We are currently in quite an interesting spot where the housing industry is concerned, specifically here in Texas. This may be news to you, but Texas as a whole actually managed to avoid the housing boom – and subsequent crash – of 1998-2006 and the Great Recession. Since the real estate industry rebounded in 2012, Texas has mainly been met with positive news. Not only does our state have one of the strongest housing markets in the nation, but it has registered strong price appreciation numbers in comparison to the rest of the country.
So, what does all this mean? For starters, whether you are buying or selling a home, or neither, actually, it is a good idea to pay attention to housing prices in your area. Housing prices are an excellent way to determine the actual value of your home in comparison to homes of similar lot size and features. While many real estate industry experts and housing analysts believe that the 1998-2006 housing boom was caused by a departure of housing prices determined by economic fundamentals, this does not mean we are setting ourselves up for another similar situation just because the current housing prices are increasing.
According to housing analysts, the house price-to-rent ratio at present date is similar to that of 2003, which many consider a tipping point in the housing boom. However, this is not to say this imbalance will have the same outcome as it did a decade ago. It is far too soon to tell whether a bubble is forming and while the housing price-to-rent ratio seems like a great way to track what is going to happen, there are numerous other factors to take into consideration.
As you can imagine, it is no easy task to track and determine if there is a misalignment in house prices and how – or if – this will impact the market as a whole. We have talked a lot about the Texas’ housing market, in particular, as it continues to grow and experience growth. However, just because home prices are up and the market is hotter than ever doesn’t mean we are in danger of reaching that bubble point. Housing demand is leading to more new construction, which means jobs and more homes for the influx of people moving into Frisco, Plano, and elsewhere in North Texas because of corporations like Toyota and JPMorgan Chase.
Before we wrap things up for the day, let’s look at a few key factors that impact the real estate market in Texas and elsewhere:
- Demographics – The rise and fall of home prices are often set in place by age, race, gender, income, migration patterns, and population patterns
- Interest Rates – As you likely know, interest rates have a huge impact on the real estate market. Changes in interest rates can create various patterns and market swings. If interest rates remain as low as they are, we should be in a good place moving forward.
- Economy – This is undoubtedly a big one, as the economy is what drives many different markets, namely housing. With a good economy, people are more prepared to buy a home and make their mortgage payments. When the economy falters, this is not as simple.
To learn more about the Texas real estate market, housing prices, and why it is important to pay attention to the ebb and flow of the market, please contact The Cheney Group today.