The Seller’s Market Continues, with One Silver Lining for Buyers
2021 has been a seller’s market for sure, with the unusually low supply of homes coming on the market affecting pretty much the entire country. Even with that, local home sales in the Houston area this year still managed to outpace 2020’s sales by nearly 20%. In addition, the average sales price increased by 15% and the median sales price rose 14%. Houston-area single family home inventory was hovering at a 1.8 month’s supply, compared to the national supply of 2.6 month’s supply.
Homes were on the market much less time, too. In Houston, 26 days was the average time, decreasing from about 56 days last year. Unfortunately for some buyers who are financing, this seller’s market has been deluged by cash buyers and investors. More and more, buyers are finding it necessary to make super-strong offers, in many cases over asking price. If there is a silver lining for buyers, it has to be the super low mortgage interest rates.
One thing is for sure: if you’re a homeowner who is looking to sell and then purchase another home, you’re in a really great position. The strong seller’s market will help you get the old home sold faster, and the extremely low interest rates will benefit you in purchasing the new home.
Buyer competition may get even stiffer in Spring – be prepared
In my post of February 4, I discussed how 2020 was a record-breaking year for Houston home sales. Well, all indicators point to that trend continuing at least through this Spring and likely beyond. There was a very low number of homes available for sale in January, which will likely cause prices to continue rising at least through Spring. As seen in the chart below, new home listings have dropped considerably across the nation from the previous year, while median listing prices have risen:
Realtor Magazine, February 2021
Realtors understand the importance of acting quickly in this kind of market, but not all buyers are aware of this urgency (especially first-time buyers). Many may have an unpleasant experience the first time they make an offer, when it turns into the inevitable “bidding war” with other buyers. That’s why it’s crucial that realtors prepare buyers for this situation by explaining the market, as well as the best strategies to get that home they want in such a competitive seller’s market.
Negotiation is certainly a big part of the process, but a bit of old-fashioned psychology and common sense comes into play also. How much do you want to offer initially? What’s the absolute highest you can ultimately go? Do you increase in large or small amounts? Will the home appraise for the highest amount you are willing to pay (of course, if you’re a cash buyer this isn’t a concern)? Are you willing to offer even more than what the home will appraise for, and make a larger down payment to offset the higher purchase price? And try to put yourself in your competitor’s shoes – they could be thinking just like you as far as pricing, or they could be a bit lower or higher. And are they automatically adding $5000 (a nice, round number) to their original offer, or tacking on substantially more?
It can be a bit nerve-wracking for buyers, but also for their realtors at times. It’s just all part of the business, so try your best to be prepared. You may end up losing a couple of homes to higher offers, but I promise you that you will ultimately win that dream home.
Houston housing market breaks sales records for second consecutive year
The Houston housing market is off to a great start this year. Believe it or not, 2020 was a record-breaking year for home sales, even with the dark cloud of the pandemic rearing its ugly head. According to Houston Area Realtors, 96,151 single-family homes were sold in 2020 versus 86,996 in 2019, the last record-setting year: a more than 10% increase.
The designation of real estate as an essential service gave the industry a much-needed boost after the March and April stay-at-home orders eased up. Interest rates were already low, and buyers were out in force to take advantage of the new market landscape. Virtual home showings and open houses were in full swing during the stay-at-home period, but continued to flourish throughout the remainder of the year. The chart below compares the total numbers from 2019 and 2020:
HAR.com, January 2021
An unfortunate downside to that record sales activity last year is that now the inventory is significantly lower than normally expected this time of year. But things are still bright, since interest rates are still very desirable. And patience does eventually pay off if you’re still looking for that perfect home.
If you like public gardens, there are plenty around Houston!
I’ve travelled all over the world several times, while active-duty military and later as a civilian with my wife and daughter. Wherever we are in the world, some of our favorite places to visit are botanical gardens and parks. When we moved from northern Virginia to Houston, our first thought was “well, it’s just a big flat area made up of several other cities, no seasons, and not a whole lot to see.”
It wasn’t until we started asking around and doing research that we started finding these gardens and parks; and they are sprinkled all over the Houston and surrounding area. Here is a list of some of our favorites to get you started:
North Houston, Tomball, Spring area:
22306 Aldine Westfield Rd, Humble, TX 77338
Cypresswood Water Conservation Garden
4107 Evening Trail Dr, Spring, TX 77388
10315 Summit Bridge Ln, Houston, TX 77070
Closer to downtown and south Houston:
Houston Arboretum and Nature Center
4501 Woodway Dr, Houston, TX 77024
Bayou Bend Collection and Gardens
6003 Memorial Dr, Houston, TX 77007
Japanese Garden (Hermann Park)
6000 Fannin St, Houston, TX 77030
McGovern Centenial Gardens (Hermann Park)
1500 Hermann Dr, Houston, TX 77004
5555 Hermann Park Dr, Houston, TX 77030
Houston Botanic Garden (Southeast of downtown Houston)
8200 Park Pl Blvd, Houston, TX 77017
Thinking of buying? Winter is a great time!
Everyone knows mortgage rates have been at the extreme low end of the spectrum for some time now. The question is: how long before the rates start creeping up? This is a case that whatever goes down, must eventually go back up. Not only that, but we are still in the middle of winter, when the rates usually are better than the other times of the year.
Lenders are willing to routinely offer a discount of almost 20 basis points in January, as compared to other times of the year. If you took out a mortgage in July at 3.5%, this month you may have gotten it at 3.3%. But if you miss out in January, remember that December and February are the next-best (cheapest) months to shop for a loan.
What does this mean to us? Just like what is happening across the U.S., the housing market here in the Houston and surrounding areas has been very hot, with a majority of properties getting multiple offers. So even though it’s supposed to be a slow season, it has been very competitive for buyers, with many properties selling for above asking price. People are taking advantage of the super-low rates, and if you’ve been thinking of buying and have been on the sidelines, you may be missing out on an opportunity that only comes along once in a blue moon.