Residential and Commercial real estate is a popular news topic covered regularly on local and national news outlets. Headlines can range from “The real estate market is hot” or “We are heading for a crash” in the residential housing market. Yes, national trends can affect sales volume. Typically what one would consider a trend and has been the topic of conversation for a year or so, are the attempts the Federal Reserve has been making to reduce inflation and that trend has been by increasing interest rates to curb consumer spending. Even though these rate increases do not directly correlate with the increases on 15 and 30 year mortgage rates, mortgage rates have slowly increased. In our current market, it does in fact cost more monthly today than 18 months ago.
As mortgage rates have increased, so have apartment rents. According to ALN apartment data, the annual monthly apartment rents have increased just over 7% with an average occupancy rate of 92.4%. The average apartment rent rate in Abilene was just over $900. Even with mortgage rate increases, buy what you can afford because the average net worth of a homeowner exceeds $250,000 compared to the average net worth of a renter being just over $6,000. It is recommended however, to lease if one intends on moving out of a city in 3 years or less.
Not only does owning a home create wealth, the actual sale of each property generates money into our local economy. In an economic impact study conducted by the National Association of REALTORS®, in Texas the real estate industry accounted for 16% of the gross state product, or a total economic impact of $285 billion. The breakdown is as follows: $22,000 of income generated from real estate transactions, such as sales commissions, closing fees, and moving expenses; $4,650 in expenditures directly related to home purchases such as remodeling expenses and new furniture; $13,100, the multiplier of money re-circulated into our local economy for the fact of income earned in other sectors of the economy directly related to the sale of one property; and new construction which adds just over $33,500. Locally, there is approximately one new home constructed for every 10 existing home sales, so 1/10 or $33,500 of a new home’s value is added back into the local economy. (Our 2022 average new home sales price was $335,000) The state average ratio of new homes constructed to existing home sales is 1 new home to 6 existing homes.
Locally in 2022 there were 2,246 closed residential sales. When the numbers are applied, our local real estate industry added just over $165 million into our local economy. After one adds commercial sales, farm and ranch sales, that number increases significantly.
As the market normalizes, our sales volume locally has returned to a typical pre-covid market with seasonally adjusted sales numbers. Our local inventory has increased but not to pre-covid numbers. Our inventory year-ending 2022 was 380 active listings in Taylor County, compared to year ending 2019 at 547. As the inventory remains low, this continues to push sales prices upward with Taylor County seeing an 11% increase in sales prices ending 2022, with a median price of just over $220,000. Our market is also seeing some seller concessions such as rate-buy downs and closing cost concessions.
Looking into 2023 and 2024, the National Association of REALTORS staff of economists formulates sales projections. The following numbers are included in their report. Volume is anticipated to be 7%
lower than 2022, but 2024 sees a strong rebound with sales volume anticipated to be up 15%. Home prices are expected to remain at our 2022 numbers with no measurable increase or decrease, but 2024 prices are expected to increase another 10% nationally.
I want to stress that all real estate is local, Texas continues to outpace many states in attracting business, and in fact is the 9th largest economy in the world. The condition of every real estate market mirrors the condition of the local economy. Thanks to our very active Chamber of Commerce, Military Affairs Committee, and Development Corporation of Abilene for helping to facilitate our growth, our local economy continues to remain strong.
Coming back from a recent conference in Seattle, the cab ride back to the airport ultimately ended up with a conversation about real estate. The driver indicated he and his neighbors had been approached by a developer about buying their property, and after a short consultation, he really needed a Realtor to objectively help them through this process. The real estate industry is technical, and Realtors have the expertise to help navigate the consumer through the myriad of paperwork, inspections, the loan and the closing process. When someone gets ready to buy or sell, the first call to make is to a Realtor.
---
Ken Hogan currently serves as the CEO of the Abilene Association of REALTORS® and holds a Bachelor’s degree and MBA both from Tarleton State University in Stephenville, Texas. Ken also earned the Realtor Certified Executive designation from the National Association of REALTORS®, and the CAE designation from the American Society of Association Executives, Ken continues to serve on many committees at Texas REALTORS® and at the National Association of REALTORS. The Abilene Association of REALTORS® is the largest trade association in the Abilene area serving over 800 real estate practitioners, and affiliate members.
Source contributions:
MSNBC-Brett Holzhauer
National Association of REALTORS®
Texas REALTORS®
North Texas Real Estate Information Systems
ALN Apartment Data