by Wolf Richter, Wolf Street:
“The only word to describe the Dallas housing market is ‘frenzy.’”
At Houston auto dealers, new vehicle sales in June plunged 22% from a year ago, with new truck sales down 18% and new car sales down 29%, according to TexAuto Facts via Greater Houston Partnership. It’s not a blip: Year-to-date new vehicles sales dropped 19%, with trucks down 13% and cars down 27%.
Those are scary numbers for car dealers. They’re highly leveraged, and a sudden, prolonged plunge like this is causing a lot of gnashing of teeth.
Houston’s total retail sales, including auto sales, dropped 9.8% in June and 10.3% year-to-date.
The Houston Purchasing Managers Index for June plunged 6.4% from the already crummy level a year ago, to 43.7. Below 50 = contraction.
In the construction sector, total building contracts plunged 32% in May and 23% for the first five months. Nonresidential contracts plummeted 55% in May and 23% for the first five months. Residential contracts fell 10% in May and 22% for the first five months.
Homes sales – still hanging on by the skin of their teeth – inched down 0.9% in June, according to Multiple Listing Services (MLS). The median price inched up 2.5%. But active listings jumped 14%, and pressures are building.
The office space sector is in serious trouble, as we reported Friday… It Starts: First Mega-Foreclosure Hits Houston Office Market
Employment in the Houston-Sugar Land-Baytown area edged up in June by 0.2% from a year ago. Service sector employment rose 1.5% to 2,465,100. But in the goods-producing sector, which includes oil and gas, employment fell 5.7% to 533,600. The unemployment rate rose to 5.5%.
Foreign trade, which includes oil and petrochemicals, plunged 27% in May from a year ago, and 27% over the five months, with exports down 21% and imports down 34%.
The Port of Houston reported that shipments, measured in short tons, dropped 14% in May from a year ago, and were down 11% year-to-date.
Airfreight into and out of Houston plunged 22% in May and 19% year-to-date.
These are not exactly the data points of a raging boom town but the profile of an economy broadsided by the Great American Oil Bust.
But Houston isn’t Texas. While some smaller cities are getting hit hard too, others are not. And Dallas – more generally North Texas – is booming, still, with housing going decidedly nuts. D Magazine, which covers the Dallas area, offers this cover on its latest issue:
The article starts out nicely tongue in cheek:
Great news, everybody. The white-hot Dallas-area real estate market is even hotter than ever. Again!
David in Texas explained the phenomenon in an email:
“From what I saw driving around last week, the only word to describe the Dallas-Fort Worth real estate market now is ‘frenzy.’”
David mentioned some of the companies that are moving to North Texas, including Toyota, which is transferring its North American headquarters to West Plano. And puzzled:
This would drive demand in certain locations but doesn’t really explain the area-wide mania for real estate. In the nicer, older parts of town, cottages are being scrapped and gigantic McMansions put up just as fast as contractors can assemble equipment and workers.
I have no idea what will bring it all crashing down. The oil bust has had zero impact on all this (even in nicer parts of Fort Worth, which is a lot closer to the Barnett Shale). So, I suppose the only thing to do is to scrape together a 3% down payment, take on as much debt as I possibly can, and buy the most expensive house I can, now, before being priced out forever.
OK, I’m going insane. But that strategy has worked for a lot of folks in Dallas lately, who now think that real estate is the only sure way to make money. I spent all weekend hearing this, and being chided for conservatism.
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