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December Housing Data Across Texas

6,706 Views | 59 Replies | Last: 1 yr ago by mts6175
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HOUSTON

  • Inventory is DOWN to 2.7 months from 2.9 months in November. This decline of 0.2 months tracks exactly with each November to December timeframe going back all the way to 2016. The last time it was less was in 2015, when inventory numbers only declined 0.1 months during that same monthly period.
  • Average and Median pricing is UP 5.1% / 3.8% year over year.
  • Number of transactions are WAY DOWN.
  • Personally, my upcoming buy-side client list is about 4 times larger than my sale-side client list.
  • I closed several rental listings in December, all at good terms. Now is a good time to be a landlord, but I'm not sure rents are going to continue to climb like they did in mid 2022. If anything, they may fall this Spring.
  • A lot of Sellers are sticky on their pricing, but deals can still be had. This month, I helped one of my fish buddies get a home for what I believe is a solid 15% less than market value, and there is nothing wrong with the home...it's move-in ready. Don't be emotional about deals, and be ready to move on if you can't get at least fair pricing.
  • Be aware that Sellers do not care about your interest rate. Almost all of them that I've spoken to have interest rates in the 2% or 3% range and are perfectly happy renting their home to people like you (or letting the home sit vacant) until they hit their sales pricing number.
  • This link has some really detailed statistics that have not been published by HAR before.



https://www.har.com/content/department/newsroom
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K_P
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Thank you. I always appreciate these threads.

I think you've said previously that a more significant price drop will occur if people need to sell their homes en masse, i.e. job losses due to recession. A lot of people need / want to move during the summer. What do you think happens this summer when everyone wants to move? Some people will have a lot of equity and potentially be willing to cut their prices. However, prices usually go up some during summer.

Do you think the summer moving season is a catalyst for a deeper correction absent a larger recession?
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CPI
YOY +6.5%
MOM -0.1 (Yes, that's a DECLINE)

PPI
TBD


https://www.bls.gov/news.release/cpi.nr0.htm
Michael Burry called it 6 months ago
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Red Pear Realty
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I'm about to have to step out for appointments but I'll respond this afternoon as early as possible
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K_P
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No rush at all
evan_aggie
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K_P said:


Do you think the summer moving season is a catalyst for a deeper correction absent a larger recession?

I think it has to be a catalyst to some extent.

The higher rates are going to make a like-for-like housing move be much more painful due to interest rates.

People who have had homes for a few years at much lower payments aren't likely to take on a much larger payment due to higher rates + higher purchase price.
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K_P said:

Thank you. I always appreciate these threads.

I think you've said previously that a more significant price drop will occur if people need to sell their homes en masse, i.e. job losses due to recession. A lot of people need / want to move during the summer. What do you think happens this summer when everyone wants to move? Some people will have a lot of equity and potentially be willing to cut their prices. However, prices usually go up some during summer.

Do you think the summer moving season is a catalyst for a deeper correction absent a larger recession?

I have to preface this by saying that every market is different, just like every neighborhood, price point, and season is different. This is my opinion about the Houston market only.

I think year-over-year Houston pricing for this Spring/Summer cycle will be up approximately 5% compared to the same time last year. My reasoning:

  • Interest rates are higher than they were a year ago by around 3%. That's real money to a lot of people. It looks like the market believes the Fed target rate will be exactly the same level a year from today. But don't forget that everyone doesn't need financing to buy a home. Roughly 1/3 of buyers pay all cash. From what I've seen, rising interest rates only affect the middle class because the upper class has the ability to buy their homes all cash, and the lower class aren't buying, but renting (from the upper class). So once again, the middle class got screwed. BTW, I have two clients getting loans right now with rates in the low to mid 5% range. To put numbers to it, homes in Houston at $300,000 and below and $1,000,000 and above seem to have not been affected by rising interest rates.
  • The unemployment rate in Houston is 4.0% as of November and has been steadily falling month over month for the last several months. O&G is helping to insulate us from a lot of the layoffs the rest of the US is seeing. I still don't see massive price dips until or unless we start seeing major layoffs in Houston.
  • Inventory is cyclical with the seasons. The winter months (today) are typically the highest inventory months of the year. As of this latest data publication, we are sitting at 2.7 months, which is still in the lowest 15% of all months tracked by HAR over the last roughly 20 years. 6 months is considered equilibrium. HOWEVER, watching what inventory numbers do going into the Spring/Summer sales season will tell us a lot before it happens. If inventory builds at a crazy clip like 1.0 months of inventory added in January, February, and March, then obviously, we should expect declining prices in the following months. Reference Image 1 below.
  • Given 2.7 months of inventory today, my data predicts approximately a 7% increase in home prices in another year. See Images 2 and 3 below.
  • Don't forget that May brings another class of graduates searching for housing. Many of those graduates sign leases at apartments, which eventually turn into single-family home rentals with a friend or two a year or two later, which eventually turn into buying a house at around the same time in another few years.
  • I have multiple clients who sold their homes last spring/summer, are renting now, and are looking to buy again in the spring or summer again. This goes back to my list of active buyers which is 4 times longer than my list of sellers for this spring/summer season.
  • Here's a real life example that a client brought to me last week. My client is looking to buy a rental, all cash. This home is priced at $575,000 today, and its been on the market for 176 days without a price drop. I ran comps and arrived at the conclusion that its probably worth a maximum of $525,000. Its currently rented for $3,500 a month, and I believe thats a fair market rent. With traditional financing at 20% down, 30 amort, 6.67% interest rate, the total payment is just under $3,900. I don't want to share what this seller paid for the property in 2012, but let's assume that they have a 3% interest rate and a total monthly payment of $2,500. The seller is cash flowing $1,000 per month. Why would they sell at any number that is less than their desired amount? Why would they reduce their price even after 180 days on market? My all cash buyer would be better off buying risk free government bonds at this pricing. So who is wrong here? Nobody, I'd say. No wonder transaction volume is way down.
  • Finally, I honestly hope prices do come down a bit. We need them to for the health of the market, and I want them to so I can keep adding to the portfolio.


Image 1



Image 2



Image 3



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evan_aggie
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Is your 1/3rd paying all cash a stat your data over all time? 2022? 2020-2022?
K_P
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So you're saying 6-7% up from the peak last summer? Personally, I would be surprised if prices were flat June'23/June'22. I'm thinking it continues to fall a bit and is ~flat or slightly below current pricing, i.e. no summer increase in prices.
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I said 5%, but the data suggests it could be anything from -3% to 15%, with the trend line at about 7%.
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evan_aggie said:

Is your 1/3rd paying all cash a stat your data over all time? 2022? 2020-2022?
Redfin is the only place I can find year-by-year data, and it only goes through 2021 (30%). This is national data, and my clients probably skew wealthier than average, but it looks like 25% to 35% is a decent estimate depending on the year.

https://www.redfin.com/news/all-cash-home-purchases-2021/
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Red Pear Jack
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I find the HAR.com Listing Views stats you included in the linked report interesting, obviously it makes sense that they are down dramatically due to a lower amount of active listings, however, it'd be interesting to know if the average views per listing is down (due to buyers throwing in the towel) or actually up (due to same number of buyers in the market, however, lower inventory of homes).
Red Pear Jack
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North Texas

Pretty much the majority of what Jamie pointed out for Houston applies to the DFW Metroplex as well.

I recently closed a transaction were I was able to save my client ~8% of the Listing Price, however, this was an occasion were the Seller needed to sell and was more accommodating to taking a "hit."

On the opposite side of the equation, another Buyer client of mine submitted an offer for a townhome in Allen that was also below list price (supported by comps), however, the Seller in this case countered $1k below list price. The house lingered on the market and in a last "attempt" to spur up demand, the seller sent out an email blast offering Buyers a $1k seller credit. After virtually no showings, the seller pulled the home off the market (re-emphasizing Jamie's points above regarding sellers not really needing to sell, hence not wanting to take a hit).

A few notes below:

  • Median Price increased 6.1% to $385,000.
  • Active Listings skyrocketed 147.5% increasing inventory to 2.2 months, however, still well below equilibrium of 6 months.
  • Days on Market continues to trend higher, increasing 21 days to a total of 90 days YoY.
  • For the most part, inventory is the tightest in CBD counties.














evan_aggie
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2021 is going to be skewed. But even that number has to be inclusive of companies: orchard, openDoor, Zillow.


Fairly certain 1/3 of people aren't dropping that much cash 2010-2022.
CS78
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evan_aggie said:

2021 is going to be skewed. But even that number has to be inclusive of companies: orchard, openDoor, Zillow.

Fairly certain 1/3 of people aren't dropping that much cash 2010-2022.


I used to keep a loose eye on it in B/CS and that seemed to be the norm. I always assumed it was skewed due to our number of retirees and investors.
htxag09
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evan_aggie said:

2021 is going to be skewed. But even that number has to be inclusive of companies: orchard, openDoor, Zillow.


Fairly certain 1/3 of people aren't dropping that much cash 2010-2022.
I put in an offer on a home in fall of 2022 with Jamie, just over the $1mm price point, and something like 4 out of the 6 offers were cash.
evan_aggie
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htxag09 said:

evan_aggie said:

2021 is going to be skewed. But even that number has to be inclusive of companies: orchard, openDoor, Zillow.


Fairly certain 1/3 of people aren't dropping that much cash 2010-2022.
I put in an offer on a home in fall of 2022 with Jamie, just over the $1mm price point, and something like 4 out of the 6 offers were cash.


I don't doubt that at all.

Like I said, I think 2021-2022 was an exceptional time where buyers were out of state, companies trying to flip, or cash-companies paying for buyers to put all cash offers on the table with a 1-2% charge.

Common sense tells me that is abnormal.

I'd love to see what the numbers looked like 2010-2019.
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Click the link I posted. There are several years in the last decade that were higher than 2021.
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evan_aggie
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I was reading where businesses were responsible for about 25% of home purchases last year, and the long term trend is around 10-15%.

Wow, I never would have guessed 15% in normal times.
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For rentals? There was an NAR report about what they called "institutions" buying houses a while back and their number shocked me too. That one really reinforced the build to rent idea in my mind.
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Shooter McGavin
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I appraised a house today that sold for $565k. The listed price was over $750k at one point.

Monday's appraisal is on a house selling for $992k. It was listed for $1.4 before three price drops to final listing price of $1.1.

Folks are either waaaaay to aggressive on listed prices or accepting some really low offers.

Don't be afraid to negotiate in this market, you never know.
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Where's Luke? I need that BCS data
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ElephantRider said:

Where's Luke? I need that BCS data


- We are still seeing very convincing demand across most price ranges save for the upper $1M+ homes.
- There are still some homes being listed and going under contract very quickly after, in some cases just 14 hours…


Bryan:



College Station:



Brazos County:



If anyone needs data from the surrounding areas, just let me know!



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Red Pear Realty
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Shooter McGavin said:

I appraised a house today that sold for $565k. The listed price was over $750k at one point.

Monday's appraisal is on a house selling for $992k. It was listed for $1.4 before three price drops to final listing price of $1.1.

Folks are either waaaaay to aggressive on listed prices or accepting some really low offers.

Don't be afraid to negotiate in this market, you never know.


Couldn't agree more. Also, check out this pic of me and Shooter:


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mts6175
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I will add I just sold a house at the end of November in Dallas ~$650k. It was under contract within 3 days at all cash at list. I have another under construction in the same range, and we're not finished yet and have had ~10 buyers come through, the majority of them are cash buyers.
LostInLA07
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Listed our house in the woodlands yesterday. Open house starts in about 20 minutes but so far we have 3 offers.
Shooter McGavin
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Red Pear Realty said:

Shooter McGavin said:

I appraised a house today that sold for $565k. The listed price was over $750k at one point.

Monday's appraisal is on a house selling for $992k. It was listed for $1.4 before three price drops to final listing price of $1.1.

Folks are either waaaaay to aggressive on listed prices or accepting some really low offers.

Don't be afraid to negotiate in this market, you never know.


Couldn't agree more. Also, check out this pic of me and Shooter:



I didn't know what to do with my hands.
Red Pear Jack
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What area?
mts6175
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Red Pear Jack said:

What area?
Lochwood sold, Saint Andrews under construction
LostInLA07
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LostInLA07 said:

Listed our house in the woodlands yesterday. Open house starts in about 20 minutes but so far we have 3 offers.


Under contract for $115k over list price with appraisal waiver.
zagman
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LostInLA07 said:

LostInLA07 said:

Listed our house in the woodlands yesterday. Open house starts in about 20 minutes but so far we have 3 offers.


Under contract for $115k over list price with appraisal waiver.


What's the age of the house, SF, and price per foot? And does it have a pool or any features that add additional value? Was it a cash offer?
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Pizza
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LostInLA07 said:

LostInLA07 said:

Listed our house in the woodlands yesterday. Open house starts in about 20 minutes but so far we have 3 offers.


Under contract for $115k over list price with appraisal waiver.


Any buyer who skips a $500 appraisal that will probably have a 1-2 day turn time, and is purchasing a home for 115k over list price must be purchasing the Taj Mahal of homes in the woodlands, or has lots of cash and little common sense.

3 offers before the open house, and one that high? Is the market in your area really that hot? Or do you have a pool, ensuite baths in each bedroom, detached shops, saunas, theater rooms, and a car wash built into the garage?
ravingfans
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okay, okay now--the car wash built in to the garage was a bit over the top, wasn't it???
Pizza
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ravingfans said:

okay, okay now--the car wash built in to the garage was a bit over the top, wasn't it???


I've seen pressure washer systems in garages, and 2 post or 4 post car lifts, but I have yet to see a built in car wash...that would be sweet.

I'm just curious as to who would pay 100k+ over asking price, and why?
LostInLA07
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6 years old and 4,100sf. No pool. Offer wasn't cash but the buyer had already cleared underwriting, waived appraisal and sent proof of funds sufficient to pay cash if they wanted to. 21 day close.

The lot is almost 0.7 acres which is pretty unique for most of the woodlands.
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