Local real estate agents talk about houses selling so quickly they do not appear on the Multiple Listing Service, and some who have worked in Waco for decades say they’ve never seen demand quite so high.
That has created a problem, according to Nationwide. In a report released last week, the Ohio-based insurance giant ranks Waco among the 10 least healthy housing markets in the United States.
Not only did Waco crack the bottom 10, it was deemed to have experienced the ninth largest decline across 400 U.S. markets in the past year, according to a press release from Nationwide.
Ben Ayers, an economist with Nationwide familiar with the findings, said in an interview Waco received poor rankings because the local market has become overheated, causing home prices to increase faster than wages. Ayers also said employment growth in the Waco area has become stagnant, meaning there are fewer people with jobs to buy homes.
“The housing market there in Waco is too hot,” Ayers said. “House price growth is well above average, far surpassing income growth, and unfortunately, that has negative implications.”
Five of the 10 markets appearing on the “unhealthy” list are in Texas. They include, besides Waco, the Victoria, Dallas-Plano-Irving, San Angelo and Fort Worth-Arlington metropolitan statistical areas.
Others include Anchorage, Alaska; Rapid City, South Dakota; Bismarck, North Dakota; Houma-Thibodaux, Louisiana; and New Orleans-Metairie, Louisiana, according to the press release from Nationwide.
“The most frequent downward driver was affordability as home price gains outpace income growth in markets such as Waco,” the press release states.
By the numbers
Amarillo-based economist Karr Ingham, who prepares a monthly snapshot of local economic trends, showed in his most recent report that the average price for a home sold in August reached $205,662, which is 13.4 percent more than the average of $181,384 in August of last year.
For the first eight months of 2017, the average stood at $192,932, which is 7.1 percent more than the $180,114 through August of 2016.
Meanwhile, the average taxable value of a home increased from $113,150 to $122,377 during the past year, according to certified tax rolls the McLennan County Appraisal District released in July.
“We show that house prices have gone up nearly 10 percent the past four quarters,” said Ayers, the Nationwide economist. “Income growth has been decent, but there remains a sizable gap between income and home price growth.”
Scott Bland, president of the Heart of Texas Builders Association, took issue with Nationwide’s finding that Waco is suffering as a housing market.
“Sure, prices have gone up, but we had a lot of room for them to go up,” Bland said. “This is just another national study that does not take local factors into consideration. Talk to real estate agents, and they will tell you how little inventory there is out there. That’s our biggest problem.
“If you look at cost-per-foot in comparable markets such as Bryan-College Station, Temple and Belton, we are at or below their numbers. I have expressed concern about prices moving beyond the budget of first-time homebuyers, but we now have subdivisions under development from builders such as Stylecraft and D.R. Horton that will go a long way toward providing a remedy to that situation.”
For example, the 1,500-home Park Meadows development on the western outskirts of Waco will take shape over the next decade. A D.R. Horton website devoted to Park Meadows shows a variety of home floor plans carrying prices ranging from $168,000 to $212,000.
Trammell Kelly, a residential sales specialist with Kelly Realtors, said the appreciation of home values locally is unprecedented.
“Is the market cooling at all? If you had asked me that a month ago, I would have said it is cooling a bit. But then in the last couple of weeks, it has not. I put properties up for sale that sold within 24 to 48 hours. I’m seeing a lot of homes priced at $200,000 to $400,000 move very quickly, and I had one in the upper $100,000s that sold in one day.”
Wages around Waco
Chris Evilia, director of the Waco Metropolitan Planning Organization, said he does not yet have U.S. Census figures showing local wages in 2017.
But between 2015 and 2016, the mean household income in McLennan County increased from $62,980 to $67,968, or 7.9 percent. In the city of Waco, meanwhile, the mean household income rose from $54,760 to $59,981, or 9.5 percent, according to figures from the U.S. Census.
Ayers said Nationwide considers job growth, income growth and home prices in compiling its list. It relies on metrics provided by government and industry sources and compares “each metropolitan area with its own long-term average,” he said.
Statistics show job growth has increased less than 1 percent the past year, “which is a much slower rate than usual and tells us demand won’t be quite as strong. Waco is not getting the jobs or the higher wages that would support the faster pace of home price increases,” Ayers said.
Indeed, the latest report by Ingham shows payroll employment in the Waco metropolitan area reached 118,600 in August, which is 0.7 percent less than the 119,400 in August of last year.
The year-to-date average stood at 119,965, a modest 1 percent more than the 117,975 during the first eight months of 2016.