Single-Family Housing Squeeze Eases in Texas; Multi-family Soars

According to Laila Assanie a business economist in the Research Department of of the Federal Reserve Bank of Dallas, single family home sales in Texas-constrained by rising prices, tight bank lending standards and insufficient new-house inventory-should ganin traction in 2015. A booming apartment market moderates slightly amid still elevated contruction activity, occupancy rates, and rents.

Generally, the outlook forward is moderate growth. Despite sound economic fundamentals-including a booming Texas economy, high in-migration and rising incomes-growth in home sales and single-family construction activity has been modest in 2014. Entry level buyers have been left out of the market amid rapidly rising prices and credit constraints. Thus, improved access to credit and an expanding supply of new homes for first time and lower income buyers are essential for the state's housing market to strengthen in the coming year.

Some builders are expanding their offerings aimed at the entry level buyer. Moreover, of the anticipated easing of mortgage lending rules should spur modest housing demand growth in 2015. Headwinds include rising mortgage rates that could damp sales activity.

On the multi-family side, brisk construction activity is beginning to moderate and will likely slow further. Occupancy levels and rent growth will cool as units under construction are completed. However, continued healthy economic and population expansion and diminished housing affordability combined with a steadily declining Texas homeownership rate should continue to generate a strong appetite for apartments. This will keep both occupancy and rents at or above the long run average through 2015.