As home sales cool on the East and West coasts, some cities that missed out on the real estate boom are becoming the strongest markets.
A look at inventories of unsold homes, prices and employment trends points to generally positive signs in Houston, Dallas and Atlanta – cities that have seen only modest home-price gains in recent years.
Metropolitan areas whose housing markets look less healthy, at least in the short term, include Boston, Los Angeles, Miami, Minneapolis, New York, Philadelphia and San Francisco. All have growing inventories of homes and relatively weak job growth.
As a result, houses that a year or two ago might have sold in hours now are languishing on the market for months, and some sellers are cutting prices.
To produce a snapshot of residential real estate prospects for 18 major metro areas, The Wall Street Journal examined inventories of homes for sale at the end of the first quarter from a variety of local sources; pricing trends based on surveys of real estate agents by Daniel Oppenheim, an analyst at Banc of America Securities in New York; and projections of job creation by Moody’s Economy.com, a research firm in West Chester, Pa. Inventory data provide a broad picture of the overall supply of housing, while job trends are the biggest driver of demand. The pricing data show how markets are adjusting to recent shifts in supply and demand.
Texas has been a laggard in recent years, partly because job markets were weak in some cities and land for new houses is plentiful. Now, the state’s job market is strong, as cities there are benefiting from the oil boom and an influx of people from abroad and elsewhere in the U.S., and housing demand is keeping up with the relentless spread of new subdivisions as Texas cities sprawl. Investors, many from California, are adding to the demand.
Texas home prices could rise 6 percent to 9 percent annually over the next several years, up from an average of 4.5 percent over the past 15 years, says James Gaines, an economist at Texas A&M University’s Real Estate Center in College Station. He says the state is attracting residents and employers because its housing remains affordable by national standards.
Atlanta also benefits from a healthy job market, due partly to the city’s role as a regional hub and a magnet for immigrants and conventions. J. Lewis Glenn, president of Harry Norman Realtors, says the total value of homes sold by the big local firm in March was up more than 10 percent from a year earlier. Unlike Dallas and Houston, though, Atlanta’s inventory also is up substantially – 15 percent – from a year earlier, according to SmartNumbers LLC, a local research firm. That bulge should restrain price increases.
For the nation as a whole, many real estate executives and economists continue to predict a fairly soft landing for the housing market. Among those taking that view are Ronald Peltier, chief executive of HomeServices of America, a chain of real estate brokerage firms owned by Warren Buffett’s Berkshire Hathaway Inc.
But Peltier warns that prices in parts of Southern California could fall as much as 5 percent to 10 percent this year.
One coastal market that remains strong is Seattle, where jobs are plentiful and home inventories remain lean, though they have crept up from a year earlier. But many other coastal markets are suffering hangovers from the boom of recent years. Rising interest rates have priced some buyers out of these expensive markets and deterred speculators, who no longer can count on fast profits and are dumping properties on the market.
