Texas’ Residential Sales Market Recovering
The past four years have been challenging for the residential brokerage business, like every business in America. Sales volume has dropped substantially from the glory days of 2005–07.
Every economic cycle reaches a peak, which is followed by a period of decline. Eventually, the decline subsides, and the market levels at a trough.
It appears that the residential housing market in Texas has reached a trough and is forming the basis of the next phase of the cycle, which is a period of expansion that can last for many years.
First let’s look at annual sales volume in terms of units sold. This chart, based on MLS data compiled by the Real Estate Center, shows how sales volume peaked in 2006 at the historic high of 292,805 properties sold. The trough was in 2010 at 203,637.
I would like to call two things to your attention about this chart. First, the 2010 and 2011 data clearly indicate that a bottom has been forming for the Texas residential real estate market for over two years. The 2012 numbers are looking even better. The numbers below show that sales volume has been up substantially every month in 2012.
Second, notice how the sales volumes for 2011 and 2010 compare with sales volume in the late 1990s. When I first started at the Real Estate Center in 1997, I was describing the residential market as a bonfire that was “red hot.” Then during speeches in 1998, I described the market as “blue hot,” even hotter than red hot. Then in 1999, I described the market as “white hot,” which is hotter than blue. When the market got even more robust in 2000, I had to change my metaphor because there is nothing hotter than white hot.
(Disclaimer: It is clear from my credentials that I know virtually nothing about the science of the colors of heat. So if you are a science major, give me some slack. You know what I’m trying to say.)
Let’s compare sales volume in those “red hot” years with the past two years.
Total reported Texas home sales in:
- 1997: 146,395
- 1998: 170,638
- 1999: 184,054
- 2000: 188,738
Now let’s compare those halcyon years with the past two “difficult years.”
Total reported Texas home sales in:
- 2010: 203,637
- 2011: 205,824
Here’s the point.
In 1999, we thought 184,054 units sold was so hot it was off the charts.
In 2011, we thought 203,637 units sold was a difficult market.
Don’t compare your business activity with what happened in 2006 and 2007. Those years were an aberration. That kind of sales volume should have never happened. We have learned our lesson, and from now on you actually have to have a job and some income to buy a house. That’s called “a normal market.”
Would you like to see the housing market recover even faster? I certainly would, and so would a lot of Americans. Here are three miracles that are unlikely to happen, but if they did it would greatly speed up the residential real estate recovery.
Miracle One: Congress could actually do its job and restructure Fannie Mae and Freddie Mac in such a way that the private sector could compete in the mortgage market. “Frannie” has been broken for at least six years now. You would think there is sufficient mental horsepower in America to fix this problem in less than a decade.
Miracle Two: The Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency could encourage banks to move delinquent mortgage loans through the foreclosure process faster and clear the nefarious “shadow inventory” that is dampening buyer enthusiasm. Why are some people allowed to stay in their house for years without making mortgage payments?
Miracle Three: The Dodd-Frank legislation could be gently revised to remove the threat of “put backs” to mortgage originators. Until this happens, a lot of qualified homebuyers will be shut out of the housing market because lenders are afraid of financial penalties they can incur if a mortgage loan they make becomes delinquent. If you are unfamiliar with this concept, Google “mortgage put backs.” There are plenty of stories about it.
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