Hays County sees record real estate sales, price increase

Economists at the Texas Real Estate Research Center at Texas A&M found that Hays County had an extremely strong housing market in 2020, according to an evaluation of the Multiple Listing Service.

Research Economist Dr. Luis Torres said that ultra-low inventory combined with a record number of sales for 2020 and a record increase in prices during a pandemic and a recession is extraordinary and shows the strength of the market in Hays.

The county saw a historically low one month inventory at the end of 2020 alongside its highest number of annual sales at 4,854 up from 3,991 in 2019 and an 11% increase in the median price of a home from $266,000 in 2019 to $295,000 in 2020. The center projects an 8.4% increase for all of Texas single-family sales for 2021.

Monica Malorgio, Broker, CEO and Realtor at McNabb & Co., who had her best year in 2020 and doubled her profits from 2019, says prices are going to stay high until the demand is absorbed.  

“Central Texas is just the area to be,” Malorgio said. “That level of natural demand means people and businesses are wanting to move here and that’s going to push prices up.

“The people that get hurt the most are at that $200,000 price point. And they are the ones that have the most competition,” Malorgio said, referring also to investors buying with cash and beating out first time buyers or young families in the area.

The shortage of homes priced less than $300,000 in Texas has pushed buyers toward higher priced homes, revealing threats to recent improvements in affordability, Torres said. 

Lack of supply — an issue familiar to Texas even before COVID-19 — is exacerbating the issue, pushing prices higher as families and singles move here from out of state, Torres said. 

Another indicator of Hays County’s strong housing market is how quickly inventory is moving off market; recently that average number has fallen to just 40 days on the market, compared to 44 days statewide.

“It's just surprising how strong of a housing market has been maintained in Hays,” Torres said. “That’s a reflection of how some people, those who are highly educated and can work from home, haven’t been affected by the pandemic. They can purchase a new home.”

Torres is not concerned about a housing market crash later in the year. “You shouldn’t be worried,” Torres said. “As long as the economy continues on the recovery track, now with the stimulus and if we increase the vaccination rate, that's all tailwinds to the economy to push the recovery. As long as the economy begins to recover, I don’t see an issue in 2021.”

“The real estate market is going to continue to be hot, and it’s not going anywhere,” said Chelsea Roberts, Realtor with Coldwell Banker and D’ann Harper Realtors. “Low interest rates help a lot and people need to take advantage of what they are offering. If you want to sell your house, now is the time because we don’t have inventory.”

The center recently released their 2021 Texas Housing & Economic Outlook — its economists’ outlook for housing and the state economy — a task made more difficult by unprecedented unknowns.

They found that the 2021 single family housing market will be characterized by strong demand with low inventories accompanied by solid price growth. Inventories of homes priced under $300,000 will be especially low, affecting sales in that price range. 

“That could even go further to $400,000 due to supply and demand,” Roberts said. “We don’t have much supply there in San Marcos, that drives up the prices ... So any resale houses are going fast. There are opportunities for new construction in La Cima and Cottonwood, but for homes in established neighborhoods you are going to pay more, because there is nothing else out there.”

The center also predicts that price growth will be positive because of stable demand. 

Roberts confirmed she has not seen the pandemic affect the real estate market much because of low interest rates. 

Low-skill/low-wage earners in jobs that cannot socially distance were hurt the most economically, and they are typically renters, not home buyers, according to the Center. Demographic trends, such as aging millennials and migration from out of state, will help drive Texas housing demand in 2021.

“The economy could look different coming out of the pandemic as some changes become  permanent,” Torres said. “Because this recession was caused by a health catastrophe, the recovery path could be different than that of previous  recessions. Consumer and business safety expectations will play an important role in the economy’s full reopening.” 

Homebuilders are trying to satisfy demand in the lower price cohorts by building homes in the suburbs or outer city borders where land costs are lower. This trend was prevalent before the  pandemic but has accelerated during COVID-19.

Monetary policy implemented by the Federal Reserve, low inflation expectations and slow  economic growth are expected to keep mortgage rates low. 

According to the Mortgage Bankers Association, 2.7 million homeowners and 5.5 % of all  home loans, were in forbearance as of Dec. 13, 2020. 

“The share of homeowners who will be able to make their mortgage payments once forbearance ends is unknown, but we expect delinquencies and foreclosures, which have so far been kept low by government policy, to increase during the year,” Torres said. 

The number of tenants who will be able to pay rent going forward is unknown because many  renters are jobless, and the ability to pay rent depends on their earning wages or receiving  unemployment benefits. This affects landlords’ ability to cover operating costs and make  mortgage payments on properties.  

The apartment market outlook is worrisome due to the uncertainty surrounding the ending of the eviction moratorium and the dissipation of the fiscal stimulus.  

In 2021, the Center expects overall rural land prices to increase by  5% or more; the number of rural land sales to increase by 10%; total dollar sales volume to increase by 12%; and small properties to sell well. 

The 2021 Texas Housing & Economic Outlook, including tables from major Texas Metropolitan  Statistical Areas, is available online at https://www.recenter.tamu.edu/articles/special-report/2021-Texas-Housing...

Funded primarily by Texas real estate licensee fees, the Texas Real Estate Research Center was created by the state legislature to meet the needs of many audiences, including the real  estate industry, instructors, researchers and the public. The center is part of Mays Business  School at Texas A&M University.