It appears to me that the two metro cities that have already surpassed the previous peak median home prices are Dallas and Denver.
Interestingly the Dallas housing market was pretty much recession proof during the house crisis when most metros areas fell as low as 20% like the Charlotte market and as much as 60% like the Vegas market. Dallas only fell 10.7% from its peak in Aug 2006 to its bottom in Feb 2009. The Dallas market quickly surpassed its last Aug 2006 peak as early as April of 2013.
Why was Dallas housing market recession proof while all the other metro area markets almost fell off a cliff? Why are now seeing higher appreciation in Dallas than we have ever seen in the past?
The appreciation in the Dallas market was very modest averaging about 3.3% from 2000 - 2006. Now we are seeing appreciation of 10.21 in 2013 and likely to be at 9.3% appreciation by year end 2014.
Do you believe that appreciation that will take place in Dallas in the future will be unprecedented from 3.3% average appreciation we have seen in the past? Do you believe close to 10% appreciation is sustainable in the Dallas market going forward?
Dallas has two things going for it: Increasing population and a stable energy market. As long as those things remain, it will continue. However, oil prices have fallen below the ~$75 a barrel which makes it profitable. Watching those prices is essential, as wells will be capped if they cannot sustain profitability, losing jobs and inward immigration patterns.
There have been numerous articles written about the geographic reasons Texas doesn't generally experience "bubbles" in the market. Basically, it comes down to Texas having few, if any, geographic barriers to expansion, which prevents demand driven appreciation.
As for why Texas didn't drop as far as the other markets, again, it hadn't experienced the unbridled appreciation. What it did experience was more a stagnation of the normally dependable appreciation. However, unlike other markets, Dallas' 10.7% drop in prices was much less a result of price correction and more a result of a lack of available credit. Lenders weren't lending to anyone other than A+ borrowers. People who could get approved were suddenly faced with 20% down requirements, when 3 months prior they were expecting to put 0% down. Prices fell, because people couldn't sell their homes. There were many reluctant landlords born, during that period of time.
There are micro-markets in Dallas County where appreciation has been pushing 30% over 2013, so 9.3% is not surprising, even though that takes into account less desirable areas. I don't expect it to continue at that pace. However, I do expect it to take a couple of years for it to settle back into historic norms for appreciation. Right now we still have ridiculously low inventory in areas of moderate to high desirability. New construction is really just starting to really crank back up, since the crash, so it's probably a bit before inventory catches up with demand.
Add to that the fact that we are still seeing unprecedented job creation across a wide salary range, and I expect to continue having a huge demand.
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