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Kim_Gatley
Kim Gatley
S
enior Vice President & Director of Research at REOC San Antonio

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The outlook for home sales in 2014

New Home SoldThe outlook for home sales in 2014 in Texas looks very promising.

Three things help predict future home sales volume:

  • job growth,
  • cheap mortgage money and
  • home price appreciation.

Texas continues to create jobs at an impressive rate.

That job growth is likely to continue through 2014. Texas has added over 459,000 jobs since January 2012.

Mortgage rates are increasing, but they are still ridiculously cheap. 

An increase in mortgage rates will not cause houses to be unaffordable. Houses have never been more affordable, if you have a job. A recent Real Estate Center calculation indicated that even if mortgage rates were to rise to 7 percent, houses would be just as affordable as they were in 2007. If your memory is short, 2007 was a good year for selling homes in Texas.

Home price appreciation is caused when you have too many buyers and not enough sellers. The most common measure of this is called the “months inventory.” Center research years ago showed that 6.5 months of inventory could be viewed as a balanced market with modestly increasing prices. Texas, like many parts of the country, is short on inventory of homes for sale. The entire state of Texas has just four months of inventory. Austin has less than three months. Because of the limited inventory, prices are expected to continue to increase smartly.

This constrained supply of homes in Texas (and elsewhere) is likely to continue through 2014 because home builders are having a difficult time getting loans to build new houses. Texas needs to be building thousands of new homes now to meet demand. But bad memories of the Great Recession and pressure from bank regulators have restrained new home construction. Ditto new subdivision development.

Looking forward to 2014, the housing market in Texas most likely will be hot. Home builders will not be able to build homes fast enough to meet the demand. Developers won’t be able to supply lots to meet demand. Hence, prices are likely to continue to move up. Higher prices spur more buyer demand. Transaction volume will most likely increase as well.

If you are a real estate professional in Texas, I would suggest that you not take a vacation at all in 2014. Things are shaping up to be a good year.

Click to read entire article: The Outlook for Home Sales in 2014 (The Blog, Real Estate Center at Texas A&M, 9-19-13)

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