COLLEGE STATION – Before COVID-19, Texas’ home price growth was strong but declining to more sustainable rates. Texas Real Estate Research Center Senior Data Analyst Joshua Roberson said 2020’s unpredictability led to growth estimates that could be mistaken for data flukes.
Fourth quarter price growth, based on the Center’s Home Price Index, is enough to cause alarm. In Austin, the index jumped over 10 percent above last year’s estimate. At what point will home prices eclipse interest rate savings? Is there a bubble brewing in the housing market?
“In a post-pandemic economy, nothing is really off the table,” Roberson said, “but if anyone is waiting for another Great Recession-like housing crash, they may be disappointed.
“During the Great Recession, home demand plummeted along with consumer confidence while home supply was left high and dry. Today, it’s the exact opposite. Homebuyers are in a buying frenzy, but supply is nowhere in sight.”
According to Roberson, the end result of that high demand and low supply has been price hikes like those experienced in the past two quarters, and future quarters are likely to follow this trend. Mortgage rates are expected to remain low, which will help sustain demand. Demand for more square footage is also not likely to fade soon.
On the supply side, existing homeowners are staying put, resulting in a massive shortage of listings while builders struggle to keep up with the surge in demand.
While price growth is likely to remain hot this year, the fourth quarter 2020 spike may be a one-time phenomenon.
“Normally during the winter months, the housing market cools and buyers are less aggressive, but this winter things were still heating up,” said Roberson. “If 2021 returns to the normal summer-focused seasonality, then next winter may not be as impressive. But until COVID is managed, nothing should be taken for granted.”
Article by: Texas Real Estate Researcher Center