Friday, October 23, 2020 / by Scott Shine
"Many prospective homebuyers who were planning to purchase next year have been pulled into the market early as their affordability has suddenly improved," said Dr. James Gaines, chief economist for the Real Estate Center at Texas A&M University. "This pull factor contrasts the pent-up demand that drove the summer sales surge."
According to the National Association of Realtors, existing-home sales increased 9.4 percent across the country compared to August 2019. First-time buyers accounted for 31 percent of September sales, down from 33 percent in both August 2020 and September 2019.
Home-purchase mortgage applications have increased within Texas despite tightening lending standards. "Loan-to-value and debt-to-income ratios are falling, while credit scores for qualifying applicants are rising as lenders acknowledge the current state of economic uncertainty," said Gaines.
Aggressive fiscal and monetary policies in response to the coronavirus crisis have helped buoy housing demand, but the effect of those stimulants may be short-lived. Center Research Economist Dr. Luis Torres said consumer purchasing power has been affected since the onset of the global pandemic.
"Texas’ real income per capita increased 8.1 percent year over year during the second quarter, explaining much of the housing markets’ resiliency. This income growth, however, was driven purely by an increase in transfer payments, like the stimulus checks widely distributed at the beginning of the pandemic. Net earnings and dividends/interest/rent components of the real income calculation decreased as expected. Congress is still debating the extent of the next round of stimulus," said Torres.
In addition to this uncertainty, supply-side factors present a growing challenge to the housing outlook. The number of new listings hitting the market have not kept pace with the sales rebound, diminishing housing inventories that were already at record lows. Texas’ months of inventory for existing homes fell to less than 2.1 months in September. Housing shortages are even more pronounced in the major metropolitan areas.
The combination of stimulated demand and dwindling supply have pushed housing prices upward. Texas’ median home price hovered around $260,000, a double-digit percentage increase compared to September 2019. Some of this home-price appreciation is due to a change in sales composition, as inventory constraints are more severe at the lower end of the market. The Texas Repeat Sales Index, however, accounts for compositional changes and has suggested real price growth closer to 5 percent.?