Fynsa
We haven't seen annualized inflation on this scale in the U.S. since the early 1980s, reaching 8.3% in April. As you know, the Federal Reserve began winding down monetary stimulus and raising interest rates a couple of months ago, and economists estimate it will continue to do so in order to return to reasonable price increases (3% year-over-year). We’re all affected differently by both rising prices and rising interest rates. Housing is one such area, and in the U.S., depending on where you live and the type of housing you rent, the impacts can vary greatly. Meanwhile, 30-year mortgage rates have risen from 3.5% to 5.5% in just over a year, and they will likely continue to climb. Another interesting fact is the housing shortage in the U.S. It’s estimated to be close to 4 million homes, and this figure has been rising since before 2020. There are many reasons for this: restrictions, regulations, labor shortages, rising costs, among others.
In summary, we have a housing shortage (4 million homes), rising prices (+20% over the last 12 months), rising rents (5.1% to 17%, depending on the source), and rising financing costs (+57% over the last 12 months). Like “almost” everything in life, the U.S. real estate market will gradually adjust and find a balance among the various factors affecting it today.
One of the most interesting markets in recent years has been Texas. It is the second-largest economy in the U.S. (USD 2 trillion), has a population of just over 29 million, and is often associated with oil. However, it has a highly diversified economy, with companies in the energy, technology, aerospace, telecommunications, and healthcare sectors, among others. It has the same number of Fortune 500 companies as the state of California. In addition, it is home to the country’s largest medical center, renowned universities, and some of the busiest airports in the country, making Texas an economy that has attracted—and is expected to continue attracting—a large number of migrants from other states and, of course, other countries.
The state’s two major metropolitan areas are Dallas-Fort Worth and Greater Houston, the fourth and fifth largest metropolitan areas in the U.S., respectively. Their real estate market has been very dynamic in recent years. In Houston, home sales rose 7.4% year-over-year and rents rose 17.2% year-over-year as of March 2022, with an extremely high volume of transactions. While transactions in the under-$500,000 home segment rose by 13%, transactions in the $500,000 to $1 million range increased by 45%, according to the Houston Association of Realtors. The average home price surpassed $400,000 for the first time, rising nearly 15% over the past 12 months. The average value of multifamily properties rose by 25.7%. Meanwhile, in Dallas, the median home price rose by 19% year-over-year as of March 2022.
The rise in property values will likely level off in the coming months, due to increased supply, higher costs, or simply slower economic growth. But without a doubt, real estate will continue to be one of the most resilient assets across various economic cycles, since at the end of the day, most of us go to sleep in a place we call “home.”
