Home prices in El Paso are expected to continue to rise this year and next, but as housing becomes less affordable, economists expect demand for housing to moderate this year.
The number of home sales in El Paso rose significantly last year. There were 1,575 home sales in the fourth quarter of 2012, an increase of 19 percent on a year-over-year basis, according to the most recent Real Estate Quarterly report published by Coldwell Banker in El Paso.
At the same time, home prices increased 5.2 percent, according to the report.
The increase in sales was greater than even the temporary gains seen when the first-time home buyer tax credit was available three years ago, said Charles de Wetter, president of Coldwell Banker de Wetter Hovious.
“Sales of new homes will now be generated by the local economy,” he said.
The growth at Fort Bliss, which had been the largest driver, has peaked, he said, but growth in the medical sector is boosting sales with extensive physician recruitment efforts underway at the new El Paso Children’s Hospital and ongoing growth at Sierra Providence East.
Lone Star Title president John Martin said new orders for title work have increased steadily since January and their closing volume remains strong.
Nationwide, the real estate market turned around last year. However, just as the housing market in El Paso never fell as fast or as deep as it did nationwide when the housing bubble burst several years ago, neither is the local market rising as rapidly as many others are now.
Economist Mark Dotzour said the big surprise in 2013 may be how fast home prices increase nationwide. Some markets like Phoenix, where home prices rose more than 30 percent in 2012, have already seen significant increases, according to Dotzour.
“Housing is turning from a headwind against economic growth into a tailwind to support economic growth,” Dotzour said. “That’s the big difference in 2012 and 2013 compared to the previous few years.”
In Texas, he said, the combination of job growth and really low mortgage rates has been a good mixture for the growth of the real estate market.
Dotzour is the chief economist at the Real Estate Center at Texas A&M University. He was in El Paso on Thursday to speak to groups of business people, brokers and investors about the economic outlook for 2013. Lone Star Title in El Paso sponsored Dotzour’s visit.
Dotzour is bullish on the U.S. economy in general right now and said all the pieces are in place for continued economic recovery this year and increased hiring in 2014.
“The biggest risk is going to be that Congress and the president cannot restore the confidence of business owners,” Dotzour said, “because all the growth in the economy in terms of hiring is dependent on business owners’ confidence in the future.”
Household incomes are projected to increase at a slower pace than mortgage payments in El Paso, eroding housing affordability this year and next, according to the most recent Borderplex Economic Outlook published by the University of Texas at El Paso.
“Anytime housing affordability erodes, it is a concern in a city with as many impoverished,” said economist Tom Fullerton. “However, housing affordability had improved for six consecutive years up through last year and any downward moves this year and next are going to be moderate.”
Fullerton is a professor of economics and finance at the University of Texas at El Paso.
Little has changed in terms of where the action is in El Paso. Houses in the $100,000 range sell fastest and many sales are taking place in Far West El Paso and the Northeast, de Wetter said.
There was a 5.9 month supply of housing in the $150,000 to $200,000 range and 12.8 month supply of housing in the $310,000 to $390,000 range in the fourth quarter of 2012, according to the Real Estate Quarterly report.
El Paso’s home inventory remained stable, declining by one hundred homes, or 2.9 percent, in the last quarter of 2012.
The number of foreclosures handled by Coldwell Banker de Wetter Hovious, which represents Freddie Mac in El Paso, has been “pretty stable” over the past four years, de Wetter said.
“El Paso, regardless of recession, it has always been very steady,” he said. “In good economies or bad, our home prices are generally stable and increase slowly over time.”
Email El Paso Inc. reporter Robert Gray at firstname.lastname@example.org or call (915) 534-4422 ext. 105.