This week a decade ago, Barack Obama was about a year away from being sworn in as the first Black president of the United States. We were about nine months away from the beginning of the economic collapse and a year into the housing bubble burst that rocked the U.S. real estate market.
In College Station, unemployment had nearly doubled from the beginning of the 21st century to nearly 6.5% in 2010. Half of the growing population in Brazos County owned a home a decade ago and the vacancy rate was hovering near 2%. Since macroeconomic factors like unemployment and interest rates have a direct effect on the housing market, the real estate industry in College Station experienced the same pain that the rest of the country did.
Where We Were
It’s easy to forget today just how uncertain the economic environment was a decade ago back in early 2008. The country was six months away from the collapse of Lehman Brothers and the ensuing plummet of value in financial markets around the world. By 2008 we were already experiencing the worst of the housing collapse in College Station, TX.
The bubble burst for College Station back in September of 2007. The average price of a three bedroom home plummeted to around $75K. Compare that to today where the median home price is well above $300K.
By 2011, College Station started to see signs of economic recovery. Jobs started to comeback, albeit slowly at just under 2% from 2010 to 2011; job gains were less than 0.5% between 2009 and 2010. When people lose the security of a regular paycheck, the last thing on their minds is buying real estate.
At the same time, jobs were coming back in the health care industry, retail, construction, and education, namely the addition of jobs at Texas A&M; though 350 faculty jobs were lost due to state budget cuts. While private sector jobs were making gains, government jobs were being shed in the aftermath of the Great Recession, losing over 1.5% of jobs in both government and manufacturing.
Despite the rocky economic conditions in 2008, including in College Station, the city continued seeing an increase in population of over 2% beginning in 2004 and continuing through 2011. Part of the allure were the jobs available at two of the largest employers in the area – Texas A&M and St. Joseph’s Regional Health Center, respectively, and the influx of retirees moving to Brazos County.
Looking at the housing market in College Station specifically, home sales fell by 12% by the last quarter of 2011. Vacancy rates were less than 2% and sales for new homes dropped by nearly 40% year-over-year from 2010 to 2011. Even sales of existing homes took a beating falling by 30%.
If you were lucky enough to find someone to buy your home, you were willing to let it go for around $181K or less. Chances are, that interest was coming from those looking to turn a profit on the millions of distressed properties hitting the housing market nationwide, including in College Station. Here, while home sales for new and existing homes were sharply declining, sales of distressed properties for the same period held steady, falling only 2% from 2010 to 2011.
The average DOM (Days-on-the-Market) had zoomed up to over 4 months; a 15% increase from 2010 to 2011. Nationwide, the numbers of distressed and foreclosed properties were nearing all time highs at close to 8%, but here in College Station, REO and delinquent homes accounted for fewer than 2% of home loans issued over the same period.
In the wake up so many foreclosures around the country and statewide in Texas where the rate was closer to the national average at 4.5%, the move from homeownership to majority renter began. Developers began seeking out multifamily properties and new builders sought to accommodate the influx of new renters in 2009 and 2010, becoming for several years the leading sector of the housing market on the upswing.
Alternately, permits to build single family homes sank as banks tightened lending requirements and home sales slowed to a standstill. Compared to where we are now, homeowners have a reason to feel better about their prospects for selling at a profit when the time comes while first-time buyers are having a hard time getting their foot through the housing market door.
Where We Are
Today, the housing market in College Station is much more stable than it was a decade ago. However, the effects of the housing collapse have resulted in lasting changes for some things and some things have gone back to normal.
Texas A&M’s Real Estate Center produced a paper that has identified one anomaly happening in the State of Texas; housing prices have kept rising despite stagnant incomes since 2012 – a reverse of decades of real estate trends where income is tied directly to housing prices.
3 Ways the College Station Real Estate Market Has Changed
One of the reasons for this “misalignment” the paper suggests is the constant limits on real estate inventory in Texas. In fact, the vacancy rate in College Station has remained virtually unchanged over the last decade at around 1.7%, even when vacancy rates across the country at the height of the housing collapse were in the double digits. Here are 3 ways the College Station real estate market has changed over the past decade.
#1: Homes are Over 15% More Expensive
Since January 2000, total appreciation in College Station has gone up nearly 120% with an annual appreciation rate around 4.5%. The median listing price is up around $310K and closing slightly above at $314K. Compare that to sales prices back in 2007 and 2008 on average between $75K and $120K.
#2: Buyers Want Homes under $200K
Despite prices being higher, buyers looking for real estate here are looking for homes under $200K. Over 55% of homes sold in College Station sold from between $134K and $268K. Homes between $268K and $402 came in second at 18.8%.
#3: Shortest DOMs on Record Today
New homes are sitting on the market three times longer than existing homes. Homes under $200K are in high demand turning College Station into a hot sellers market where agents are frequently facing multiple offer situations. The State of Texas overall is seeing some of the shortest DOMs on record. High demand plus the limited inventory of existing homes, and slowed sales for new homes is causing home prices to go up.
3 Ways It Has Stayed the Same
College Station buyers want a specific type of home. The majority want a two bedroom home. They prefer a home that is priced around $150K. They would rather buy an existing home than a newly built one and that specific supply is very limited in College Station. Here are 3 ways the College Station real estate market has stayed the same over the past decade.
#1: Older Homes Sell Better than New Ones
A clear majority of homes being sold in College Station over the last decade were built in the 70’s, 80’s, and 90’s. Newer homes made up only 33.7% of homes compared to 57.2% built between 1970 and 1999. Because older homes tend to be the most affordable, they have always sold better in College Station than newer homes.
#2: New Construction for Multifamily Still Increasing
The University keeps new renters coming into the area every year. However, lifestyle changes have made multifamily attractive to families that would rather rent than own these days. For a decade, new construction for single family homes has far lagged behind multifamily new construction and that remains the same today. In College Station alone, there were over 300 residential building permits issued last year.
#3: Homes in Demand Are in Limited Supply
Two bedroom homes are highest in demand at 31.5% of homes sold in the area. Three bedroom homes made up 29.6% of homes while 4 bedroom homes made up 21.5%. As of the last quarter of 2017, there was a slowdown in home sales of around 6% and limited supply is believed to be the culprit.
Taken altogether, we have a reason to breathe a sigh of relief when we look back over the past decade and realize what a comeback we’ve made. Sellers are seeing several offers for their 40 and 50 year old homes and buyers are moving in from all over the place, creating plenty of opportunities for parties on both sides of home sales transactions today.