Is the housing market cooling?
Investor · Lucas, TX · Member since 2010 · 620 posts · 352 votes
Is the housing market cooling?
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Dallas, TX · Member since 2016 · 37 posts · 10 votes
9yI am a new investor. I just flipped a property in Mckinney. It took me 93 days from beginning to end. The market in Collin county seems to be healthy and will continue to stay that way for a bit longer in my humble estimations. I do believe that with all the new employment opportunities coming into this county demand definitely grow. I will continue to watch the market carefully , as the high sales season has just expired though. Be resourceful and wise.
Happy investing!
50 Replies
- Investor · Lucas, TX · Member since 2010 · 620 posts · 352 votes7y
@Chris Carlson I am a buy & holder plus part time flipper. I've been a net seller these past 3 years though. The money has been too good. Triple the normal appreciation in a span of 6 years. I had to take some money off the table.
I hate to say it, but I noticed this slump starting well over a year ago, thus this thread. The stalling of rent increases gave the earliest indication of where this market was headed. What I'm still not sure of is, is this just a normal correction in an otherwise bull market or have we hit the cycle top. I'm hoping for the former but leaning to the latter.
I'm not so worried about my SFRs. Yes I expect the rent to drop but I also am expecting the taxes to as well. I've been in this weird limbo land where my rent has been going nowhere but my taxes are getting bumped up, in some cases 20% a year. To be fair, this also happened at the beginning of this madness in 2012. My rents were skyrocketing but my taxes weren't budging. So I guess it evens out.
I'm concerned about my flipping. It used to be I could count on the house selling for what I appraised it for, or even more, a few months later. Then I could sell it immediately. Now I'm concerned with holding costs blowing out the budget if it takes a month or two to sell. Margins have been tight enough with all the competition.
@Ben H. Earlier this year I got a SFR in McKinney under contract to sell in 3 days for 4% above ask and closed within 2 weeks. Right now I have a similar house in McKinney sitting for 6 weeks with an ask 4% below market and no showings for weeks. Hoping its just the Thanksgiving to New Years stretch being a bad time to sell.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
As it relates to Texas I think property tax's have an influence as well.. those are fixed costs that are 1 to 3X higher than other markets for similar priced properties.. and interest rates have no effect there. so add rising interest and very high property tax. that can have an impact.. I always thought the property tax situation was one of the main reasons that HIGH end lux housing there was literally 1/2 price or less than other major metros.
- Investor · Lucas, TX · Member since 2010 · 620 posts · 352 votes7y
@Jay Hinrichs You're absolutely right. I've always believed that property taxes were the sole reason keeping prices down in DFW, until these last several years. Over a decade ago I was looking at investing in Raleigh, NC. It was interesting to note that even though the house prices were much higher, the property taxes were much lower and for comparable houses the cash flow worked out exactly the same. I guess the saying is true; people buy payments, not houses.
Looking at it now we have the $10K cap on property taxes for homeowners which is really going to put a dent in those high end luxury homes. Is that thing even indexed for inflation? God help the equity appreciation investor in those high property tax states if it isn't.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Robert Steele:
@Jay Hinrichs You're absolutely right. I've always believed that property taxes were the sole reason keeping prices down in DFW, until these last several years. Over a decade ago I was looking at investing in Raleigh, NC. It was interesting to note that even though the house prices were much higher, the property taxes were much lower and for comparable houses the cash flow worked out exactly the same. I guess the saying is true; people buy payments, not houses.
Looking at it now we have the $10K cap on property taxes for homeowners which is really going to put a dent in those high end luxury homes. Is that thing even indexed for inflation? God help the equity appreciation investor in those high property tax states if it isn't.
for certain areas of the country I can see that 10k cap having an impact. other areas not so.. much.. I mean if you tax's are 12k a year on your personal resi and you write off 10 k but cant write off 2k I don't see that as a major deterrent. I think the one that really hurts is the no writing off tax income tax against federal.. at least for high wage earners.. and they say the tax code benefits the higher income I see it completely the opposite frankly. and I think its one reason Vegas will remain pretty viable. the over flow from CA folks who can work from home or whatever.. still 5 hour drive to LA but in a tax haven.
- Accountant · Dallas, TX · Member since 2016 · 161 posts · 75 votes7y
I feel like the housing market in DFW will heat up bigly when the weather starts to warm up again. We are in a similar economic state, probably improving actually. Those that have recently moved here and are renting right now and those with decent incomes that have rented for a while will still want houses in the long run. I agree there is softness now but it will soon harden. Another recent announcement is the McKesson HQ moving from San Francisco to Irving, TX.
Any houses in the range of $325,000 or less will be purchased. Property taxes remain high in the lone star state but rising rents will tilt those with a long time horizon towards home ownership. I rented an apartment for a few years when I first moved to DFW, but had generally wanted to own a house. I think most people want to own a house as well.
- Real Estate Broker · Los Angeles, CA · Member since 2017 · 658 posts · 293 votes7y
Home appreciation has slowed, rates have ticked up a bit, and I think people have fears over the future of the economy. I believe we are at the top of a cycle and have headed into neutral territory. I'm in Los Angeles and we have seen appreciation slow into the 3% ranges, cash buyers and multiple offers have also cooled off
- Member since 2018 · 7 posts · 1 vote7y
Robert,
You are correct the market is changing. The market is beginning to stabilize and seems to be treading back to a buyer's market. Homes are staying on the market longer than a few years ago, even longer than last year. I see this on the MLS for the DFW area. Also, NAR (National Association or Realtors) statistics states the same. Here's additional information: https://texasrealestatebuysell.com/real-estate-blo...
https://www.nar.realtor/research-and-statistics/ho...
https://www.youtube.com/watch?v=Nh5MbY0Pzzk&t=7s
Hope this information helps..
Jacquelyn
- 7yLevi T.Pro MemberRental Property Investor · Tucson AZ / Nice FR / Washington DC · Member since 2016 · 1k+ posts · 1k+ votes
There is a softening happening. When we crossed 5% interest rates, that killed a lot of deals. To many houses have been priced at much lowers rates, and now you can see them slipping large margins as sellers try to find the market bottom, I think the winter slowdown also helped compound some of this, but this is also why you see the fed started to flench with their rate hikes.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Levi T.:
There is a softening happening. When we crossed 5% interest rates, that killed a lot of deals. To many houses have been priced at much lowers rates, and now you can see them slipping large margins as sellers try to find the market bottom, I think the winter slowdown also helped compound some of this, but this is also why you see the fed started to flench with their rate hikes.
Yup no doubt there was some / is slow down in sales Q3 Q4.
I was talking with Lennars head of Northwest market on Monday. We have projects next to each other.. in a few cities around Portland.
He said they are having to give some incentives to get people off the fence.. they do this with Rate buy downs and closing costs.. but they are keeping their prices stable ( which you need of course for appraisal comps).. In Portland I was talking with a Lux builder and he said it appears the floor on the lux moved off of highs by 10% to get sales this fall ( he has two in contract) so 1.5 sells for 1.350.. but in those markets that all pure profit he is losing.. but still making money.. at the moment I am between projects.. I have 3 coming out of the ground this week in Inner Portland. and confident those will sell and will sell for the numbers we project simply because of location and I am building on the low end of new build pricing.. ( which seems to always sell).. these are located with one of the best walk scores in the city.. And I just sold a new build in Charleston SC.. that closes next week.. and it was on the market for about 30 days. instead of selling day one.. I started at 519k settled at 510k.. were as in the past no discount. this is a cash buyer .. we have one closing on Jan at 2.2 in Charleston historic district same thing cash buyer.. so interest rates are not affecting them.. in these uber cool markets its all about location.. for instance the 2.2 one we are the ONLY new build South of Broad in the top end historic district.. and that one never even made it to market.. ( which might have been a mistake) but when I bought the lot I was going to be happy at anything between 1.9 and 2.0 so to get 2.2 we are very happy.. nice way to start Q 1.. so that's kind of real world in my world.
Also I asked the Lennar guy if they thought they would keep pace at 300 homes a year in the PDX market and that is what they are gunning for.. I meet with him end of the month they may want to buy some of my lots.. So to the fact that he wants a sit down means we still have something that others want and need and that is buildable lots.
- Investor · Hendersonville, NC · Member since 2013 · 755 posts · 281 votes7y
I think a bit of hesitancy on the part of developers can be good, because one of the phenomena that happens is that developers are too industrious and ambitious, and they overbuild, creating a huge glut of supply in a market downturn, making landlords want to pull their hair out.
I know I bought my first home as a condo, built in 2007, in the run-up to the great collapse. The douchebags who developed it made it rife with construction defects to hurry up and cash out before the music stopped. Only NOW are we finally repairing the damage, after a lawsuit. And we only recouped half of what we needed.
Point is, when developers get crazy, as they have been lately in Charleston and Mt. Pleasant and Summerville SC, it messes with the market. In fact, almost by definition, every time a new neighborhood goes up with $120/foot prices, it keeps more established neighborhood prices depressed. Supply/demand!
- Member since 2018 · 10 posts · 1 vote7y
My wife and I have been looking at houses in Katy, TX for awhile; moving to get closer to her parents (Catspring). I've noticed the inventory is getting very high lately with very few new sales which looks like a market top to me. Prices are coming down steadily on the listings.
Now we're thinking more about moving and renting for a year just to watch the market and make sure we don't get a bad deal on our primary residence and also to start looking at investing in SFR's and multi family rentals.
Does anyone have any feedback on how the market in TX... esp Houston area reacted in 2008? My understanding is that TX fared better than most areas.
- Florissant, MO · Member since 2018 · 23 posts · 5 votes7y
The market can only go so high, seems to me it's "cooling" off a bit, but perhaps it's more like leveling out, which is certainly preferable to a jarring correction.
- Rental Property Investor · Member since 2018 · 19 posts · 5 votes7y
I have to say that in the 250-300k range is not cooling off here in Dallas, I am trying to buy a primary residence and deals in that range has multiple offers and bid wars. we put few offers with above-asking prices to find out that the winning offer was about 10k more than ours.
I have been watching the market for a few months now and anything above 300k is staying longer.
I think we will hold off for 6 months to a year until the dust settles down. I also read an article by Zillow expecting the crash in 2020.
https://www.zillow.com/research/experts-2020-next-recession-19994/
- Dallas, TX · Member since 2018 · 25 posts · 8 votes7y
I think we're starting to see the effects of rates and price/wage ratios. I don't go very high end, so just from observation, above the FHA limits things have definitely cooled. Below 250k in DFW? Still solid. You might need to clean up or finish out just slightly better, but in good neighborhoods dom is sub-20 still.
Someone said that people buy a payment, which I think is true. Prices can only go up 7+% while wages go up 3% for so long until there are affordability limits.
- Dallas, TX · Member since 2016 · 1k+ posts · 745 votes7y
Originally posted by @Eric Kephart:
I think we're starting to see the effects of rates and price/wage ratios. I don't go very high end, so just from observation, above the FHA limits things have definitely cooled. Below 250k in DFW? Still solid. You might need to clean up or finish out just slightly better, but in good neighborhoods dom is sub-20 still.
Someone said that people buy a payment, which I think is true. Prices can only go up 7+% while wages go up 3% for so long until there are affordability limits.
We might get a second round of prices going up as the PGA, DJO and McKesson come to town.
- Member since 2019 · 2 posts · 0 votes7y
We looked at houses in Dallas Spring 2018, felt the market was very over priced. Fast forward September-December 2018started looking again. Sellers were cutting prices 10% Plus. Several of the properties still were not selling. Sellers removed their properties over the holidays, and are now relisting them as ‘new listings’ at even lower prices. We are looking in the $400-$550 range. A house now needs to be priced very competitive and in good/updated condition to sell in 30 days. We will continue to look, but from what we are seeing by fall 2019 the prices will be even less lower and we will not have to settle. Dallas did not experience the drop much of the rest of the country did in 2007, they are about th experience a housing price adjustment. Which may trip one off across the country, if there is an economic downturn. Consumer debt is at a record.
- Dallas, TX · Member since 2016 · 1k+ posts · 745 votes7y
Originally posted by @Doreen Luko:
We looked at houses in Dallas Spring 2018, felt the market was very over priced. Fast forward September-December 2018started looking again. Sellers were cutting prices 10% Plus. Several of the properties still were not selling. Sellers removed their properties over the holidays, and are now relisting them as ‘new listings’ at even lower prices. We are looking in the $400-$550 range. A house now needs to be priced very competitive and in good/updated condition to sell in 30 days. We will continue to look, but from what we are seeing by fall 2019 the prices will be even less lower and we will not have to settle. Dallas did not experience the drop much of the rest of the country did in 2007, they are about th experience a housing price adjustment. Which may trip one off across the country, if there is an economic downturn. Consumer debt is at a record.
Dallas didnt drop as much as the coasts in 2007 because it didnt run up like the rest of the country in the years prior.
DFW as a whole has been one of if not the leading job creator in the country, and there are hundred plus thousand people being added annually. from 2015 to 2016 as an example DFW added 140K people.
So while it may have cooled a bit, from a smoking hot market, I think the housing market is just strong. I dont see any indication that we are on the precipice of a huge downturn in Dallas, not unless something happens nationally. And even then I think a Dallas downturn will be less volatile than the coasts because people are still moving here.
- Member since 2019 · 2 posts · 0 votes7y
I should have mentioned I am talking about neighborhoods within 10 miles of downtown. Not all the burbs of Plano, McKinney, Rockwall etc. Affordable housing will always be found out there. True Dallas has added people, but the wages have not increased as much as the price of housing in Dallas. Rents have come down in Dallas. Graduates with too much student debt will rent longer, even at professional level job. Houses under $400,000 will always be desirable but harder to come by. Property taxes will make it difficult for many people to afford higher priced homes. June 2019 will be a telling indication of the Dallas housing market.
- Rental Property Investor · San Francisco, CA · Member since 2019 · 23 posts · 22 votes7y
Originally posted by @Ed S.:
The market maybe cooling a tad on the Midwest, but still strong.If rates move up, then hold on baby!
Old enough to remember, October 1979!
Can you say more about October 1979 Ed please?
- New to Real Estate · TX · Member since 2018 · 56 posts · 24 votes7y
Here you go... You tell me. This is the most recent from January. : )
- New to Real Estate · TX · Member since 2018 · 56 posts · 24 votes7y
Originally posted by @Jay Hinrichs:
As it relates to Texas I think property tax's have an influence as well.. those are fixed costs that are 1 to 3X higher than other markets for similar priced properties.. and interest rates have no effect there. so add rising interest and very high property tax. that can have an impact.. I always thought the property tax situation was one of the main reasons that HIGH end lux housing there was literally 1/2 price or less than other major metros.
Jay, Just curious. I always thought Texas had low property tax rates. Where I am at it's 2.36% Is that considered high? Also, The county I am in assesses at about 80% of value.
$100,000 homes is assessed at $80,000 x 2.36% = $1,888 or $157 a month. - Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes7y
Originally posted by @Account Closed:
Originally posted by @Jay Hinrichs:
As it relates to Texas I think property tax's have an influence as well.. those are fixed costs that are 1 to 3X higher than other markets for similar priced properties.. and interest rates have no effect there. so add rising interest and very high property tax. that can have an impact.. I always thought the property tax situation was one of the main reasons that HIGH end lux housing there was literally 1/2 price or less than other major metros.
Jay, Just curious. I always thought Texas had low property tax rates. Where I am at it's 2.36% Is that considered high? Also, The county I am in assesses at about 80% of value.
$100,000 homes is assessed at $80,000 x 2.36% = $1,888 or $157 a month.Texas is one of the highest in the country. For example, our house in Austin Texas is accessed in the $350,000 range and the property taxes are north of $11,000 including the Homestead exemption. Our house in Colorado is in the $300,000 range and the property taxes are approx $1200
- Investor · Oskaloosa, IA · Member since 2014 · 126 posts · 65 votes7y
Sorry for the delayed response.
Inflation was 1% a month (12% year). The Fed decided the only way to break inflation was to jump the Prime rate (lot of history that drove inflation -- worth the research time). I believe prime capped out at 20.5%, it stopped inflation and just did a gut punch to the economy! Everything here in the Midwest slowed to a crawl - by 1985 the Ag economy was in full recession, lots of farms foreclosed on and a number of banks closed by the FDIC. Hard to cashflow any purchase (or debt on a variable rate) at 18%!
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