In case you see a rare “For Sale” sign come down, and new neighbors move in, it likely won’t be an oil baron in the making. Gas prices are at unfamiliar (at least in more recent times), historically low levels these days. Everywhere you look, gas stations are dropping their prices. While lower fuel costs are a welcome respite to consumer wallets, the situation lends itself to a curious dilemma for an otherwise strong real estate market.
While oil has seen a 60% plunge since the middle of 2014, the national average for home prices is still ticking (slowly) upward. Dallas, in particular, has seen an almost 8% increase in November 2014 from the year prior. Forecasts are still pointing ever upward for the market, but will that pan out if oil continues its trek downward? When it comes to the strong growth that has characterized the Lone Star State in most recent post-recession days, energy is the head honcho in town. That being said, if the boss is on his way out the door, what does that mean for everyone else? And what will become of the market (and homes) that have been built on the power of oil drills?
A leg up on the rest!
If Dallas real estate is bound to market conditions like job growth and the overall health of the local economy then at least it is starting out strong.
For one thing, home foreclosures are at an all-time low this decade. The Foreclosure Listing Service currently shows an almost 30% decline in Dallas-Fort Worth area home foreclosures from this period two years ago. Even more staggering of a statistic: the foreclosure rate is almost 80% down from the same period four years ago! Suffice it to say lenders are in a better position on average than their counterparts two and four years ago.
Pre-owned home prices are equally heading in the right direction. In the last month, Dallas has edged up to the third spot on the list of highest average price increases. The fact that prices are up is not a shock per se–the S&P/Case-Schiller Home Price Index tracks 20 U.S. cities and all are up over 4%. Dallas is now in the real estate ivy league of traditionally high-priced markets like San Francisco and Miami. While the most recent of the increase in the area has been par for the course in recent years, the general upward trend is beginning to show signs of abating.
The other side of the coin: short supply
Much like other real estate hotspots in the nation–San Francisco, New York, Miami–listings are in short supply in the Dallas-Fort Worth area. These days it isn’t even the lack of quality new or pre-owned homes, there just simply aren’t many homes on the market, period. The constriction in the market has naturally played its part in rising prices. Millennials will continue to enter the market this year, and we will only see a greater influx in the next five years in spite of any measurable, protracted economic downturn–you can thank rising rental prices. Additionally, the culture of retirement has changed nationwide in the face of a post-recession society. Baby Boomers who would otherwise sell their empty nests are turning their “forever homes” into real forever homes instead. All these forces combined have and will continue to dictate a seller’s market.
So what does the weatherman say?
A slowdown in the local economy will inevitably impact the Dallas-Fort Worth market. That being said, the extent to which it will do so is what is in question. Job growth has boomed in recent years thanks to the energy sector which in turn has fueled the boom in real estate. As job growth slows or even comes to a halt, the real estate market will move to respond in kind. But even if new residents become sparse there is still myriad of other buyers as we mentioned who can keep the boat afloat, even in a protracted slowdown. Energy is a sizeable chunk of employment in the state. However, from the perspective of a Dallas Realtor, energy isn’t the majority of potential buyers and a slowdown will make homeowners more inclined keep their homes off the market therefore keeping supply limited.
You can’t predict the future…
It’s true, you can’t predict the future. What you can do is plan and be prepared. Whether you are looking to buy in a highly-competitive and limited market, the best Realtors with demonstrated success can be instrumental in getting potential buyers their own piece of Dallas–in good times and in bad. Conversely, as a homeowner looking to sell, keep in mind that smart agents will be looking for you when supply remains this low so be smart yourself. Interview and vet multiple Realtors, check references, heed local and trusted recommendations, and go where the gold is–or oil, in this case.