Debbie Szatkowski knew she wanted to settle in Tyler; her sister lives here, and Ms. Szatkowski, recently retired from NASA, was beginning to need more help with their mother.
But when she started looking for a place to build a home, she found her choices were limited.
“I knew I wanted to build,” said the retired engineer. “But finding a lot was very difficult for us.”
She settled on a builder, Mike Pardue, after touring his house on display in last year’s Parade of Homes. That was easy, she said. Finding the right location, with an available lot, was tougher.
“It was either Oak Hollow or The Crossing,” she said. “Hollytree was tied up. There just weren’t any other lots to choose from. The Crossing was more appropriate for us. So that’s where we’re building.”
Ms. Szatkowski’s experience is a good indicator of how the housing market fared in 2016. It was a record year, with brisk sales and steadily increasing prices. But there are some pressures - fewer available starters and mid-size homes, a dearth of lots for builders and a rising population - that could mean some market distortion in the future. Demand is clearly outstripping supply.
Pardue, who is building Ms. Szatkowski’s home, said builders are having trouble keeping up. Pardue builds both custom homes and spec houses.
“We can’t even start a new (spec) house without selling it before it’s even finished,” said Pardue, who has been building homes since 1993. “And we get three or so custom plans we bid on each week. Things are just selling like hotcakes.”
BY THE NUMBERS
In 2016, a record number of Smith County homes sold. A total of 2,539 home sales closed, compared to 2015’s 2,492 (that was also a record year).
Kyle Smith, who chairs the Greater Tyler Association of Realtors, said the numbers are healthy.
“In 2016, we saw a lot of buyers searching a limited market of available properties,” Smith said. “What that meant was a shorter time on the market (for homes), higher prices and competitive offers on properties. That helped push prices up.”
In fact, the average price was more than 4 percent higher than last year. The average sales price for 2016 was $208,329, compared to 2015’s average of $199,568.
That’s true of the median sales price, as well. The median sales price for 2016 was $175,000, up 4.48 percent over 2015’s $167,500.
The median home price is the midpoint of home sales prices - in 2016, the selling price of the 1,270th home sold. It’s a useful gauge, because it isn’t skewed by unusually high (or unusually low) home prices.
Another useful gauge is the average days-on-market. That figure was 62 for 2016, down from the 67 days the average home stayed on the market in 2015.
“We had a great year,” said GTAR’s Smith. “We had good numbers - even with the tight market and a lack of inventory, we still saw record sales. That should push us unto 2017 with a strong, healthy market.”
Yet there are some troubling indicators, he acknowledged. For one thing, credit remains tight.
“There are a lot of banks with huge reserves right now,” Smith said. “They’re sitting on the money and not making anything on it. It’s a sad thing for the businesses and homeowners. That means buyers are not able to capitalize on good interest rates when it’s really in their interest to do so.”
Yet that could be changing.
“We saw a lot of people in the 2005-2009 (Great Recession) timeframe who lost homes or who had other credit issues arise,” Smith said. “This has put people into a recovery period. They’re coming back into the market now, and they’re looking at a home as a good long-term investment.”
Consumer confidence is higher, he added.
And if President Donald Trump makes good on his talk of rolling back some of the financial regulations put in place in response to the recession, “That would put money into the housing market," Smith said.
Still, it’s not tight credit that is the most serious challenge facing the Tyler and Smith County housing market. It’s lack of inventory - particularly starter homes and mid-price houses. That’s where the demand is. But it’s not what's being built.
According to the Texas A&M Real Estate Center, about half of all homes sold in Smith County last year were priced between $100,000 and $199,999. Those figures match 2015, with slightly more homes in the $150,000 to $199,999 range (the uptick in that number is explained by rising home prices.).
Of the remaining homes sold, more are priced above $200,000 than below $100,000. And nearly 7 percent of the homes sold in 2016 cost $400,000 and up.
“I can tell you as a builder, if you were set up to build homes in the $180,000 to $200,000 price range, those would sell like you wouldn’t believe,” said Pardue. “So why isn’t anyone doing it? One of the reasons goes back to lots. The lots just aren’t there. Developers haven’t put in subdivisions - at least yet - for those start homes.”
And the lots in existing subdivisions - the ones that are available - are so expensive, they drive up the cost above what new homebuyers and young families are able to afford, Pardue said.
A market demand this big just begs to be filled, said GTAR’s Smith.
“No one in Tyler, right now, is building affordable housing,” Smith said. “Builders are building $300,000 to 400,000 and up. We have very few options at $250,000 and below. We need someone to step in and build those homes.”
And eventually, someone will, he said.
“Commercial real estate developers look for a market to have a minimum of 100,000 population within the immediate market,” Smith said. “And just recently, in the last few years, we have hit that mark within Tyler. Now we’re seeing the big chains and big box stores coming into Tyler. And I think soon we’re going to see the big home builders coming in from outside, because no one here is filling that void.”
Population is one of the factors putting pressure on the real estate market. People are moving to Tyler and Smith County, and the housing market can’t keep up.
Tom Mullins, at the Tyler Area Economic Development Council, said Smith County gained about 3,500 in 2016.
“Approximately half of those are new births, and half are new residents,” Mullins explained. “And they all need someplace to live.”
Trend charts show that Smith County and Tyler continue to draw people, from young people coming for the colleges and universities, to young families coming for the health care jobs, to retirees like Ms. Szatkowski.
BUILDING FOR THE FUTURE
That’s what builder Mike Pardue sees.
“I’m building for people coming from California, from Dallas-Fort Worth, from Houston,” he said. “I’m building for some younger professionals, who are moving up into a larger, nicer home.”
But the lack of available lots within Tyler means he’s spending more and more time in his truck to accommodate all those new home buyers.
“I’ve got two lots in Lindale I’m building on, and I have one in Bullard,” he said. “Lindale, in fact, is very hot now. You might see a shortage of (developed) lots there soon.”
But there’s more space, even within Tyler proper, he added.
“I think eventually you’ll see people get serious about development on the west side of town,” Pardue said. “There’s still a lot of land out there. And as you see more (commercial) development out that way, I think you’ll see the residential follow.”
Smith agreed, saying he expects the strong housing market trend will continue this year. But current trends also could mean significantly higher prices as demand outstrips supply.
“There’s a lot of pent-up demand,” he said. “And that could mean a real increase in pricing. That’s not something that would happen quickly, but it’s something we could see toward the end of 2017.”