Frankly, these numbers surprised me. I expected to find that our home prices have held up. What I didn’t expect to find was that they have held up remarkably well, especially given the blood-letting in the rest of the country. Plus, the news earlier this week that DFW-Arlington prices fell .1 percent annually (from the respected S&P/Case-Shiller index) makes our success that much more amazing.
The complete chart for the eight ZIP codes in East Dallas, Lakewood and Lake Highlands is here. The more I think about it, the more I’m convinced that we’ve benefited for two main reasons: First, foreclosure rates around here have remained low. There was an uptick in December, but that may have been an aberration. Second, since our home supply is limited, it’s almost impossible to overbuild. And overbuilding has caused many of the problems elsewhere in the Dallas area and in the rest of the country.
My hunch is that home prices here in 2008 won’t hold up this well if the rest of the economy continues to slow. But we should be able to avoid the 1980s-style meltdown that those of us who have lived here since then remember with fear and trepidation.
After the jump, the complete story:
At this moment, my desk is scattered with more than a dozen or so reports on Dallas-area home prices. There would be others, but I got tired of looking. Every time I did an Internet search, more turned up.
I mention this not to demonstrate my cyber prowess, but to note how difficult it is to get a handle on what’s happening to home prices in our neighborhoods. There is little doubt that home prices nationally have tanked, thanks to the subprime loan crisis and a slowing economy. Some analysts predict that this could turn into the worst housing slump since the Great Depression, while one government-backed lender says home prices nationally could fall 5 percent this year.
But what’s going on here? The reports I found, from respected private and public groups that use many of the same numbers, are nothing if not contradictory. A couple say things aren’t bad, a couple say things aren’t as bad here as elsewhere, and some are downright gloomy.
Hence the Advocate Home Price Snapshot, compiled with the help of Ron Burch at Coldwell Banker. We broke down single-family home sales by ZIP code for East Dallas, Lakewood and Lake Highlands since 2003, and discovered that home prices here are more than holding up. In only one of the eight ZIP codes (75223) did home prices decline from 2006 to 2007, and even then, the average sales price was still up almost 19 percent from 2003. In fact, the average sale price in every ZIP code was higher in 2007 than it was in 2003.
Not all the news was good, and, not surprisingly, there were many contradictions. But overall, we’re in a lot better shape than the rest of the country and much of the rest of Dallas, and even in better shape than many of us thought. Among the findings:
• The market, in terms of the number of homes sold per month, the number of days on the market, and average number of homes for sale, apparently peaked between 2005 and 2006. Since then, though prices remained steady, fewer people are putting their homes on the market; the average number of houses sold is down; and it is taking longer to sell them.
• The strongest market has been 75204, where the average sale price increased 74 percent from 2003 to $313,085. No, we’re not quite sure why that is.
• The weakest market has been 75243, where prices increased just 14 percent in the five-year period, to $233,404.
So why have our prices continued to increase, while the rest of the country’s haven’t? There is some truth to the theory that our prices haven’t increased as much as elsewhere in the country, especially in the case of Lake Highlands. This means that we didn’t see a housing price bubble like homeowners did in California and Florida. But that’s only part of the explanation.
More important, says John Baen, who teaches real estate finance at the University of North Texas and who used to live in East Dallas, is that demand for homes here has increased. People tired of long suburban commutes or higher crime rates elsewhere in Dallas want to live in this area. Meanwhile, the supply of homes hasn’t increased, since we don’t have any farmland to turn into subdivisions. In addition, there is less turnover here than elsewhere, which further crimps supply. We buy our homes to live in, Baen says, and not to flip after a couple of years to make a buck. Plus, since we like it here, we tend to stay longer, which also reduces turnover.
Finally, we haven’t seen the foreclosure problems that other parts of the Dallas area have seen. As long as foreclosure rates remain relatively low, we won’t have houses thrown on the market at cut rates, which increases supply and lowers prices in one stroke.
Says Baen: “Texas is better off than the rest of the country, Dallas is better off than most of the rest of Texas, and you’re better off than most of the rest of Dallas.”