It is not news that the Texas real estate market leads the nation in recovery. Part is due, of course, to strong job growth, but Texas also acts as a magnet attracting businesses and new citizens because of pro-business policies and the absence of state income taxes. Housing starts are a leading indicator of a recovering market and Texas hosing starts represent 15.4% of the nation’s new builds this year or about 59,000 units.
I have written before about the decline of housing starts nationwide. As reported in the Dallas Morning News recently, new housing starts (including multifamily) were clipping along at 2,000,000 units per year as late as 2005. The fall off began in early 2007. In 2010 there were only about 706,000 starts and it is projected that by 2013 the starts would only be back to about 895,000. Now a lot can happen of course, but interest rates are abnormally low and are expected to stay there for awhile. The country needs about 1,250,000 units per year to meet population growth and the loss of units going out of service. Thus, we have a classic supply pinch, likely to remain for some time.
So far this year there are about 384,300 units (single family and multifamily) under construction. Texas housing starts, as I said represents about 15.4% of this. Further, Houston accounts for 21,080, Dallas for 13,070, and Austin for 5,790. Washington DC and Phoenix are the next highest new construction regions but account for only 8,540 and 6,830 units respectively.
Now as another twist Corelogic™ reports that Dallas-Fort Worth has only 1.40% foreclosure rate as compared to the US as a whole at 3.40%. So you have to conclude that either local foreclosures have “bottomed out” or that people are now paying their mortgage payments. That’s consistent with economic indicators of joblessness in the DFW market which is below the national average. It should be noted, however, that resale housing prices remain flat and builders are pricing carefully at lesser margins than before. Remember that house prices, as opposed to housing starts, are a trailing indicator. In other words, the last thing that happens at the end of the downturn and a sure sign that an upturn is beginning is when house prices rise. They rise because of peoples’ expectations.
As the housing economy begins to turn, Apartment Financing America is positioned to provide the most competitive multifamily construction loans in the world to developers returning to the market.
In summary, while other parts of the country are still coming to grips with foreclosures, much less predicting growth in the housing stock, it appears that the worst is almost over for the Texas markets and DFW in particular.