DFW Housing Forecast

Britt Fair
October 6, 2015
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Economics Trivia

Who is the #1 State for job creation for the most

recent 12 months measured (August 14 to August
15)?
California, which added 438k jobs. Florida was second,
with 243k. Texas was third with 212k.

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Roadmap for Discussion

Update on DFW housing
Highest $ volume in DFW residential resale history
Transactions up 6% vs YTD14; average sale price up 8%;
median sales price up 11%
And 2015 gains are on top of records in 2013 & 2014

Evaluation of possible economic threats predicted

early in 2015
Final thoughts and predictions

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Metro Job Growth (8/14-8/15)

Metro Areas With Largest Employment Growth
New York City
161,800
Los Angeles
124,800
Dallas/Fort Worth
103,500
San Francisco
70,600
Boston
70,300
Miami
68,700
Seattle
67,800
Atlanta
66,400
San Jose
55,500
Source: US Bureau of Labor Statistics
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Employment Change (8/14-8/15)

12 Largest US Metro Areas

Source: US Bureau of Labor Statistics

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NTREIS Dollar Volume Since 2007

August 2015 home resale dollar volume was $2.683 billion, the third
highest month all-time in DFW and an increase of 22% versus August 2014
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August 2015 YTD NTREIS (resale) stats

% Change
% Change Average % Change
% Change
Months
vs. Prior
# of vs. Prior
Average
vs. Prior Days on vs. Prior
Market
Year
Inventory
Year
Sales
Year
Sale Price
Year
1,312

2%

$260,152

10%

25

-29%

1.1

-25%

21 Coppell

363

-4%

$402,529

7%

41

37%

2.4

14%

10 Dallas Far N

852

3%

$430,671

7%

32

0%

1.7

-18%

11 Dallas N

482

-5%

$1,117,652

10%

55

-20%

4.4

4%

16 Dallas NW

505

-2%

$324,287

9%

33

-18%

1.6

-18%

31 Denton County N

3,355

9%

$227,660

10%

37

-18%

1.6

-26%

41 Denton County S

3,233

4%

$316,857

13%

34

-6%

1.9

-5%

433

9%

$336,100

15%

30

-3%

1.2

-21%

957

1%

$266,091

8%

45

0%

2.1

-10%

2,456

-2%

$353,158

9%

26

-16%

1.3

-7%

448

0%

$753,287

8%

59

26%

3.6

12%

349

-8%

$204,241

10%

19

-14%

0.8

4%

22 Carrollton/F.Branch

124 Grapevine
26 Irving
20 Plano
125 Southlake
9

The Colony

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Case-Shiller Index: Prices Still Rising

Source: S&P / Case-Shiller

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Case-Shiller Index: Prices Rising

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Stock market wealth effect:

Recovery has helped rich feel richer
Those with assets
over the past 6.5
years are feeling
good financially

Stock market indices are at all-time highs

Wealth effects, combined with cheap financing, have fueled the current boom
In a nutshell, the rich continue to get richer
Source: BigCharts, MarketWatch.com

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Evaluation of Threats to DFW Housing

Impact of low oil prices

The new 4-letter word: CFPB
Consensus prediction of rising
interest rates

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Threat #1: Oil Prices Fall

Price of West Texas Intermediate Crude Oil has fallen dramatically since mid-2014

Source: CNBC.com

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Impact of Oil Price Decline

Has not been as problematic for DFW as feared
Diversified DFW economy has avoided much of the
impact, whereas Houston has taken a bigger hit

But it could still negatively impact DFW jobs

Cost to produce a barrel of oil from a new well is ~$70
If sale price per barrel remains below that, when
current wells in operation get depleted, oil companies
will lay off people and not drill new wells

This will continue to provide negative pressure on

DFW/Texas economy for many months to come
Housing threat level: 3
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Threat #2: TRID

New mortgage world started 10/3/2015
Consumer Financial Protection Bureau (CFPB) was
created by the Dodd-Frank law to protect consumers

TRID: TILA/RESPA Integrated Disclosure

No more TIL, GFE, and HUD-1 forms
Loan Estimate and Closing Disclosure

Will be very annoying in initial months

My tip: Build in longer lead times, longer leasebacks
Dont be concerned if November home closings are
low its a one time statistical anomoly
Housing threat level: 2
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Threat #3: Interest Rates to Rise?

Rates have barely risen, not enough to choke growth

Source: CNBC.com

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Impact of Interest Rates

Asset values (real estate, stocks, etc) have gotten a
boost from low interest rates in recent years
A large increase in interest rates will be what
eventually causes us financial pain
Home prices would have downward pressure from rising
mortgage rates
Stock market would also be hurt, which could then also negatively
impact housing in its own way

But the good news is that interest rates dont look

like they will rise significantly over the next year
Core inflation is below Fed 2% target, and GDP growth still weak
Appreciation of the dollar creates more deflationary pressure
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US Treasury interest rates

US national debt is $18 trillion, so for every 1% increase in interest
rates, we will pay $180 billion more in interest per year
If normal interest rates are ~3-5% higher than current levels, you
can see that a return to normal would add significantly to the debt
Thus, the US governments financial stability stands to be harmed if
rates rise significantly
CONSPIRACY THEORY: Given the negative consequences of a
normalization of interest rates, wouldnt you think that the US
government (Treasury, Federal Reserve, etc) would do all it can to
keep rates low?
Lip service about being tough on inflation and ready to hike rates

PROBLEM: Interest rates are controlled by the market, not govt

Housing threat level: 3 in short term, 10 in the long term
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Final Predictions

DFW housing will continue to set all-time monthly
records for months to come

2015 key threats (low oil prices, TRID and interest
rates) dont appear ready to derail housing

The party will end when interest rates start rising, but that
does not appear imminent

Dont panic when November sales figures look terrible

We will probably see a 1-month temporary setback in sales volume, due
exclusively to longer contract times due to TRID

December and early 2016 months will return to setting records

2016 looks strong for DFW housing, too

Goldilocks US economy (not too hot, not too cold) to keep
DFW housing on positive trend
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