HOUSTON

The Facts

• Inventory continues to climb. Currently sitting at 4.3 months (up 1.3 months YOY and up 0.3 months MOM). We would not normally be seeing inventory rise in a summer month like June.
• Total sales and total dollar volume are DOWN 13.6% and 12.2%, respectively.
• Mean and median sales prices are still trending up (0.8% and 0.7% YOY)
• Rental listings are up 8.5% YOY and lease prices are up slightly (1.3%)
• 10 Year Treasury is sitting at 4.242% as of this posting. Mortgage rates for owner occupied 30 year loans are sitting in the high 6 / low 7 percent range.
• See the CME Group FedWatch tool link below. The market continues to bet on lower interest rates going forward. Right now the market is betting on about 150 bps of target rate drops a year from now. But they've been betting basically the same thing for the last two years, so we will see!

https://www.har.com/content/department/newsroom?pid=2096

https://www.har.com/content/department/newsroom?pid=2097

https://www.cnbc.com/quotes/US10Y

https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html

My Take

• I'm continuing to put deals under contract on both sides. The homes that sell the fastest and for the most money are the ones with absolutely nothing for a buyer to do when they close.
• The luxury market (I'm going to call this $1M+) and the first time buyer market (I call this <$400k) have remained strong. It's the middle class type of home ($400k to $1M) that's been a little more difficult to move lately. That's submarket dependent of course, but in general terms, fairly accurate.
• In the last month, Breanne and I closed deals in East Downtown, Spring, Montgomery, New Braunfels, and La Vernia.
• About a year ago, maybe a year and a half ago, I started getting "bail me out" calls from owner occupant folks with real estate in the DFW market. I probably got about 4 or 5 of these from folks looking to offload real estate in the DFW market for below market prices. The DFW market is down overall since then (Jack can speak better to the amount than I can), and I think there is probably a correlation. I just got my first call from someone in Houston like this. So is it possible that the building inventory numbers we see above coupled with my anecdotal story here could mean that we are in for some price declines in Houston in the next year or so?

Would really like to see rates get back into the 5.75-6.25% range. I think that's the area that can support a healthy path forward. 7% and above and a lot of people will continue to stay hunkered down.

As an investor, small local banks are in the 9s. At those rates, im focusing on paying off, not borrowing more.

Can you share the reason folks needed to be bailed out? Liquidity crunch I imagine? How much below market are they listing for? Are these below market listings getting any sort of bidding wars?

I would imagine this will accelerate.

Just wait. Interest rates will not go down until second quarter. There will be some opportunities for cheaper purchases in the beginning of he year.

Sea Speed said:

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Can you share the reason folks needed to be bailed out? Liquidity crunch I imagine? How much below market are they listing for? Are these below market listings getting any sort of bidding wars?

I would imagine this will accelerate.

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Liquidity crunch. All of these were off market, phone call type of asks for help. I'll give one example. Friend who knows I invest calls me last April and says he has a family friend who is looking to sell a house quickly. The husband and wife are about to get a divorce, haven't made a payment since Covid deferrals kicked in, that has ended, and they want to sell it, but they also want to stay in the house until the kids finish school that year, and maybe even longer. I offered enough that they could avoid foreclosure, stay in the house for a few more months, and even take a small amount of cash after vacating. But there were also strings attached where I tried to protect myself from a situation where I got dragged into the middle of the divorce situation or a bad tenant situation. I thought I was being very fair. Made my offer and heard back a couple of days later that a young buck investor doing his first deal had stepped in and offered them full market value with a quick close. That's how it goes sometimes!

Red Pear Realty said:

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Sea Speed said:

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Can you share the reason folks needed to be bailed out? Liquidity crunch I imagine? How much below market are they listing for? Are these below market listings getting any sort of bidding wars?

I would imagine this will accelerate.

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Liquidity crunch. All of these were off market, phone call type of asks for help. I'll give one example. Friend who knows I invest calls me last April and says he has a family friend who is looking to sell a house quickly. The husband and wife are about to get a divorce, haven't made a payment since Covid deferrals kicked in, that has ended, and they want to sell it, but they also want to stay in the house until the kids finish school that year, and maybe even longer. I offered enough that they could avoid foreclosure, stay in the house for a few more months, and even take a small amount of cash after vacating. But there were also strings attached where I tried to protect myself from a situation where I got dragged into the middle of the divorce situation or a bad tenant situation. I thought I was being very fair. Made my offer and heard back a couple of days later that a young buck investor doing his first deal had stepped in and offered them full market value with a quick close. That's how it goes sometimes!

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Another example - House behind my rent house was bought in August 2023 by an Airbnb guy. I didn't find him having more on the county tax records. He is now selling it as a "cash flowing" investment for $100K above the market and above his purchase price. I'm sure he is sitting with a painful interest rate and high UPB give his purchase date.

I don't think he will get it sold for that price but hey it's called a market for a reason.

Austin-Round Rock-San Marcos


Central Texas Housing Market June Report

Quote:

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Kent Redding, 2024 ABoR and Unlock MLS president, stressed key actions to be successful in today's market.

"For the remainder of the year, both buyers and sellers need to adjust the way they navigate the market. Homes are selling at 96.4% of original list price, but the homes that are selling are moving because they are showing well and priced appropriately. Price and presentation are the top two critical components to a successful sale, whereas time on the market can be a big detractor. For buyers, now is the time to expand your options and make competitive offers in this high-inventory environment. Ensure your REALTOR is in lockstep with your motivations and goals so that you can confidently make bold decisions that maximize the opportunity present in the market."

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Austin Facts

• Median sales prices decreased by 6.3 % YOY to $450,000 and closed sales dropped 13.7% YOY to 2,732.
• Active listings increased by 25.9% to 13,277 and pending sales are down 2.4% to 2,802.
• Months of inventory now sits at 5.0 for the Greater Austin area. Will this start to bring prices down even more?
• I had the great pleasure of helping a couple buy their first home. They earned a $5,000 buyer rebate at closing. We were also able to get the house for $10K under asking.
• Sellers are getting 96.4% of their asking price which is an increase of just under 1% from last month. Houses are definitely being priced appropriately, but what's going to happen once we cross over the 6 months of inventory.

Austin-Round Rock-San Marcos


Bastrop County


Caldwell County


City of Austin


Hays County


Travis County


Williamson County

Sea Speed said:

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So cheap housing is coming back but no one can afford the interest anyways.

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Bingo

Tale as old as time. When you build EVERYTHING over a 5-year period, and population growth starts to cool, prices WILL come down.

This is just starting for DFW. Austin has been dealing with it all year. Houston is about to see it start.

Red Pear Realty said:

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This is data looks at months of housing inventory over the last 20 years. I sourced it as of this month. HAR (Houston) data only, but for everything posted to HAR (that spans globally). We are about to cross the historical average for months inventory (4.4 months).

Edit: This is relevant because, as I've continued to say, pricing follows inventory.





Source: HAR.com

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Wow. This is very informative.

Appreciate you putting these together! Is there any way you could do one for the HIghland Lakes area (Buchanan, Inks, LBJ, Marble Falls, Travis)?

Tex117 said:

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That you again for posting this. I read it every month

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Ditto.

Seems like everything I'm seeing the past week or so is talking about how the housing market is slowing. Is this because people are waiting/expecting rate cuts, or is this economy slowing down and about enter a recession? Will (expected) rate cuts in September prop up the real estate market?

Sea Speed said:

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Relevant Twitter thread

Sales down

Prices turning down

Inventory rising FAST

This is how price corrections begin https://t.co/pg08yhiGsY

— Amy Nixon (@texasrunnerDFW) July 20, 2024

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interesting data but Amy Nixon is a doom and gloomer. It's her engagement schtick.

Is inventory growing in the Metroplex? Sure...but it needed to.

Jumping from 2.5 to 3.8 months of inventory (while prices contract slightly) does not scream correction to me.

The "balanced" market inventory has always been quoted at six months. I would argue that's a bit high, but four months is not a glut by any means.

This article talks a bit more about the recent market trends. It's behind a paywall on my desktop, but I could read it fine on my phone for some reason

https://www.dallasnews.com/business/real-estate/2024/06/17/north-texas-housing-inventory-hits-12-year-high-what-happens-next/

Interesting I will keep that in mind. I don't use Twitter enough to know people's schticks outside of all the losers who post stories immediately followed by trying to hock their ba small business programs or the like.

txaggie_08 said:

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Seems like everything I'm seeing the past week or so is talking about how the housing market is slowing. Is this because people are waiting/expecting rate cuts, or is this economy slowing down and about enter a recession? Will (expected) rate cuts in September prop up the real estate market?

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I think it's some of both but probably more slowing economy. The folks who aren't buyers at 7% interest rates stopped being buyers around 5.5% rates, so they've been knocked out for a while.

I had lunch today with a big money Ag who does multifamily brokerage. His take was that once the Fed cuts rates, the effect on real estate would be kind of like a rocket ship launch. First some smoke, then some grumbling, then slow liftoff, followed by acceleration, and then once it gets going, look out.

And I just realized that there are only two more fed meetings before the election. One on 7/31 and the last on 9/18. I'd bet money we see no movement this month and then a cut in September just in time for elections. After that, who knows.

Yeah, the Twitter algo matches you up with folks in the industries you're interested in and doesn't let go.

She's good at getting clicks.

I think you might be right. Everyone always says 6 months is equilibrium, but is it really? We are at 4.3 months as of this month and I've had some buyers agents recently speak to me in ways that I haven't encountered since sellers agents were talking to me like that back in 2021/2022.

I follow zero people and have probably never interacted with a real estate post so who knows how it came across my feed. I have seen a handful of her other posts when scrolling since I made that post a while back and noticed she was always negative though. I did find it interesting one screenshot she posted of some neighborhood near Dallas having something like 100 homes for sale though. Thats pretty wild.

Understood. I was explaining why I see her posts all the time.

Ah my bad, misunderstood.

Red Pear Realty said:

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txaggie_08 said:

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Seems like everything I'm seeing the past week or so is talking about how the housing market is slowing. Is this because people are waiting/expecting rate cuts, or is this economy slowing down and about enter a recession? Will (expected) rate cuts in September prop up the real estate market?

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I think it's some of both but probably more slowing economy. The folks who aren't buyers at 7% interest rates stopped being buyers around 5.5% rates, so they've been knocked out for a while.

I had lunch today with a big money Ag who does multifamily brokerage. His take was that once the Fed cuts rates, the effect on real estate would be kind of like a rocket ship launch. First some smoke, then some grumbling, then slow liftoff, followed by acceleration, and then once it gets going, look out.

And I just realized that there are only two more fed meetings before the election. One on 7/31 and the last on 9/18. I'd bet money we see no movement this month and then a cut in September just in time for elections. After that, who knows.

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I'm ignorant in all of this, so apologies if this is a basic question.

If rates drop in a 'rocket ship' fashion, is that more likely to keep home prices higher?

I loosely keep up with Pinellas county, FL I used to live there and it could be a canary in the coal mine for our markets.

Their YoY inventory has exploded over 100% for the last 3 months. But, their prices are still up. Some well experienced people will tell you, it can take 6-12 months to work its way into prices but I expect to be able to see it there first.

Hopefully we can get some meaningful rate cuts in the next 6 months before it falls off a cliff.

Average Joe said:

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Red Pear Realty said:

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txaggie_08 said:

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Seems like everything I'm seeing the past week or so is talking about how the housing market is slowing. Is this because people are waiting/expecting rate cuts, or is this economy slowing down and about enter a recession? Will (expected) rate cuts in September prop up the real estate market?

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I think it's some of both but probably more slowing economy. The folks who aren't buyers at 7% interest rates stopped being buyers around 5.5% rates, so they've been knocked out for a while.

I had lunch today with a big money Ag who does multifamily brokerage. His take was that once the Fed cuts rates, the effect on real estate would be kind of like a rocket ship launch. First some smoke, then some grumbling, then slow liftoff, followed by acceleration, and then once it gets going, look out.

And I just realized that there are only two more fed meetings before the election. One on 7/31 and the last on 9/18. I'd bet money we see no movement this month and then a cut in September just in time for elections. After that, who knows.

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I'm ignorant in all of this, so apologies if this is a basic question.

If rates drop in a 'rocket ship' fashion, is that more likely to keep home prices higher?

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No, he's saying if rates are cut real estate is going to take off. Supply won't meet demand and prices will skyrocket again.

10 year treasury yield is collapsing

Maybe I'm bad at reading charts.. but it seems to be nearing the lows for 2024 and no where near the 5 year historical lows.

Lower yield means treasury (bond) prices are rising. People are locking their money up long term at these higher rates, b/c everyone expects a rate cut within the next 3 months.

A rate cut will likely be 25 basis points, which barely makes a dent when mortgages are up between 6-8%.

Things are definitely trending in the right direction, but this is just one step in a long journey towards normalizing housing/borrowing costs.

Correct. If yields FULLY collapse overnight it's because the world is completely falling apart economically or geopolitically. Like someone set off a nuke somewhere.

Now do the same chart but for 5 day. Compare against Powell's comments and watch the payroll release tomorrow.