Taking Inventory

It’s hard to buy a home right now in Amarillo. New or used. Big or small. First home or investment property. Regardless of the size or age of the house, there are hardly any homes on the market.

According to the Multiple Listing Service (MLS) inventory, 271 homes were for sale in Potter and Randall counties in mid-April. “That includes anywhere from a $56,000 trailer home to a multimillion-dollar single-family residence,” says Realtor Leslie Cunningham of Keller Williams Amarillo.

She’s one of around a thousand Realtors in the area. That’s nearly four real estate agents for every one home on the market.

A more normal local inventory is upwards of 2,000 homes.

“The MLS inventory is not only historically low but shockingly low,” says Matt Griffith, Vice President at Rockrose Development, the company behind the development of several Amarillo neighborhoods, including The Colonies and Westover Park. Griffith has been in the industry for nearly three decades. “I can’t put into words how it’s even possible for inventory to be as low as it is.”

In Rockrose’s new Pinnacle development, near Hollywood and Bell behind Randall High School, the home inventory is precisely zero. That includes houses built on speculation—which builders design and construct prior to having a particular buyer in place. “Everything that’s built and finished is sold,” Griffith says. “That’s a relatively new [development] and there are not a lot of houses out there. Builders are getting full ask—in some cases, above ask. When you have inventories as low as they are, basic supply and demand suggests that prices will go up.”

The Pandemic Impact

The past two years have served as case studies on the law of supply and demand, not just in the Amarillo area but nationwide. “It’s literally coast to coast,” says Cunningham. Nationally, home builders had already slowed down in the wake of the 2008 financial crisis and were very gradually starting to catch up. Then came the pandemic. 

In March 2020, when the first positive COVID-19 cases arrived in the United States and the initial shutdowns resulted, home construction stopped for a brief period. “Everybody hit pause,” Griffith says. “Nobody was going full tilt on home construction.”

It wasn’t just builders, though. Lumber yards closed. Brickmakers and window manufacturers suspended operations. Almost every kind of home construction material, from electronics to insulation, saw hiccups in production.

People who had been planning to sell their homes that spring changed their plans. Everyone stayed home for a few weeks. Some began working remotely. That’s when the market began to shift.

Within a couple of weeks, local builders resumed as much construction as possible. Most of their work took place outside anyway. “We adjusted and deviated but never really slowed down,” says custom home builder Eric White of Old World Construction. “But a lot of subcontractors lost a lot of people.” Some older craftspeople saw the pandemic as an opportunity to retire early, taking veteran carpenters and concrete layers off the market. “We lost a concrete guy who’d been working with us more than 20 years. He was 70-something years old. When the older crew retired, we didn’t have very many options to replace them,” White says.

Meanwhile, any subcontractors paying just above minimum wage found it hard to compete with the government’s stimulus money and bring workers back on site. 

The lumber yards and manufacturers quickly got back online, but the Spring 2020 slowdown threw a lot of deliveries behind schedule. Home-building is a step-by-step process, and builders like Eric White found themselves waiting on parts, products and labor.

Demand Grows

Meanwhile, local housing demand began to tick up. One reason is demographic. The highest birth rates of the economically dominant millennial generation had occurred between 1989 and 1993. Those residents will approach their 30th birthdays between 2019 and 2023—a milestone age for buying a first home.

Mortgage rates had already been falling dramatically in recent years, and the 30-year, fixed-rate mortgage hit record lows in 2020. In early 2021, it fell below 3 percent. That meant America’s biggest generation reached their peak home-buying years flush with stimulus cash, while it had become cheaper than ever to get a mortgage.

At the same time, the idea of “home” became more important than ever. People were spending much more time in their house or apartment. Schoolchildren had been stuck at home. Remote-working moms and dads grew restless. They wanted more space—or, at least, better space. 

Meanwhile, investors had begun taking advantage of the low rates to buy rental homes. Road travel resumed first, but hotel stays were still uncertain. In that environment, the Airbnb market zoomed, and a few local entrepreneurs decided to experiment with managing an increasingly profitable Airbnb property.

In other words, people began wanting to buy new homes at the same time fewer new homes were being finished and fewer people were ready to sell. The idea of allowing strangers into a home during a pandemic also complicated things, even though local Realtors quickly pivoted to ways to show a home safely. Others just declined to sell at all, given the ongoing market uncertainty. They decided to wait.

So for the rest of 2020 and 2021, demand dramatically outstripped supply, which sent home prices soaring. In Texas, the housing crunch boosted the average home price 33 percent above pre-pandemic levels. 

As 2022 began, listings had dropped historically while the median home price was up 12 percent.

Incredible Competition

That’s when other potential sellers began taking their homes off the market. Sure, they could sell and make a profit, but then what? They’d be buying another property—at an inflated price—and competing with everyone else in the marketplace. “As prices go up, people realize they can’t sell their house because they’d have nowhere to go,” says broker/owner Rick Thomason of Thomason Scott. “So they end up holding onto their houses,” at least until the market calms down.

“There is no inventory under $200,000,” Cunningham explains. Those properties are being bought up by investors, who often pay cash, rather than first-time homeowners. “If it gets out that you have [a home] under $250,000, you have people lining up to see it.”

Even higher-priced homes are seeing increased demand. “People are walking in and paying $500,000 easily,” she adds. Some of these new homeowners are moving to Amarillo from other parts of the country, choosing to work remotely in a city with a lower cost of living than major urban centers. Others are retiring here, having sold at an immense profit in other markets. “Sometimes it’s parents moving here, especially if they come from the West Coast and sold at an incredibly high price,” says Cunningham. “They can go out to River Falls and pay $750,000 for a house with a canyon view. It’s not a big deal for them.”

And they can definitely outbid a first-time homeowner, or a seller with a contingency loan, she says. “Nothing is lasting in town. We’re seeing homes go under contract within a week. We’ll put it out on a Thursday or Friday, show it through the weekend, and take offers on Monday. There might be 20 offers on a property. If the house is priced correctly, buyers will be competitive.”

Thomason says he’s seen prospective out-of-town buyers make offers on a home without even seeing the property.

Supply-Chain Issues

And as all that local demand played out, with used homes being snatched up incredibly fast, home builders have struggled to keep up. “Here we come out of COVID and that’s when they got hit with the supply-chain issues,” Griffith says. It’s not just a convenient excuse, he says. The brief downtime during the early days of the pandemic set in motion a complex chain reaction involving materials, transportation, inflation, production and demand that still hasn’t yet been resolved.

“My gosh, the anecdotes you hear from builders,” says Griffith. “A 30-week wait on windows. Twelve to 16 weeks on garage doors. Certain bricks, maybe there’s no time frame at all. The answer is ‘We don’t know if we’ll ever get it.’ You just take what you can get and paint it.”

Consider the current lumber situation. Like other commodities, the price of lumber has been extremely volatile since the start of the pandemic. “You have a double-edged sword,” says Griffith. “Number one, the lumber yards aren’t going to give you a quote that’s good for an extended period of time. And they also can’t guarantee when you’re going to get it.”

Builders need lumber to build a house. They know how much lumber they’ll need. But right now they don’t know how much that lumber will cost, or when they’re going to get it. So they order it and pray.

The same applies to almost every other material used in home-building, from flooring to shingles. 

That complexity has made it challenging for builders to give customers a closing date or even a price, which frustrates builders like White. He’s been constructing houses in Amarillo for 20 years and, until the past year, has never had to put customers on a waiting list. 

“I’ve always managed to handle anything that walks in the door, but right now we’re booked up until April of next year. I can’t touch another job,” he admits. And he still gets calls every week from people wanting a custom home from Old World Construction, even though some of their desires are pushing $300 a square foot. “I’m seeing a big rush of people coming in and just wanting everything.” 

He’s adding those customers to his waiting list.

The Future

So how does the area’s low housing inventory resolve? How do things return to normal?

“In my business, I don’t know what normal is anymore,” says Griffith with a laugh. But he does assume that, eventually, the supply chain issues will ease and distribution and manufacturing will catch up. Mortgage interest rates are going up as well. The rising rates might reduce demand, because they limit how much house a family can afford.

Or maybe not. 

“It’s all relative. If you’re making plans to buy a home and expand your family, once you’ve made a decision, will a .25 percent uptick in the mortgage rate make you change your mind?” Griffith asks. “Maybe you’ll purchase a home that’s a little lower [price]. But for some people, that’s a life decision, not a money decision.”

He wonders if the increasing rates might pump the market even further. “Some would argue that, psychologically, [a rise in mortgage rates] creates more purchasing. You want to hurry up and buy before it goes up more.”

But the frustration and complexity of the past couple of years does tell him one thing: People want to live in Amarillo. “There are tremendous job opportunities here, and a good cost of living. It’s a really wonderful place to live, especially for folks coming from a high-tax environment like California or a high-stress place like Dallas,” Griffith says.

Cunningham agrees. “The builders are building as fast as they can, but not just in Amarillo. This [housing inventory problem] is nationwide. But our housing prices are much more fair and achievable for the average consumer and homebuyer, compared to prices in Florida or Austin,” she says. “People are wanting to be here. I believe Amarillo has so many good things happening.”

According to Thomason, Amarillo may be experiencing growing pains—but growth is almost always positive. “It might get tougher before it gets better,” he says, “but I think it’ll work itself out.”

Thomason knows those pains first-hand. He and his wife sold their house in late 2019, right before the pandemic hit, so they could start the process of building a custom home in the Trails at Tascosa Golf Club, a new development immediately north of West Amarillo Boulevard. His builder has struggled with supplies and labor. The Thomasons have juggled budgeting issues and tried to manage two-plus years of delays. Only within the past few weeks has the house neared completion.

“I keep saying ‘We’ll be in it by Christmas,’” Thomason says. “I’m just not going to say which Christmas.”