DFW real estate recovery may have legs this time
We could declare a seller's market, if only there were more sellers.
Bidding wars are breaking out for homes in pockets of North Texas because buyers are finally jumping onboard -- only to find that the supply of properties for sale is the lowest in a decade.
Last month, two houses near Texas Christian University -- one on Waits Avenue, the other on Tanglewood Trail -- attracted five offers each on the day they appeared on the listing service. Both sold for more than the asking price, $229,000 and $264,000, respectively, according to the listing company.
"The right house on the right street won't last a day," said Marshall Boyd, managing partner for Williams Trew Sotheby's International Realty.
Reports of multiple bids have become fairly common in other parts of North Texas, a sign that supply and demand has shifted markedly. In the past year, the supply of homes in Fort Worth has fallen from 7.2 months to 5.1 months. Several submarkets, including southeast Arlington, Grapevine, Allen and Richardson, have a three-month supply of homes, about half the ideal balance.
While local players remain cautious, the real estate recovery appears to have legs this time. In central Fort Worth, existing-home sales rose 42 percent this year through May, and median prices were up 9 percent, according to data from the Texas A&M Real Estate Center. Sales in Addison and far north Dallas rose 41 percent through the first five months, and Southlake, Colleyville and east Dallas increased more than 30 percent.
Hopes for a recovery have been dashed before. Tax credits lifted sales sharply in 2010, but the trend didn't hold. And residential real estate remains a neighborhood-by-neighborhood story, with some parts of north Fort Worth still overwhelmed by foreclosures.
But signs of strength dominate the picture. Last week, the S&P/Case-Shiller Index reported that Dallas-area prices rose in April, the second straight month of solid gains. Prices were 2.8 percent higher than a year ago and are now just 7.9 percent shy of their pre-bust peak.
Prices have recovered in Dallas more than in any other metro area, and the index for all 20 major cities is still 34 percent off the all-time high. All this is more evidence that Dallas-Fort Worth is clawing back faster than most of the country and that it wasn't hit as hard initially, either.
Home builders may have taken the worst blow, with starts falling 75 percent from the 2006 peak to the trough. Finally, they're getting a lift, too.
Midway through the year, many builders in DFW report that they've already hit their sales goals for all of 2012. For the first time in years, they've passed along price increases for entire floor plans, not just select items. And they're looking for lots, a sign of confidence that's been absent for half a decade.
"Everyone's still gun-shy, but it looks like we've turned the corner," said Scott Sandlin, adding that his Sandlin Homes is on pace to double sales this year.
After long resisting hiring, the Fort Worth company added four employees and several contractors. And it's not alone. Statewide, construction jobs had fallen 32 months in a row before the trend shifted last fall. The state has added building jobs every month since September, and the pace picked up in February.
David Brown, director of the DFW office of Metrostudy, said that "buyers just started to believe" during the latter half of last year. As they gained confidence in the economy, the housing deals looked better and better, thanks to low prices and the lowest interest rates ever.
New-home inventories are low, too, so it doesn't pay to dally. Metrostudy estimates that DFW has 2,700 new vacant homes, the fewest since 1994.
"Higher sales and lower inventories are a recipe for higher prices," Brown said.
Case-Shiller prices are a lagging indicator, and the latest numbers don't include May and June. So DFW may be percolating even faster than the index indicates.
Brown projects a 15 percent increase in starts and a 5 percent increase in prices by the end of the year. James Gaines, an economist at the Texas A&M Real Estate Center, expects a bigger price bump in 2013 as long as financing can be secured.
Borrowers with blemishes on their credit may have trouble getting loans, so builders often must help customers repair their credit scores. They advise them on which debts to pay first, including student loans, and how to improve key ratios.
Ron Formby, CEO of Antares Homes, said he worked with a couple for two years before they could finally close on a house this week. It can be slow sledding, but it's the way to build sales today, especially with first-time buyers.
Antares expects to sell 130 homes, about 20 more than last year.
"I'm a happy camper," Formby said.
After some trying years, a lot of sellers must be thinking the same way.
Mitchell Schnurman's column appears Sundays and Thursdays.
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