dallas-area home prices up 10.2 percent in 2013
Home prices in the Dallas area hit a new peak in December and for the first time registered a double-digit gain year over year, according to the closely watched Standard & Poor’s/Case-Shiller Home Price Index.
This year, the rate of increase in North Texas is expected to moderate somewhat but continue advancing.
“I expect us to have another strong year of appreciation,” said David Brown, who heads the Dallas office of housing consultant Metrostudy. “The supply of homes is as low as I’ve seen in my career.”
Prices of pre-owned homes in the area were up 0.2 percent in December from November, the S&P/Case-Shiller report said, and up 10.2 percent from the previous December.
Dallas was one of just six cities to show one-month gains. The others were Las Vegas, Miami, San Francisco, Tampa, Fla., and Washington, D.C.
The report’s national index had home prices declining 0.3 percent in the one-month period and up 11.3 percent year-over-year.
The Case-Shiller report tracks repeat sales of homes and measures the difference in prices when the same home is resold months or years later.
In his comments with the report, S&P’s David Blitzer said national price gains are slowing and the strongest part of the recovery in home values may be over.
“Existing-home sales fell 5.1 percent in January from December to the slowest pace in over a year,” Blitzer said. “Permits for new residential construction and housing starts were both down and below expectations.”
Still, Blitzer said, the Case-Shiller index in 2013 had its largest gain since 2005.
Brown, who said he has been following the housing industry since the 1980s, pointed to several bullish indicators for the local market:
Interest rates remain relatively low.
At current transaction rates, there is only a 2.6-month supply of homes for sale. Supply and demand are typically seen to be in balance when there is a six-month supply.
At the end of January, just over 19,000 homes were listed for sale on MLS, Brown said. At the peak in 2008, more than 40,000 were for sale.
Only 21,000 new homes were built last year. At the peak, there were more than 52,000. In a normal market, Brown said, he would expect 30,000 to 35,000 new homes a year. However, he said, building costs have risen substantially, which is tempering new starts.
At the peak in 2006, there were more than 200,000 home transactions — sales of new, existing and foreclosed homes. That number dropped to about 100,000 at the bottom in 2011 and increased to only about 140,000 last year.
“We have quite a long ways to go before we start to talk about bubble territory,” Brown said when asked if the market were overheating.
He said a sudden spike in interest rates would slow sales because it “changes the equation on affordability” for homeowners by substantially increasing monthly mortgage payments.
Brown, though, doesn’t expect any interest rate spikes.
Average U.S. rates on fixed mortgages rose last week but remained near historically low levels. The average rate for a 30-year loan increased to 4.33 percent from 4.28 percent, according to mortgage buyer Freddie Mac.
Brown said the indicator he watches most closely for market shifts — his canary in the coal mine, he said — is the “finished vacant inventory” of new homes, which stands at about 22 percent here. Most of the new homes are still classified as under construction.
When the housing market is in balance, that “finished vacant” rate is about one-third. For all of 2013 it remained well under 30 percent, Brown said.
“If that number goes from 33 percent to 38 percent in one quarter, that’s a red flag,” Brown said.
Dallas-area home prices have increased year-over-year for 22 straight months, according to the Case-Shiller report. Local home prices are up more than 5 percent since before the recession.
By GARY JACOBSON and STEVE BROWN The Dallas Morning News
Staff Writers Published: 25 February 2014 11:41 PM