“Panflation” and real estate

Ghost Pepper Hot

 Is the housing market TOO hot?

Lumber up 90%, steel up 67%, labor costs within 3% of pre-pandemic levels.

So here we are, median price of a new single-family residence up 20.3% to a record $381,000 (past 12 mos ending in April).

How’s all that for overdosing on inflation?

Used home shoppers are no better off – a 2.2 month supply as of April 2021?  If you can say when inventory was last this close to zero, we’d like to hear from you.

Good for sellers, not for buyers.

I personally know of one used house in Austin a family member bid $5,000 over asking.

Lost the bid.

Last weekend she bid $52,000 over asking on new construction.

Lost that one, too.

$52,000.

Over.

Not a typo.

It would seem now is the worst time ever to be buying a house, used or new, but the weird is, many experts argue that okay, housing is ghost-pepper-hot, but it’s not a bubble.

We’ll see, but with Wall Street and banks nearing the end of their soiree, don’t be so sure.

Some of this pressure in housing is leaking in on commercial too, and not in a way you’d want: escalated building cost, disrupted supply chains and tightened labor markets are testing the limits of what developers can pay for land.

Just two weeks ago as we were finalizing terms on 12 acres of commercial in San Antonio, the buyer slams the brakes over – you got it – skyrocketing lumber costs.

No panic, replacement signed in 72 hours and, at far better numbers – Cresta Bella is a much sought-after destination.

What to watch: canceled projects. . . over build costs not penciling in as expected (came close to that on 32 acres in Forney, knocked us off the ladder on 12 acres in San Antonio). Downward pressure. . . on land costs – swollen lumber, steel, labor -- all are resetting the price points developers can afford. Gradually rising mortgage rates. . . along with a topping out for demand for the remainder of 2021 will begin cooling the market.  Inflation, too. . . will begin to take its bite of what consumers can spend for housing.

In rural areas, just the opposite: prices escalate as the masses flee rising crime, supply shortages, power outages, massive police force resignations (was it you, San Francisco, Austin, that were all in on opening borders, defunding police, wokeness, cancel culture, critical race theory?  Yes, it was. So noble of you.)

Rural is King.

And Texas owns Rural.

Here’s the deal for Texas real estate: It’s Dr. Jekyll and Mr. Hyde – for every good op, there’s  a not-so-good next to it.  Choose carefully, you may end up neighbors with a cancel culture escapee from San Francisco.