Mortgage News Daily reported that the spring housing market in the United States got an early start this year due to “hotter-than-average demand and overheating home prices.”
Higher home prices are partially supported by improving local economies and employment, the report stated, but in some markets – including Dallas – the tension between too much demand and too little supply is resulting in an overheated housing market.
Fitch Ratings reported Dallas, Las Vegas, Phoenix, and Portland, are overpriced by 10 to 14 percent. Fitch considers markets “overheated” when they exceed the areas’ supporting economic fundamentals. Analysts at Fitch don’t predict if or when any of these bubbles will burst, but Samuel So, director of research at Fitch, does offer some words of caution for those of us living and working in the DFW area.
“For Dallas, the current unemployment rate in the Fort Worth [Texas] region is 3 percent,” he told Mortgage News Daily. “You’d have to go back 30 years to go that low. We think it’s not sustainable. The business cycle will turn. Eventually, when it does, home prices will come down.”
Where it stops, nobody knows – but of course that won’t stop anyone from speculating. Ralph McLaughlin, the chief economist for home-listing website Trulia, also offered his thoughts.
“Housing affordability is the key to helping break yet another year of gridlocked inventory,” he says, “but all signs are showing that homes this spring will be much less affordable than last year.”
Nationally, entry-level homes have become slim pickings after investors scooped them up during the housing crises and turned them into rentals. The number of single-family rentals went from about 11 million in 2009 to more than 15 million, according to the U.S. Census.
Thanks in large part to millennials, who are finally starting to buy homes now that they have stronger support from the job market, the housing demand climbed considerably this year, even compared with last year.
A monthly demand index from Redfin jumped to the highest level since January 2013, when the index began. In January 2016 homebuyer demand was up 23 percent, led by a 26 percent annual increase in homebuyers requesting tours and an 18 percent increase in buyers making offers.
According to Redfin chief economist Nela Richardson, 2017 has had a smashing start due to “soaring stock markets, still-low mortgage rates, and a steady economy.”
“Homebuyers were not just window shopping,” she points out. “They were serious about making offers and getting to the closing table. However, this uptick in homebuyer enthusiasm won’t guarantee strong sales in the coming months. With pending home sales down across the country in January despite strong demand, the lack of supply is a formidable foe for buyers this year.”