Demand for Texas housing weathered mortgage rate increases in December 2016, according to a Texas Housing Insight report authored by James P. Gaines, Luis B. Torres, Wayne Day, and Wesley Miller with the Real Estate Center at Texas A&M University. Additionally, according to the report, “strong demand overtook modest supply increases.”
Prices remain one of the big stories of Texas real estate, with briskly rising prices since late 2011. The average sales price in Austin, as well as in Dallas and Houston, grew more than five percent year over year, with new home sales also performing best in those cities. Austin is the price appreciation leader among large Texas metros, with prices per square foot for average new and existing homes in Austin $50 and $30 more, respectively, than those in other major Texas metros.
In December 2016, interest rates increased 43 basis points to a 4.20 percent average rate on a 30-year fixed-rate mortgage. This is the highest peak in interest rates since April 2014. “With interest rates expected to rise in 2017,” the report states, “sales in the short-term may pull back, but home prices are expected to keep increasing.”
For the state as a whole, housing starts decreased 13.2 percent year-over-year (seasonally adjusted) in December, a negative trend that began in late-summer 2016. (Housing starts and construction permits are positively related, but housing starts can lag by months.) However, total building permits increased over the month and year. Austin experienced a trough in housing starts in mid-2015 but has grown at an accelerate rate since. Austin ranked sixth nationally for the number of construction permits issued, with 1,144 construction permits issued.
In general, the Texas economy fared well in December, expanding as energy and housing markets advanced. Nonfarm employment expanded 1.8 percent, and the “outlook on overall economic conditions in Texas increased from November.”