Newsflash – it’s not all bad!

After a brief hiatus (thanks Google for repeatedly resetting my password), there are so many interesting articles online to discuss.

I continue to believe that, for multiple reasons, the DFW market in general, and certain sub-markets, in particular, do not face the same sort of doom and gloom facing the rest of the nation. How’s that? Well, if you take the time to read whole articles and skip the headline, you’ll see the facts. 1) Housing prices in DFW are in pretty good shape – if you look at the appropriate time horizon, 2) Supply levels of houses on the market are at what are considered “normal” inventory levels, and 3) people are still moving to DFW.

1) Dallas area prices are just fine . As I’ve said before, you can’t trade a house in Phoenix for a house here – so why does the price decline there have anything to do with a price decline here? It doesn’t. Houses are not mass produced widgets (well, the ones we build aren’t), they aren’t transferrable, and they aren’t commodities. The economic forces of supply and demand are totally irrelevant from one city to another? No one is out there thinking, hmm, should I move to Dallas or Phoenix. Which has the better house price?

Here’s a price graph comparing the Dallas MSA to the Case-Shiller data for the 10-city composite and 20-city composite. The first graph is for all the periods data for Dallas is available (January 2000) to now. The other is from January 2006 to now. I picked Jan 2006 because it’s more or less the top of the housing market prices nationwide. I don’t see anything resembling a “bubble” in the Dallas prices.

If you look at the data from the precipice, Dallas is sitting pretty. The nationwide market is off 20 to 25% and Dallas is down by less than one half of one percent . In this economic environment, that sounds pretty good to me.

2) Dallas area supply has reached “normal” historical levels . While I believe that these numbers are probably low because people aren’t putting their houses on the market, the reality is that supply has been shrinking due to sales (yes, people are buying) and people taking houses out of inventory. It is likely that we will see the supply number dip below six months, but it’s still a good sign.

A bright spot in the local monthly home resale report is that the number of houses on the market in the 26-county North Texas region continues to fall. At the end of 2008, 35,999 pre-owned single-family homes were for sale in the area – near the lowest number in more than three years.

That works out to less than a six-month supply of houses on the market, which is considered a healthy inventory. Nationwide, the inventory is more than 10 months.

However, not all homes for sale in the area – including some foreclosed properties – are included in the figures.

Still, Dallas has one of the lowest home inventories of any big-city market, according to a report Wednesday by Altos Research and Real IQ. The same survey says that Dallas ranks among the five U.S. cities with the shortest average time to sell a home. Link

3) People are still moving to Dallas .

The Dallas-Fort Worth-Arlington metro area reported the second largest year-over-year employment gain nationally in November 2008 by adding 46,900 jobs. The Dallas-Fort Worth-Arlington area trailed only the Houston-Sugar Land-Baytown area, which reported a non-farm employment gain of 54,300 jobs.Link

More people means more demand.

Hmmm, prices in Dallas are holding strong, supply is shrinking, people are still moving to Dallas. When this market turns and the consumer feels safe enough to buy again, I don’t know. But I will predict that when it happens, there might even be a bit of a shortage of housing. This is the nature of cycles.

Sources:
S&P/Case-Shiller Home Price Indices
Dallas-Fort Worth home sales fall 18%
D-FW reports 2nd largest employment gain

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