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Home prices aren't coming down in Texas are they?

8,120 Views | 29 Replies | Last: 1 yr ago by Taxman90
Andrew Dufresne
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12:09a, 10/4/23
I was looking at the HPI chart for Texas and it's pretty much just been a steady incline for the last 50 years.. It's had periods where it was somewhat flat, but it hasn't really had a drop since the late 80's.

https://fred.stlouisfed.org/series/TXSTHPI

Texas Chart


I was comparing the Texas chart to the overall US HPI chart and noticed a large dip on the national chart from 2006 to 2012. Texas did not suffer this same dip during that time period.

https://fred.stlouisfed.org/series/CSUSHPINSA

National Chart


Then when you factor in that Texas is currently the 3rd fastest growing state in the Union at a13.36% population growth clip, I just can't see housing prices ever taking a huge dip in the Lone Star State.

This isn't some in depth look at things. Pretty basic stuff, so I ask the experts: Am I wrong?
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Kyle Field Shade Chaser
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In reply to Andrew Dufresne • 5:26a, 10/4/23
AG
Who knows but sure would be more bearable for new buyers if interest rates came down by 50%.
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Red Pear Luke (BCS)
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In reply to Andrew Dufresne • 5:29a, 10/4/23
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AG
As a self confessed real estate expert - we have no idea where home prices are going.

But I'll expand a bit more upon real estate values in general - rates go up, so values go down. You're see values across commercial real estate erode a bit as cap rates increase. Apartments in HTX valued last year at a 5.25% cap are now looking at a 6.25% cap rate, which means 15-20%ish decrease in value. In Office - we just saw Blackrock sell an office building in San Fran for $84M that it purchased in 2017 for $240M and put $150M in debt back then to finance it.

So back to residential - we are still seeing incredibly low supply of homes for sale which is propping up prices. But that doesn't mean the supply isn't starting to sit for longer, which can get sellers dropping prices little by little until they find a buyer…

But do I think we start to see a lot of erosion in Texas home prices? Not until we significant softening in the labor market and people are forced to sell.

So to answer your question - I'm short term not so sure you're right about them NOT going down. But long term, I think you're probably right that any downtrend will be a blip on another wise upward trajectory.
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Diggity
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10:00a, 10/4/23
AG
crazy thing that I'm seeing in the commercial market is that construction costs just continue to skyrocket.

Medical Office Buildings that we could build for "x" 3-5 years ago are now estimated at "2x". That just isn't sustainable.
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SW AG80
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10:04a, 10/4/23
AG
I am no real estate expert, but I do not believe we see RE in Texas go down to pre-pandemic levels.

About 10 years ago we were at a wedding in Houston for a young Aggie couple. I was visiting with a nurse who once lived in Houston but was now living in Charlotte, NC. She had flown in for the wedding. I was asking her how she liked Charlotte. She said the only draw back was that she could not afford a house in Charlotte even though she had owned one in Houston. She told me how much more expensive housing was in NC contrasted with Texas.

I was surprised. But I came to realize that RE in Texas had been under valued compared with the rest of the country. Since the pandemic Texas RE has almost caught up with the other states' RE valuations (that is other states that are thriving) but I think Texas RE still will go higher.

Supply and demand.
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MAS444
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In reply to SW AG80 • 10:22a, 10/4/23
AG
edit - I misread your first sentence. Sorry!
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jtraggie99
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In reply to Kyle Field Shade Chaser • 10:56a, 10/4/23
AG
Kyle Field Shade Chaser said:
Who knows but sure would be more bearable for new buyers if interest rates came down by 50%.
It's only been in the last 15 years or so that rates were consistently below 5%. Historically, that's not typically been the case. What we are seeing now is more in line with years past. I know people had become accustomed to the very low rates (I'm currently around 3%), but I'm wondering if those days are over for the foreseeable future.
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Diggity
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11:03a, 10/4/23
AG
by encouraging near 0 rates for extended periods, the government basically ****ed the entire housing market for the foreseeable future.



even with some of the recent drops in isolated markets, we've still seen huge appreciation since March '22. For context, rates were a hair below 4% at that time. Add in the rising cost of property insurance and I have no idea how anyone can afford FL. Probably mostly oligarchs and narcos.
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SW AG80
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In reply to MAS444 • 11:30a, 10/4/23
AG
Up.
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PeekingDuck
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2:19p, 10/4/23
AG
This is so bad for young people. And the country.
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Heineken-Ashi
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4:03p, 10/4/23
This is what you get when an unelected group of Keynesian morons are allowed to manipulate free markets while the elected morons manipulate the money supply to enrich themselves on the back of your labor and taxes.

Abolish the FED. Start the major correction. Not just to pre-pandemic levels. That's nothing and is still massively inflated from not only pre-2008 levels, but pre-dot com boom levels. If you want a sound economy and fair market pricing, you have to unwind ALL of the fake money that was forced through the system. I say let's get it over with so the current generation of kids aren't paying for our collective idiocy.
"H-A: In return for the flattery, can you reduce the size of your signature? It's the only part of your posts that don't add value. In its' place, just put "I'm an investing savant, and make no apologies for it", as oldarmy1 would do."
- I Bleed Maroon (distracted easily by signatures)
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dc509
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4:14p, 10/4/23
AG
Long term they aren't coming down. Like Red Pear Luke said, there is a slight dip right now, but that will be a blip on the radar.

We have a ton of people moving here and getting lots on the ground is hard.
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Medaggie
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6:23p, 10/4/23
Many things worry me about the economy and typically the market will correct in a logical manner. But when it comes to homes, it has become illogical.

home prices continue to be flat or moving up. Interest rate has jumped from 3% to 7.5+%.

So someone buying a home today would be paying about $1500/mo or 18k/yr more for the same 500K home.
Economic theory tells you that when something becomes more expensive, demand will go down, and supply up thus putting downward pressure on prices.

But this has not happened. Something bad will happen. I don't know when or what, but something will have to give to correct the housing market.

Americans have become poorer, more debt, less savings. Increased inflationary pressures. Something has to give. I suspect we are going to go into a big recession in the next 12-24 months and home prices will plummet as those holding rental homes will have to capitulate.
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SteveBott
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7:54p, 10/4/23
AG
From my view the reason supply is so low is high interest rates. Many would be buyers are not wanting to dramatically increase their hosing costs, and if they own a home now, are trapped into a low rate/payment. They cling to those 3% mortgages.

And I'm not a home builder but I'm guessing they are pulling back on spec building so less inventory as well.
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dc509
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In reply to SteveBott • 9:07p, 10/4/23
AG
SteveBott said:
From my view the reason supply is so low is high interest rates. Many would be buyers are not wanting to dramatically increase their hosing costs, and if they own a home now, are trapped into a low rate/payment. They cling to those 3% mortgages.

And I'm not a home builder but I'm guessing they are pulling back on spec building so less inventory as well.
Small builders probably are. The big builders are offering interest rate buydowns and their homes are moving. I don't do residential real estate, but I would imagine resales that are <$1MM are sitting for quite a bit longer.
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mwp02ag
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In reply to Medaggie • 9:42p, 10/4/23
AG
We're truly painted into a corner and still have the brush in hand. Keep trying to stave off inflation with interest rate hikes and it will destroy property values and create a worse 2008. Cut interest rates and inflation will soar. There will be no soft landing either way.
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SteveBott
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In reply to dc509 • 9:45p, 10/4/23
AG
This attic is in a phone app so could not figure a way to link. This is from July but it is consistent with other articles in my mortgage news
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dc509
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In reply to SteveBott • 9:27a, 10/5/23
AG
SteveBott said:
This attic is in a phone app so could not figure a way to link. This is from July but it is consistent with other articles in my mortgage news
At the national level that makes sense. My info is DFW focused. In the metroplex starts (-28.2% YoY) and lot delivers (-3.9%YoY) are down, but closings (+8.0% YoY) are actually up. Starts are down here due to the initial perception that interest rates would hamstring new home buyers, but once the rate buydowns got going hasn't shown to be be the case. Now these guys are HUNGRY for acreage to put lots on. It has to be in the correct area, but they have a big appetite. I haven't seen the Q3 data yet, but starts were expected to really pick up.

Just to be clear I'm talking about large developers who deliver at scale.
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bloom
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In reply to Diggity • 9:27p, 10/5/23
Diggity said:
crazy thing that I'm seeing in the commercial market is that construction costs just continue to skyrocket.

Medical Office Buildings that we could build for "x" 3-5 years ago are now estimated at "2x". That just isn't sustainable.


Why is this? What particular factors are continuing to drive up the cost of materials? I know the cost of lumber has leveled off some, but I assume that materials are the main driver of construction cost increases
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Diggity
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In reply to bloom • 9:37p, 10/5/23
AG
Yep. Material costs.

Concrete and steel are still very high apparently
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RGRAg1/75
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In reply to Diggity • 10:43p, 10/5/23
AG
Labor has gotten awfully damned expensive too.
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Shayboy3
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7:07a, 10/6/23
S
The supply chain is still bad. HVAC and electrical gear lead times are still extremely long. You can also factory in labor cost that is rising because of inflation.
The private work is slow and tax payer projects are crazy busy.
Makes no sense!
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Red Pear Luke (BCS)
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In reply to Shayboy3 • 9:11a, 10/6/23
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AG
Shayboy3 said:
The supply chain is still bad. HVAC and electrical gear lead times are still extremely long. You can also factory in labor cost that is rising because of inflation.
The private work is slow and tax payer projects are crazy busy.
Makes no sense!
I spoke with an HVAC company owner this week during one of their inspections for a client purchasing a home.

He said he's been getting cost increases of 6-8% every 6 months for the materials on top of added pressures on labor costs. Said he's seen his margins drop a bit but there is only so much reduction that can happen before it starts cutting to the bone.
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jja79
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9:39a, 10/6/23
AG
Might be a one off but I have a client I'm financing going under contract on a house in Houston for 85% of list price.
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dc509
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In reply to jja79 • 4:18p, 10/6/23
AG
jja79 said:
Might be a one off but I have a client I'm financing going under contract on a house in Houston for 85% of list price.


Woah
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mwp02ag
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9:13a, 10/7/23
AG
So what does the fed do when the next black swan hits and throws already shaky world economy into chaos? I don't know…maybe something like war in the Middle East?

Make the right bet on which side of the coin the fed lands and you'll be set to greatly increase your wealth. Choose wrong and your on the wrong side of an already shrinking middle class.

Edit to add that I'm not saying this is what's happening today just offering the scenario for discussion. Purely speculative thought process here.
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62strat
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In reply to Diggity • 10:46a, 10/9/23
AG
Diggity said:
crazy thing that I'm seeing in the commercial market is that construction costs just continue to skyrocket.

Medical Office Buildings that we could build for "x" 3-5 years ago are now estimated at "2x". That just isn't sustainable.
interesting.. (specifically 'continue')

I'm in commercial construction and the product we build, industrial warehouse, peaked earlier this year and has steadily dropped since then (mainly due to joist/deck)

Don't get me wrong, the cost absolutely doubled from 2019 to 2023 (but that was after a decade of very little increase), but since early this year, the bottom line has started to go down.

In addition to joist/deck dropping (pre covid it was ~$4/sf, peaked at $16/sf or so, today it's $7-$8), structural steal has decreased a tick, electrical gear and roofing has decreased, and underground utilities is dropping as well.

Not ONE single sub has increased their price in the last 6 months (I am consistently repricing buildings for clients, so it's an easy apples to apples comparison).

This is the time I've repriced stuff and it go down since everyone started going up in 2020.

We haven't had ONE job break ground since early this year (I'm at a GC who did a few million sf of warehouse each year for the last decade)
Don't get me wrong, we have a few million square feet of it contracted, permitted, priced, and ready to go. But no owner is/has actually broken ground. Every job has been kicked down the road for nearly this entire year.

So we're pretty sure the subs are gonna feel this squeeze when they get off our current jobs and have no where to go. That can only mean prices will continue to drop.

One more metric, this time last year our joist/deck supplier STLD (and the others in the US) had a 12 month backlog with a 12 month leadtime. Today they have no backlog, and you can get J/D in 12 weeks. My rep said he got his first PO this year just last month. We haven't ordered anything YTD.
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62strat
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In reply to Diggity • 10:50a, 10/9/23
AG
Diggity said:
Yep. Material costs.

Concrete and steel are still very high apparently
I didn't mention concrete, but we went from ~$115/cy to about $165/cy within the last 2 years. (concrete was one of the last trades to increase after covid it was late 2021.)

However, alluding to that squeeze I mentioned, my bid yesterday came with an escalator like usual, but instead of jan 2024 or july 2024, it was april of 2025.

This year was the first in a while they didn't have a mid year increase, and now seemingly not one next year at all.
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Diggity
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In reply to 62strat • 10:58a, 10/9/23
AG
Good info. Hopefully we'll see some relief soon on this pricing.

I'm not directly involved in the bid process, rather we just get pricing from our RE team on these jobs.

The biggest thing they pointed to was concrete (especially for radiation suites, which are heavy users of concrete).

edit...looks like you answered while i was typing. Thanks!
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Taxman90
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12:38p, 10/10/23
AG
WSJ had an article about a week ago that said home prices are up nationally due to a lack of supply. Summarizing quite a bit but they said it was because less homes are for sale due to the interest rate increases. However, for the homes that are really nice for the price, they lead to bidding wars while I guess the not so nice ones sit or are taken off the market.

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