Is housing already poised to recover?

Realtors' economist, some Texas analysts disagree about timing

12:00 AM CST on Saturday, November 11, 2006

By STEVE BROWN / The Dallas Morning News

NEW ORLEANS – The top economist for the national Realtors group predicts that the national housing downturn is leveling out and a recovery may be at hand.

Not so fast, say Texas housing analysts, who think that's just wishful thinking and further cutbacks in home sales and prices are ahead.

"The bad news is just about behind us," David Lereah, chief economist with the National Association of Realtors, told industry members meeting Friday in New Orleans. "It appears that we have bottomed out.

"From a sales perspective, the worst may be over," Mr. Lereah said.

The number of unsold homes on the market nationwide seems to have peaked and the volume of pending sales looks promising, Mr. Lereah told thousands of real estate agents who are struggling with the industry's first downturn in more than a decade.

But Texas housing analysts are less sanguine.

While Dallas, Houston, Austin and other Texas cities have so far not seen a dramatic home sales retreat, the nationwide market is not out of the woods yet, they say.

Prediction that the worst is over for housing is "more jawboning, hoping that they can influence things to be at the bottom," said James Gaines, economist with Texas A&M University's Real Estate Center.

"Personally, I think the 2007 housing market will be down across the board and not make significant improvement until sometime in 2008, and that assumes we don't have a recession or anything approaching a recession," Mr. Gaines said.

Dallas housing analyst Ted Wilson agrees that it's too early to see an end to the housing slowdown.

"Yes – a little bit, perhaps wishful thinking," said Mr. Wilson with Residential Strategies.

Major homebuilders are preparing for a significant slowdown, he said.

"In Dallas, about 10 of the large builders currently are on hiatus – not committing on new lot deals," said Mr. Wilson.

"There have also been some significant layoffs with many of the building firms as well – indicative of a more long-term issue than just a blip."

The Realtors aren't the only ones saying that the housing decline is moderating. Former Federal Reserve Chairman Alan Greenspan recently remarked that he believes the home slump is ending and that the current quarter will be better.

The National Association of Realtors says pre-owned home sales have fallen about 9 percent so far this year.

"In '07 it will be a flat year," Mr. Lereah said. "Maybe a 1 percent drop – that's it."

In some cities that didn't see a big run-up in home prices during the last few years, sales are likely to increase in 2007, he said.

"Twenty-three percent of the nation falls into this category – they never experienced the boom," Mr. Lereah said. "Houston, Texas, Austin and Dallas are great examples.

"Some modest price drops will be enough to bring buyers back into those marketplaces."

Median home prices declined slightly in the Dallas-Fort Worth area during both September and October. Home sales in North Texas have been down in each of the last five months.

Nationwide home prices are forecast to rise by less than 2 percent in 2006 and 2007, following a 12.4 percent jump in 2005, according to the Realtors.

In many U.S. cities home prices are already falling.

"Don't be afraid of prices coming down," Mr. Lereah said. "When prices come down, it brings back buyers.

"If they see sellers are more flexible, they are more apt to come back to the marketplace."

Dallas-area real estate agents report that some potential buyers are taking a wait-and-see approach to the market. They are holding back until after the first of the year to determine if housing prices are going down.

"We have sidelined buyers who need to regain confidence," Mr. Lereah said. "If you are a buyer waiting for prices to come down further in your local area, you are gambling."

In overheated housing markets in the West and parts of Florida, there's still no sign that prices have stabilized.

"It's going to be tough," said real estate sales consultant Steve Murray with Denver-based Real Trends Inc. "In some markets it will be 12 months before we see any uptick and in some it will be 24 months.

"2005 marked the end of the great 12- or 13-year bull housing market."

But Mr. Murray also predicted that the worst of the housing shakeout may be past for some housing markets.

The residential sales industry will continue to see changes – even though the market is off, he said. The impact of the Internet on housing sales isn't complete, Mr. Murray said.

"We really haven't experienced the full onslaught of these structural changes," he said. "Consumers do not and will not rely on sales professionals solely, as they did in the past for their housing information.

"They will increasingly rely on the Web for their info."

There will also be fewer real estate agents.

"We are actually predicting an 8 percent drop in membership," Mr. Lereah told Realtors, who enthusiastically applauded the news. "Productivity will get better as we have less members and the quality will improve.

"It's an overall good thing for the industry."

The North Texas housing market has shifted into slower growth.

North Texas home market slows
Dallas-area sales, prices are still rising, but not as robustly as in the past

09:33 AM CST on Monday, October 30, 2006
By STEVE BROWN / The Dallas Morning News

While the Dallas-Fort Worth area isn't seeing the kind of slump some East and West Coast cities have suffered, the rates of home sales and price increases has dwindled this year.

Through the first nine months, home sales in the Dallas area are up about 2 percent from a year ago. Prices are up a scant 3 percent.

Some neighborhoods are bucking the trends. Home sales prices are up 15 percent this year in the Park Cities and up 10 percent in East Dallas. In Keller, prices are 11 percent higher than a year ago, and prices are up 10 percent in Southlake and 9 percent in McKinney.

While Dallas overall has had a "ho-hum appreciation rate," that's not bad, said Mark Dotzour, chief economist at Texas A&M University's real estate center.

"In most decades, people would be thrilled to death to have a 3 or 4 percent appreciation," Mr. Dotzour said. "In Dallas, the economic conditions for a strong housing market are still there – positive job growth, cheap mortgage rates and continued home price appreciation."

The biggest sales increases so far this year have been in Lancaster, 17 percent; Fairview, 15 percent; and Denton County, 10 percent.

Overall sales have trailed down in the last few months, but that may have more to do with attitudes than economics. Builders and real estate agents hear that some buyers are waiting to see if prices will fall as they have done elsewhere.

"It has affected the buyers' perception," said Ted Wilson of Residential Strategies Inc.

Housing is now a drag on the U.S. economy, after years of positive influence, he said. "If the consumer feels they are losing equity in their house, it can curb their spending habits," Mr. Wilson said.