McAllen tops bleak ‘Strongest Housing Markets' list

McALLEN — Ask a real estate agent about Forbes Magazine selecting McAllen as one of "America's 25 Strongest Housing Markets" this week and the question is met with a mixture of disbelief and cautious optimism.

Home prices continue to fall, sales are still down, foreclosures are abnormally high, and tightened lending standards are making it extremely difficult even for people who actually can afford it to buy a house.

Still, things are so bad in other areas of the country, the cool Rio Grande Valley market looks hot.

"You've got to be kidding," said Connie Fielder-Norton, a real estate agent in McAllen who expressed disbelief about the study released earlier this week in Forbes. "The phone is not ringing, except for rentals."

Other agents had similar reactions - and so too did Forbes. Not one metro area in the study or in the country is expected to have housing prices rise this year. On average, home values will fall 15 percent across the country, according to Moody's Economy.com, which analyzed the data for the business magazine.

To compile the list, Moody's compared metro areas with a population over 500,000 and prepared forecasts through 2011. The study used prices from the second quarter of 2008 to project how far home values will fall before hitting bottom.

For the six Texas cities that made the list, Moody's estimated prices will fall by less than 3 percent. In McAllen, they're expected to remain flat - a projection most area real estate agents found dubious.

"I don't think we've hit bottom," said Deborah Martin, a McAllen real estate agent. "Still, I don't think we're going to fall much more than we have."

In Hidalgo County, the average price of homes sold fell 8.7 percent between November 2007 and the same month last year, a slump greater than the 5.3 percent drop across the state, according to the latest data from the Real Estate Center at Texas A&M University.

Tighter lending standards are making financing difficult to find for people with blemished credit, and a surplus of homes on the market is further depressing the price of homes sold, Martin said.

The hundreds of foreclosed properties that come on the market every month are also further driving down prices. In early January, nearly 600 properties were expected to hit the auction block, according to Steve Radle, a local home appraiser who compiles foreclosure listings and sells the data through a monthly subscription service.

That decline, however, seems to be fueling a resurgence in interest among buyers looking to scoop up cheap properties. The crowd outside the foreclosure auction on the first Tuesday of the month at the Hidalgo County Courthouse has swelled in recent months, and real estate agents are reporting an uptick in interested buyers.

After hitting a 2008 high of $117,100 in September, the median price of all homes in the McAllen area fell to $101,100 in November. In November 2007 that number was $114,600. The median price - the price for which there is an equal number of higher prices and lower prices - is the most accurate way to gauge real estate price fluctuations.

Rachel Hardison-Oliva, broker and owner of Pharr Realty, McAllen Realty and other area real estate firms, has lost four agents so far this year because of the downturn. Most of the agents worked with big-time investors who have fled the local real estate market.

While she expressed some disbelief about McAllen making the Forbes list, she said that despite the downturn her firm is still making money.

"I'm getting lots of Mexican nationals willing to buy," Hardison-Oliva said. "I have the winter Texans who always come and buy a few things when they're here. Thank God."

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Sean Gaffney covers business, the economy and general assignments for The Monitor. He can be reached at (956) 683-4434.