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Texas Housing Insight – July 2020

Here is the July 2020 Summary from Texas A&M Real Estate Center.

Total Texas housing sales rose 17.1 percent in July, exceeding pre-pandemic levels with a record-breaking 36,165 sales amid historically low interest rates and steady demand. Supply-side activity bounced back with large increases in building permits and housing starts. Inventory levels, however, continued to trend downward, falling to an all-time low of 2.6 months. Strong demand and a dwindling number of listings contributed to accelerated home-price appreciation, but the pace ran below the seven-year averages in Texas’ major Metropolitan Statistical Areas (MSAs), except in Austin. Although the Real Estate Center’s single-family housing sales projection suggests activity took a step back in August from July’s high, the outlook remains overall positive.

Supply¹

The Texas Residential Construction Cycle (Coincident) Index, which measures current construction levels, increased to its highest level this year as industry employment ticked up. Moreover, the Residential Construction Leading Index posted an all-time high due to record-low interest rates and rising building permits and housing starts, indicating strong activity in the coming months. The major metros’ leading indexes posted solid gains except for the San Antonio metric, which flattened as multifamily starts slowed.

Single-family construction permits rebounded completely from pandemic-related decreases in March and April, accelerating 21.8 percent to a post-crisis high to start the third quarter. Texas remained the national leader, contributing 16 percent of the national total. Houston and Dallas-Fort Worth (DFW) issued 4,952 and 3,750 nonseasonally adjusted permits, respectively, also peak levels since the Great Recession after accounting for seasonality. Permits increased to 2,077 in Austin and 1,002 in San Antonio. Texas’ multifamily sector improved as well, with permits rising 28.2 percent.

Total Texas housing starts continued to recover from coronavirus-related uncertainty, accelerating 39.8 percent to start the second half of the year just 2 percent below the post-Great Recession high reached in February 2020. Single-family private construction values, however, dipped 1.3 percent in July after two monthly increases. Most of the decrease was due to San Antonio’s 18.2 percent decline, offsetting Houston’s third straight improvement. DFW values ticked down, but the metric in Austin made up for a contraction the previous month.

Extended decreases in the supply of active listings and record sales pulled Texas’ months of inventory (MOI) down to an all-time low of 2.6 months. A total MOI of around six months is considered a balanced housing market. Inventory for homes priced less than $300,000 was even more constrained, sliding to less than 2.1 months. The MOI for luxury homes (homes priced more than $500,000) remained higher at 6.7 months despite dropping for the second straight month.

Inventory reached historical lows in all the major MSAs except for Houston, although the metro’s MOI ticked down to 2.8 months, its scarcest level in six years. The metric in Austin fell to 1.5 months while North Texas inventory slid to 2.1 and 1.9 months in Dallas and Fort Worth, respectively. San Antonio’s MOI inched down to 2.5 months.

Demand

Total housing sales reached a record-breaking 36,165 after climbing 17.1 percent in July, although the rate of increase moderated relative to the prior month. For the first time ever, sales for homes priced more than $400,000 accounted for more than 20 percent of total transactions while the share of sales of homes priced less than $200,000 sank to one-fourth.

Every major metro posted a historical number of sales, rebounding fully from sluggish activity earlier this year amid coronavirus concerns. While economic uncertainty is still prevalent, low mortgage rates and stable employment in the income bracket more likely to buy than rent supported the recovery. DFW led with 10,500 sales, but Houston and Austin registered the largest growth in percentage terms, with sales in each area increasing by one-fifth. Sales rose 12.9 percent in San Antonio, where the YTD sum outpaced transactions during the first seven months of last year by 4.3 percent.

Texas’ average days on market (DOM) stabilized at 64 days, suggesting the fluctuations from the economic shutdown in April have weakened. Similarly, upward momentum slowed to a halt at the metropolitan level. Demand was strongest in Fort Worth with a metric of 51 days. The DOM in Houston and San Antonio flattened to 65 and 66 days, respectively. Austin and Dallas’ DOMs posted solid declines, falling below year-ago readings to 54 days each.

During widespread local and federal eviction moratoria, the national and Texas foreclosure inventories fell to 0.7 and 0.5 percent, respectively, in 2Q2020. A recent extension of the Coronavirus Aid, Relief, and Economic Security (CARES) Act’s foreclosure moratorium (which prevents the lender or loan servicer from foreclosing on the home) for federally backed mortgages through the end of 2020 will help keep inventories from rising as much as they would under the previous expiration date of August 31. Under the CARES Act, borrowers have the right of up to 12 months of mortgage forbearance (an agreement to suspend payments without penalties).

Persistent economic uncertainty surrounding the pandemic kept interest rates at historically low levels. The ten-year U.S. Treasury bond yield moved above 0.7 percent², but the Federal Home Loan Mortgage Corporation’s 30-year fixed-rate reached 3.0 percent for the first time in series history (starting in 1971). Mortgage rates extended a year-and-a-half-long slide within Texas, falling to 3.28 and 3.34 percent for nonGSE and GSE loans, respectively, pushing home-purchase applications up 8.3 percent YTD. Refinance activity slowly normalized after spiking at the onset of the pandemic. (For more information, see Finding a Representative Interest Rate for the Typical Texas Mortgagee.)

In June, there was a decrease in the median loan-to-value ratio (LTV) and debt-to-income ratio (DTI) constituting the “typical” Texas conventional-loan mortgage. Meanwhile, the median credit score shot up to an all-time high. The improved credit profile may reflect tightening lending standards as economic uncertainty looms heading into autumn. In contrast, both the median LTV and DTI of the typical Texas borrower who obtained a loan from a government-sponsored enterprise (GSE) increased for the fourth straight month.

Prices

Amid compositional changes in sales, the Texas median home price surged to $261,600 in July, climbing 9.3 percent YOY. Austin led with the greatest median home price of $347,200, followed by Dallas at $313,500. Houston’s metric surpassed the statewide average at $261,800, while the Fort Worth and San Antonio median prices were slightly lower at $257,200 and $252,300, respectively. The growth rate in median sale price, however, reflects the relative strength of demand for higher-priced homes as the lower-end of the market has been more vulnerable to recent employment shocks.

The Texas Repeat Sales Home Price Index accounts for such compositional effects and provides a better measure of changes in single-family home values. The index suggested more moderate home-price appreciation, rising 4.1 percent annually. Fort Worth’s metric tied the state’s in YOY growth, with the San Antonio index close behind, increasing 4 percent. In Dallas and Houston, the index rose 3.0 and 2.8 percent, respectively. On the other hand, price appreciation in Austin accelerated 7.2 percent, driving the statewide increase.

Single-Family Forecast

The Real Estate Center projected single-family housing sales using monthly pending listings from the preceding period (see table). Only one month in advance was projected due to the uncertainty surrounding the COVID-19 pandemic and the availability of reliable and timely data. Texas sales are expected to retreat 12.5 percent in August from July as the rush to capitalize on exceptionally low interest rates wanes and dwindling inventory inhibits activity. The downshift is not surprising given the unsustainable pace set in June and July fueled by pent-up demand from the economic shutdown. Nonetheless, overall monthly sales hover at high levels while the YTD sum through August 2020 is predicted to be greater than the sum of single-family sales in the first eight months of 2019. The estimated decline in the number of transactions from July to August 2020 is expected to be steepest in Houston, with sales projected to fall 16.4 percent. Dallas and San Antonio single-family sales are projected to decrease around 13 percent each, while Austin’s metric is projected to drop just 8.3 percent. Despite the slowdown, Texas’ housing market remains a pillar of the state’s economic recovery.

________________

¹All measurements are calculated using seasonally adjusted data, and percentage changes are calculated month over month, unless stated otherwise.

² Bond and mortgage interest rates are nonseasonally adjusted.

Source – James P. Gaines, Luis B. Torres, Wesley Miller, Paige Silva, and Griffin Carter (September 14, 2020)

https://www.recenter.tamu.edu/articles/technical-report/Texas-Housing-Insight

What You Should Know About Earnest Money

Hello, Sheri Groom with Republic Title and I’m here with Wade Bogdan, Residential Counsel and we wanted to visit a little bit today about earnest money and the purpose of that with a contract. So can you help talk a little bit about that?

Yes. Traditionally earnest money was put in place so that people knew that you were going to try to purchase a property in earnest so basically you’re showing someone that you are serious about purchasing their property.

I like that so earnest and then earnest money. That’s great. So if there’s no earnest money given does that mean there’s not a valid contract?

So actually that’s a common misnomer. So currently now in common day, you do not need earnest money to have a proper contract. However, the contract does have a section for earnest money and actually most importantly now the contract was just changed to add a three day time limit for getting your earnest money in after execution of the contract which is pretty much the most important thing that’s going on with earnest money currently.

That’s good information because we would get asked that a lot. Like do we have to have it? Is it still a valid contract?

So if you have any additional questions, please go to our website and look for our complete list of attorneys or reach out to your favorite business development rep or your favorite closer.

REALTOR® Safety Tips

September is REALTOR Safety Month and there are tons of helpful safety tips to consider while showing real estate. Whether it be a safety strategy, safety apps, or hosting an open house, we hope that you find these tips useful.

Preview the Neighborhood
Preview the neighborhood and home before you show the home. Check for cell reception and familiarize yourself with entry and exit points in the home. If you cannot preview the home before showing it, at least review the floorplan so you know escape points.

Open House Safety
Don’t assume that everyone has left the premises at the end of an open house. Check all of the rooms and the backyard prior to locking the doors. Be prepared to defend yourself, if necessary.

Charged Cell Phone
Make sure your cell phone is fully charged when you are out showing.

Hide Personal Information
Tell your sellers: DON’T leave personal information like mail or bills out in the open where anyone can see it. Lock down computers and lock up laptops and any other expensive, easy-to-pocket electronics before your showing.

Nothing Personal
When talking to clients and prospects, be friendly but still keep your personal information private. This means avoiding mention of where you live, your after-work or vacation plans, and similar details.

Carry Less
If you carry a purse, lock it in your car trunk before arriving at an appointment. Carry only non-valuable business items (except for your cell phone), and do not wear expensive jewelry or watches, or appear to be carrying large sums of money.

Have an Excuse Ready
Having an excuse in mind can help you out of an uncomfortable situation. For example, you have to return an important missed call.

Take a Self Defense Class
Check with your broker to see if they would be willing to host a self-defense class at your office or call your local police department for additional class resources.

Download Safety Apps
There are dozens of safety apps for your phone that are specifically designed with REALTORS in mind. The majority of these apps provide GPS locating to your broker or emergency contacts when you’re out showing and let you enter in information about who you are meeting. The Nationals Association of REALTORs has a great list of safety apps on their website.

Make sure to check with your brokerage for any security measures that they have put into place.

For more real estate safety tips, visit nar.realtor/safety

Source: nvar.com, nar.realtor

What Is An eClosing And How Does It Work?

An eClosing involves using some combination of electronic documents, electronic signatures, electronic notarization, and electronic recording.

An electronic document is a “native digital” document, as opposed to a scanned-in image of a paper document.
An electronic signature is a sound, symbol, or process applied by the signer to an electronic document in place of a wet-ink signature. eSignatures can take many forms, but the three most common versions are holographic (aka hand-drawn with a mouse, finger, or stylus), cursive typeface, and standard typeface.
An electronic notarization is the process of applying the notary’s electronic signature and notarial stamp or seal to an electronic document.
And lastly, electronic recording is the process of recording the electronic document in the county records in its original digital form without breaking the document’s tamper seal. This is different than the form of electronic recording that exists in many jurisdictions today which simply involves uploading a scanned-in image of a paper document.

An eClosing is the electronic execution of some or all real estate closing documents in a secure digital environment. eClosings allow for a more efficient and streamlined closing experience for sellers, borrowers, lenders, and third parties.

eClosings can occur in several different variations ranging from Hybrid eClosing to In-Person eClosing to Remote Online eClosing. Key documents such as the promissory note and security instrument can be printed to paper and wet-signed, while other documents are signed electronically. Our website can provide you more information on the different types of eClosings.

eClosing real estate will provide many benefits including:

Electronic access to documents prior to the closing
Faster closings
Fast commission check for the real estate agent, typically

In an eClosing, whether hybrid, full or remote online, you will need an online platform to house documents electronically and to enable electronic signatures and electronic notarizations. These types of platforms are typically referred to as online collaboration platforms or digital closing platforms.

For more information on eClosing, please contact our eVolve team.

Knowledge of ALTA Endorsements Necessary For Texas Lawyers

Attorney’s clients don’t just do business in Texas or even regionally anymore, it seems everyone is buying, selling and developing real estate all over the country. A Texas attorney may know the title insurance regulations and Basic Manual inside-out, but when they move to work in states that issue American Land Title Association (“ALTA”) forms, it can be a whole new ball game.

Texas attorneys know what types of coverage are available in Texas, but may get intimidated when looking at all of the coverages available in many ALTA states. There are 107 ALTA approved Endorsement forms, many with variations for specific transactions. Further, not all endorsements are available in every state issuing ALTA policies, so the task can be daunting.

The easiest way for a Texas attorney to understand many of the endorsements is to relate them to the coverages available in Texas, for example:

Texas Access Endorsement (Form T-23) insures unimpeded vehicular and pedestrian access to a parcel of real estate. The ALTA 17-06 Access and Entry Endorsement provides basically the same coverage, but ALTA sometimes takes it further, they also have an ALTA 17.1-06 which insures vehicular and pedestrian access through an indirect manner (i.e. an insured easement estate), and a 17.2-06 which insures what utilities are available to the property. So, where Texas has 1 endorsement, there are 3 ALTA variations.
The Texas Form T-19, Restrictions, Encroachments and Minerals Endorsement provides the same coverage on a Loan Policy as the ALTA 9-06 endorsement. However, where Texas can modify or delete language from the T-19 that the underwriter is not willing to provide, ALTA has additional endorsements that provide lesser coverage or modified coverage;
Texas form T-19.1 Restrictions, Encroachments and Minerals provides similar coverage to the T-19 on an Owner Policy, but in ALTA, those coverages are all in separate endorsements, the Restrictions are covered in the ALTA 9.1 or 9.2, Encroachments in the ALTA 28 series of endorsements and Minerals in the ALTA 35 series of endorsements.
Texas T-38 Endorsement is used when Mortgages are being modified, ALTA has 3 versions of a modification endorsement, the ALTA 11-06 insures against loss by reason of invalidity or enforceability as a result of the modification and priority over intervening matters, while the ALTA 11.1-06 provides the same coverage as the ALTA 11 but also includes a statement as to specific subordinate items and the ALTA 11.2-06 provides the same coverage as the ALTA 11 but also increases the amount of the policy arising out of the modification.
Texas T-3 Assignment of Lien Endorsement insures the assignment document and down dates the policy to the recording of the assignment, the ALTA 10 insures the effectiveness of the assignment but does not down date the policy, while the ALTA 10.1 insures the effectiveness of the assignment and down dates the policy as to taxes, assessments, intervening defects, liens or encumbrances, recorded federal tax liens and bankruptcies.

However, ALTA has many more endorsements than Texas, and they get revised periodically, and several states modify the ALTA endorsements to comply with their state laws. It’s impossible to keep up on all of the ins and outs of ALTA coverages and endorsements, so it’s important to have good resources to tap as you represent your clients.

One of the best ways you can do that is to have a good relationship with a national title insurance company which handles closings all over the country and are very familiar with the idiosyncrasies of the available coverages in other states. Another great resource is a current ALTA Endorsement Manual. First American Title Insurance Company and many other underwriters publish them annually. You can access First American’s current manual through the Republic Title website. This guide will provide each endorsement form and give a brief explanation of its uses and the requirements for the issuance of each.

While the endorsement manual is very handy, attorneys need to understand that the forms can be modified in many states, either to comply with each state’s laws or to limit coverage as determined by their state title insurance associations or regulations. There are also states that don’t use the ALTA forms (i.e. Texas, Pennsylvania, New York to name a few) but have produced their own forms. In those instances, it’s great to have a National Underwriting Attorney or National Underwriter in your contacts that you can call to discuss the variations and availability in the state or region your client is working.

Expediting eClosing and RON in the Current Environment

There is no question that the current pandemic has significantly reshaped every aspect of our daily lives. When it comes to real estate closings, there is also no question that the need for contactless, virtual mortgage closings is real and urgent. Before COVID-19, eClosings were growing at a modest pace as the industry collaborated on solutions to facilitate broader adoption, including acceptance of Remote Online Notarization (RON). Then everyone was told to stay home, and industry collaboration ignited with a new and passionate purpose.

As Harry Gardner, Executive Vice President of eStrategies for Docutech™, a First American® Company, pointed out in a recent HousingWire webinar, coronavirus has shifted the digital mortgage closing from a “nice-to-have” into a “must-have.” The number of settlement services providers offering digital mortgages has nearly doubled during the pandemic. The current environment has changed the RON eClosing debate from “Why should we do this?” to “How can we do this now?”

In response to the need to facilitate contactless real estate closings, governmental agencies, the GSEs, lenders, and settlement services are all moving with a new sense of urgency to enable borrowers to close on the home of their dreams easily via digital connections.

Fannie Mae and Freddie Mac announced expanded acceptance of RON-closed eNotes, now in 45 states plus the District of Columbia. A number of state governors signed executive orders permitting forms of RON, and pending RON legislation at the Federal level could make remote notarizations legal everywhere. More county clerks are getting on board with the idea that remotely notarized Deeds of Trust are legally valid and should be accepted for eRecording, a very significant step toward nationwide RON acceptance. This kind of progress on the state and local level is what we have been waiting for to truly achieve a paperless mortgage.

Perpetually focused on customer experience, Docutech offers RON capabilities within Solex eClosing. Now, notaries can eSign and eNotarize documents remotely while the borrower benefits from the same streamlined experience application through closing. No need to meet in-person, secure and convenient.

One of the most important considerations for moving RON eClosing into mainstream operations is the concept of eEligibility. Mark Ladd, Vice President of Regulatory and Industry Affairs at Simplifile, explained the nuances of eEligibility, referencing the “three legs of the stool” as Recordability, Insurability, and Marketability. Understanding your recordability, knowing if the underwriter will insure the transaction, and, if you’re connected with Fannie Mae and Freddie Mac, knowing if they will accept that eNote in the secondary market. Understanding how “e” each transaction can be, as early in the process as possible, provides lenders with support for the three legs of the stool.

Source: https://blog.docutech.com/expediting-eclosing-and-ron-in-the-current-environment-what-you-need-to-know-now

Expediting eClosing and RON in the Current Environment – What You Need to Know Now

July 2020 DFW Area Real Estate Stats

The July 2020 DFW area real estate statistics are in and we’ve got the numbers! Take a look at our stats infographics, separated by county, with MLS area stats on each county report as well! These infographics and video are perfect for social sharing so feel free to post them!

To see past month’s reports, please visit our resources section here.

For the full report from the Texas A&M Real Estate Research Center, click here. For NTREIS County reports click here.

Texas Housing Insight – June 2020

Here is the June 2020 Summary from Texas A&M Real Estate Center.

Total Texas housing sales rebounded almost 30 percent after three straight monthly declines corresponding to the initial wave of domestic COVID-19 cases. Falling interest rates and pent-up demand from the economic shutdown supported sales in the existing-home market and for new homes priced less than $300,000, pushing the Lone Star State’s second-quarter homeownership rate up to record-breaking levels. Ongoing uncertainty surrounding the virus, however, dampened supply-side activity in the second quarter with reduced lot development in all the major metros except for San Antonio and downward-trending building permits and housing starts. Although the pullback in construction is likely to be temporary, the decrease will exacerbate already low inventory levels.

Home-price appreciation accelerated in June after slowing to start the quarter. Nevertheless, housing affordability improved during the low interest rate environment and overall moderate price growth. The Real Estate Center’s single-family housing sales projection suggests a complete recovery in single-family homes sales will be reflected in July numbers. COVID-19 remains the greatest obstacle to the Texas housing market, and the resurgence in contracted coronavirus cases and hospitalizations in July could reverse progress.

Supply*

The Texas Residential Construction Cycle (Coincident) Index, which measures current construction levels, dipped slightly as construction values fell and hiring slowed. On the other hand, the Residential Construction Leading Index almost reached the post-recessionary high from December as interest rates continued to decrease and permits and housing starts picked up, suggesting positive momentum in the next few months. At the metropolitan level, Austin was the only major metro where the leading index decreased, pulled down by multifamily building permits.

According to Metrostudy, activity at the earliest stage of the construction cycle picked up slightly as the number of new vacant developed lots (VDLs) in the Texas Urban Triangle increased 3.5 percent quarter over quarter (QOQ). All of the second-quarter upturn, however, is due to VDLs in San Antonio more than doubling, with the $200,000-$300,000 price range accounting for most of the rebound. Houston and Austin’s 14.7 and 20.7 percent declines, respectively, kept total VDLs in negative YTD growth territory. The metric in Dallas-Fort Worth (DFW) ticked down 2.9 percent QOQ but the decrease slowed.

Despite sluggish activity to start the second quarter, single-family construction permits remained on track to exceed last year’s total after recovering 14.6 percent in June. Texas remained the national leader, contributing 16 percent of the national total. Nonseasonally adjusted permits increased to 1,105 and 4,028 in Fort Worth and Houston, respectively, almost reaching peak levels after accounting for seasonality. San Antonio permits rose to 889, while Austin and Dallas issued 1,540 and 2,358 permits, respectively. On the other hand, Texas’ multifamily fell 22.1 percent, declining for the third consecutive month.

Total Texas housing starts rebounded 27.9 percent on a monthly basis but extended a downward trend. MetroStudy data revealed less than 26,000 single-family homes broke ground in the Urban Triangle during the second quarter, a 4.3 percent decline. Houston accounted for most of the decrease, with starts sinking 16.3 percent QOQ. The San Antonio metric fell for the second straight quarter, but activity in the $500,000-and-higher price range accelerated. In Austin and Dallas, however, starts increased 1.4 and 4.7 percent QOQ, respectively, with improvement in North Texas widespread.

After a brief reprieve in May, single-family private construction values decreased for the third time in four months, declining 18.8 percent. Quarterly construction values dropped across all four major metros due to the effects of the pandemic, ranging from a 22.75 percent plummet in DFW to 30.1 percent in Houston.

A dwindling supply of active listings and a resurgence in home sales pulled Texas’ months of inventory (MOI) down to an all-time low of 2.8 months. A total MOI around six months is considered a balanced housing market. Inventory for homes priced less than $300,000 was even more constrained, sliding below 2.1 months. The MOI for luxury homes (homes priced more than $500,000) also decreased, falling to 7.2 months.

Austin and San Antonio posted record-low inventories of 1.6 and 2.6 months, respectively. The MOI in Dallas declined to 2.3 months, while the Fort Worth metric dropped to 2.1 months. Only Houston maintained a MOI above the state average at three months.