Cibolo Realty's Blog

COLLEGE STATION, Tex. (Real Estate Center at Texas A&M University) — Home prices increased in the Dallas metropolitan market in 2010, even the prices of distressed homes. Recent Real Estate Center research found that homes sold by “typical” or “nondistressed” owners in 2010 were 1.2 percent higher, on a per- square-foot basis, than in 2009. The research also revealed that homes sold by “distressed” owners increased by 2.51 percent in 2010.

As part of a major research effort, the Center combed through more than 500,000 sales records from 2003 to 2010 (51,593 in 2009 and 46,315 in 2010) in the North Texas Real Estate Information System (NTREIS) database to get a more precise view of what has been happening to “typical” and “distressed” home prices in the Dallas-Fort Worth-Arlington Metropolitan Statistical Area (MSA).

The data included all distressed sales reported by NTREIS between $50,000 and $1 million during the eight year period and all nondistressed sales between $75,000 and $1 million. Distressed sales ranged from a low of 5.7 percent of all sales in 2003 to 16.3 percent of all sales in 2010. In general, a non-distressed sale was sold by an individual and a distressed sale was sold by a financial institution or intermediary.

The Center conducted two levels of analysis. The first analysis compared the annual median price per square foot of distressed versus nondistressed sales across the entire DFW-A MSA. The Center developed filtering criteria that identified likely distressed sales from 2003 to 2010.

This analysis showed the divergent paths of prices between these two groups of sales in the MSA. The overall non-distressed per-square-foot median home price has recovered to near its 2007 peak. The overall distressed per-square-foot median price remains 5.5 percent less than the peak reached in 2006.

A second analysis further divided distressed and nondistressed sales into geographic locations based on the total level of distressed sales in the area. The Center calculated the percentage of distressed sales from 2003 to 2010 in each zip code and classified zip codes with 10 percent or more distressed sales over the time period as High Distress Zip Codes. Zip codes with less than 10 percent of distressed sales were classified as Low Distress Zip Codes.

This produced four property groupings: (1) Non-Distressed and (2) Distressed sales in High Distress Zip Codes and (3) Non-Distressed and (4) Distressed sales in Low Distress Zip Codes. Price increases were noticeably lower in high distressed areas relative to low distressed areas. The following table summarizes the results of this analysis.

An important factor to maximize home price in the current market is seller patience. The median days on market for non-distressed homes across the whole DFW-A MSA rose from 85 in 2006 to 97 in 2010.

This is just off from the peak of 98 days in 2008. For distressed sales across the MSA, the days on market fell from a peak of 92 days in 2007 to 85 days in 2010 as financial institutions ramped up liquidation.

Segregating sales based on areawide distressed sales concentration indicated the median days on market for nondistressed sales in 2010 was 100 days in a highly distressed area and 95 days in a low distressed area. Both time periods exceed the mark of 79 days for nondistressed properties in low distressed areas recorded in 2005 and 2006.

Buyers snatched up distressed homes in low distressed areas during 2010 in a relatively short median time of 86 days. Although up from the reported 76 days in 2006, it still demonstrates that distressed homes move quicker in less distressed neighborhoods.

Researchers say homeowners need to allow sufficient lead time to sell their home if they hope to capture increasing prices. Both distressed as well as nondistressed sellers may be more confident in obtaining a higher price if they are willing to practice a little planning and patience at sale time.