HOUSTON
I want to caveat ALL Houston data for July by saying that we had two significant weather events (Derecho, which even many Houstonians haven't heard of, and Hurricane Beryl, that affected the entire city and then some) that certainly affected the market from available listings to closing timelines to rental activity due to displaced people seeking housing. The data is probably close to "normal", but there were definitely some impacts across the board. With that said, here we go....


THE FACTS

• While total property sales were down again YOY by 2.1%, total dollar volume was actually UP 4.4% compared to last year.
• Active listings are up a whopping 30.5%.
• Inventory is up to 4.3 months (flat month over month) compared to 3.1 months a year ago.
• Mean and Median sales prices are up 4.7% and 2.9% year over year.
• Interest rates on mortgages are starting to fall as the market is almost certain that a rate cut will come by the Fed in September, and then most likely one or two more by the end of the year. Mortgage rates were well into the 7% range just a couple of weeks ago, but have fallen to the mid to high 6% range today. Rates could even possibly be in the 5% range by the end of the year.
• The 10 year treasury is sitting at 3.93% as of today.
• As of this moment, the market is pricing in a 76.5% likelihood of a 25 bps rate cut and a 23.5% likelihood of a 50 bps rate cut.

MY TAKE

• Deals are still closing. Last month, I closed sales in the Heights area, Katy, Sunset Heights, and south Houston, and did leases in Cypress and Rice Military.
• I like that I get to help folks on all sides as it gives me some good perspective. Right now, both Buyers and Sellers believe that they have the upper hand. It's an intersting dynamic for sure. Buyers are seeking out "good deals" and Sellers "don't have to sell and will just keep and rent it if it doesn't sell".
• Yesterday I spoke with a SVP level friend of mine at a "too big to fail" bank who does commercial real estate landing, and they said that their position is that there will be a 50 bps rate cut in September. They also said that while they hadn't originated a new CRE loan in the last 2 years, the lending environment for CRE is definitely starting to thaw and they expect to be doing deals again very soon. Definitely interesting to hear that.
• I had a deal fall out of contract a couple of weeks ago with a first time home buyer client. I pride myself on knowing the construction side of the buying process, so don't typically have a situation like this, but I'm sharing it because I think it can give some insight into the mindset of all parties right now. My buyer client put this starter home built in the 1950s under contract. We get our inspection, and it's bad. Way worse than typical. In between our showing and the inspection, the HVAC system died. The inspector also found that the electrical wiring wasn't grounded despite having three prong plugs throughout the home. And the refrigerator, despite having lights on and compressor running, wasn't cooling. Oof. Then it gets even worse. Despite our inspector estimating that the roof was about 12 years old, the insurance companies didn't have a record of it being replaced, so they were going to require it to be replaced before insuring it. So we went back to the seller and said, "If you will replace the roof, HVAC, and fridge, we will handle the electrical after closing." The seller politely declined, and then asked for a money amount instead. So we asked for the $25,000 that we got quotes for, and he exploded on us, offered a $3,000 price cut, and said that if he couldn't sell it he'd just rent it instead. (Asking for a price and then countering with $3,000 was the funniest thing to me. Did he really think we would take that?) So that deal died for us. It's back on the market for sale, with no movement.
• Our short term rentals are pretty much booked solid for the next month to month and a half with folks who could not stay in their homes after Beryl (one still due to Derecho).

https://www.har.com/content/department/newsroom?pid=2107

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

BCS

Austin-Round Rock-San Marcos


July Central Texas Housing Report

Quote:

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"Consistently high mortgage rates continue to impact buyer's purchasing power, but July's increase in sales in four of the five MSA counties shows the strength of Central Texas housing demand," Clare Knapp, Ph.D, housing economist for Unlock MLS and the Austin Board of REALTORS, said. "With rates around 6.5%, only about half of homeowners in our market can afford a median priced home and only about a quarter of renters can afford a starter home. Home prices across the market still need to decrease to meet market conditions and meet buyers where their purchasing power is currently. It is notable that we are seeing more first-time buyers willing to make a move this year compared to last, and that is a positive sign for our market."

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Austin Facts

• Median sales prices decreased by 2.8 % YOY to $450,000 and closed sales dropped 3.5% YOY to 2,652.
• Active listings are significantly up by 20.3% to 12,661 and pending sales are down 5.1% to 2,567.
• Months of inventory now sits at 5.1 for the Greater Austin area. This is a very small increase from last month but is up 1.0 compared to YOY.
• Sellers are getting 94.2% of their asking price which is a decrease of 2.2% from last month.
• I currently have a listing in Kyle that we've been trying to move. This area is saturated with resales and new builds and resales. It's been a challenge to compete with the new builds with their low rates, but my seller is offer $10,000 in concessions for a rate buy down.
• As the article above states, about half of new home buyers can afford a house currently and that's why we are starting to see more buyers venture outside of Travis County hoping to score a better deal.
• I also have a new listing in East Austin with ADU potential that is minutes from downtown. This area has stayed active as there are still some buyers who want to live near downtown Austin.

Austin-Round Rock-San Marcos


Bastrop County


Caldwell County


City of Austin


Hays County


Travis County


Williamson County

TEXAS
This is a new dataset from HAR, comparing housing affordability statewide, and to be released quarterly going forward. I'll share some of the high points / data and link it below if you want to see the whole thing. My guess is that going forward, HAR wants to show that homes are more affordable to buy than they were now.

Minimum Household Income Needed to Purchase a Home YOY


Median Lease Price for Single Family Homes in Houston YOY


Highlights
39 percent of households in the Greater Houston area could afford a median-priced home in the second quarter of 2024, unchanged from the same time last year.
The median home price was statistically flat at $351,600 in the Houston area.
The monthly mortgage payment on a 30-year, fixed-rate loan, including taxes and insurance, was $2,410. (THIS MEANS IT IS CHEAPER TO RENT THAN IT IS TO BUY THE MEDIAN PRICED HOME IN HOUSTON RIGHT NOW.)
Households needed 0.4 percent more income annually than they did a year ago to buy a median-priced home with a minimum income of $96,400.


https://www.har.com/content/department/newsroom?pid=2106

Full Data Here:
https://www.har.com/content/department/newsroom?pid=2073

That's interesting data.

I wonder what those numbers look like on a per square foot basis?

My guess is that the size of the median residential property sold is larger than the median rental home.

Red Pear Realty said:

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Yesterday I spoke with a SVP level friend of mine at a "too big to fail" bank who does commercial real estate landing. They also said that while they hadn't originated a new CRE loan in the last 2 years, the lending environment for CRE is definitely starting to thaw and they expect to be doing deals again very soon. Despite our inspector estimating that the roof was about 12 years old, the insurance companies didn't have a record of it being replaced, so they were going to require it to be replaced before insuring it. So we went back to the seller and said, "If you will replace the roof,

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Thanks for the regular update. A few questions,

Did your guy say if they have any demand for loans? I have family that builds commercial. He has some good long-term bank relationships and had his credit limits slashed over the last couple of years. Now he says the deals that he already had going have wrapped up and demand is non-existent. With no need to ask for a loan.



Concerning the roof, has anyone heard of this before? If a claim wasnt filed on the last roof, how is the insurance company supposed to have a record? Do I need to be keeping roofing receipts for 15 years? As a seller, Id likely say, "sorry but there's nothing wrong with the roof, the problem is your insurance company." Seems like a deal killer, every time.

We didn't get into demand but the assumption on my end is that there is definitely demand for CRE loans right now. This is one of the largest banks in the world so they are playing in the institutional level loan space (tens to hundreds of millions of dollars per loan).

I hear you on the roof. The problem is that our insurance broker went to over 140 insurance companies, and they all denied insuring it. To me, its one of those problems where if its every single buyer's problem, its really the sellers problem. No buyer will be able to get insurance on the home, so nobody except an all cash buyer is going to be able to buy it, and even if they do, they are going to expect a discount off purchase price for that liquidity. The reality is that a cash buyer isn't buying that house anywhere near asking price. And that's one of the reasons why its still for sale at the same price after being on the market for just shy of 2 months now.

Austin Rental Market Data

NORTH TEXAS

• Inventory continues to climb, some counties still holding on to pricing, however, throughout the metroplex median price is down 1.7% YoY with active listings up 48.6%.
• Its been a while since we last saw months of inventory at this level but July 2024 MOI reached 4 months, up from 2.6 in July 2023.
• Where do we go from here? It depends on how quickly rates drop. If we start seeing rates in the low 5s, I think the market doesn't miss a beat and buyers come out in force. If that's the case, price drops might be short lived. However, if inventory keeps climbing while the rates drop maybe we get to some sort of equilibrium. We are starting to get in the slower part of the season so maybe we get a unusually active winter buying season if rate cut projections play out.