Let's kick this off with HOUSTON

• We still aren't really getting relief on the inventory side. Inventory is up 0.1 months worth from October (2.8 months) to November (2.9 months). I feel like a broken record, but 6 months is still equilibrium, and while it's much better than the 0.9 months or whatever we peaked at in Houston, we still need roughly double the inventory to level the playing field.
• I listed a home in Pearland at $300,000 a few weeks back and had about 20 showings within two days. We accepted a very good all cash offer on day 2 (not closed yet), and I had about 5 or 6 other parties call and ask about putting an offer in, but as soon as they heard we had one offer, they all went into "let me know if it falls through" mode. I share this because I think the buyer pool right now is so exhausted from the last two years that they are just not wanting to get into bidding wars.
• The rental market is still very strong. I listed one house for sale in December, but I listed 5 or 6 for lease. Sellers who aren't hitting peak pricing numbers from 9 months ago are just holding and renting instead, because they aren't being forced to sell.
• I am probably going to put 3 or 4 homes under contract for buyers this month. So 2 of my sellers went under contract, say 3.5 for the buy side, and 6 on the rental side. I think thats a fairly decent summary of what the market is looking like right now. Lots of buyers, not too many sellers, and lots of sellers converting to rentals instead of selling.

https://www.har.com/content/department/mls?y=2022&m=12

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All housing segments experienced declines in November. By contrast, single-family home rentals had another solid gain, demonstrating that prospective buyers continue to shift to the rental market until economic conditions stabilize or improve. HAR will report on rental trends in the November 2022 Rental Home Update, to be released next Wednesday, December 21.

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ABOR Market Data

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"It's a relief to see more homes available and sitting on the market long enough to give buyers an opportunity to think before they leap," Cord Shiflet, 2022 ABoR president, said. "This healthy competition creates an opportunity for homebuyers, who may have struggled within the past two years, to take their time and find a home they love. At the same time, sellers who can still enjoy deep equity should connect with a REALTOR to discuss the best way to prepare and market their home."

Last month, home sales declined by 36.6% to 2,026 closed listings the largest drop in closings by percentage since May 2020 during the initial COVID-19 economic hesitancy when closings fell 29.2%. Sales dollar volume fell by 36.8% to $1,175,435,108 as new listings declined 17.8% to 2,406 listings across the MSA. Pending listings dropped by 38.3% to 1,987 listings and available inventory increased by 2.3 months to 3.1 months of inventory. Homes spent an average of 58 days on market, up 36 days from November 2021.

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For the first time since February 2019, there was a ZERO percent in growth in median sales price in Austin, TX!

I'm starting to see a shift towards a buyer's market here in Austin. Many sellers are starting to add seller's concessions to their deals. Sellers are paying for closing costs, buy downs, and dropping their prices. I'm curious to see what happens next year. The Fed raising the rates by 50 basis points isn't helping with mortgage rates, but you can definitely get a deal right now.

Austin-Round Rock


Bastrop County


Caldwell County


City of Austin


Hays County


Travis County


Williamson County

Quoting this so it's not missed. Great point. If you moved on when interest rates were approaching 8%, this is an opportunity.

Red Pear Jack said:

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Mortgage rates have receded slightly past couple of weeks and I've had Buyers been able to obtain rates in the low to mid 5s which has helped in terms of affordability, but this remains significantly higher than a year ago.

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Will you post Brazos County?

I think the months of inventory is not a great stat cause it does not reflect the market shift. In a snapshot, there is roughly 36k homes on the market and 6k sales. Once some of the sales data drops off from early 2022 you are going to see that "months of inventory " stat climb rapidly to reflect market realities.

No single metric is perfect, which is why we post the data, tell our individual stories, and call out metrics that surprise us or are otherwise noteworthy. I think the real story of the last 9 months or so has been the resiliency of the market. A lot of people thought that when interest rates went up, prices would go down (I've got the threads here to prove it). But while the buyer pool really took a nosedive, so did inventory, because so far, sellers haven't really been forced to sell. And that's because most people in the US have an interest rate of roughly 3% (low cost of ownership), and the buyer pool suddenly became the rental pool. So while I don't think months of inventory is perfect (because it's backward looking), I do think it's probably the most "bang for its buck" datapoint that we have across markets. All it is is available inventory divided by current demand. Looking at either of those by themselves doesn't really tell the big story. If you look at closed sales, we are WAY down from a year ago. But if you look at active buyers, they are also WAY down (while the rental pool has exploded and so have rental prices). This is why we haven't seen sales price declines. I get to experience sellers telling buyers to "pound sand" on a regular basis, and the data shows that. And that's no fun, because first and foremost, I'm an investor, and I'd love it if prices fell off a cliff right now, so I could go shopping.

What would your preferred metric of choice be instead?

Also, I forgot to mention that October, November, January, and February are typically the months where we see the highest inventory for the entire year. So if we are sitting at roughly 2.9 months of inventory at the end of November it's very possible that we could see price increases again in 2023 compared to 2022. So record high prices again coupled with record high interest rates for the last 20 years.

That's trailing though, right? Not forward looking.

These current levels would be the highest levels for the current cycle. Next November would be the highest levels trailing the Spring and Summer months coming up.

500,000ags said:

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That's trailing though, right? Not forward looking. Correct. This is why I said: "So while I don't think months of inventory is perfect (because it's backward looking), I do think it's probably the most "bang for its buck" datapoint that we have across markets."

These current levels would be the highest levels for the current cycle. Next November would be the highest levels trailing the Spring and Summer months coming up. This is not correct. You can look back at historical data here, but our current levels of inventory are about 25% tighter than before the pandemic started. If you go back to June 2019 (one of the busy summer months before the pandemic hit, we sat at 4.2 months of inventory. Thats just a tad less than 50% more inventory than we have today, with November data. https://www.har.com/content/department/mls?y=2019&m=06

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Diggity said:

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I get what you're saying and definitely agree that many sellers have decided to sit this one out.

Let's be real though, Austin/Round Rock being flat year over year is a big deal when it was up about 30% YoY this time last year. I also get things are typically seasonal, but seasonality jumped the shark the last couple years, and that's about 15% off from their April numbers.

Unless things change quickly in the spring, you're going to start seeing some large YoY drops in many Texas markets. Not "great recession" numbers, but certainly significant.

I would argue that needed to happen. Prices had completely detached themselves from logic. Folks on this very board were talking about 8% appreciation being "the new normal" in Central Texas. That's just not sustainable.

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This is the story here. I really don't think we are going to see crazy price drops across most Texas markets. Honestly, I wish we would. I just don't see it happening in the next 9 months without some big job losses in Texas, which I don't really think is going to happen anywhere outside of maybe Austin. And I agree, real estate is cyclical, and for the overall health of the market, a "reset" needs to happen. But I don't think it's going to with price declines. Given the data we have right now, I think downside case for this Spring/Summer is "flat" and upside is up again as much as 10% (again, for everywhere except Austin, and that depends on job losses again). This scenario is my worst case btw. No pricing help coupled with very high interest rates.

Diggity said:

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I would argue that needed to happen. Prices had completely detached themselves from logic. Folks on this very board were talking about 8% appreciation being "the new normal" in Central Texas. That's just not sustainable.

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This cannot be emphasized enough. Any appreciation above the general inflation rate will rapidly make housing unaffordable and is the path to Texas being the new California. 8% is roughly 6% above the Fed target inflation rate. That means every 12 years housing will be 2x as expensive as it was. If you don't want your kids priced out of your town/area/state like in Cali, we need to work for fiscal policy, zoning regs, environmental permitting streamlining, etc that support keeping house price appreciation low. You can still build a lot of wealth at 2-3% appreciation thanks to the magic of leverage. That needs to be enough for people.

We're talking passed each other to some degree, but I do see what you are saying on the inventory.

Bryan/College Station:

State of the Market:
- There seems to be a steady clip of homes moving on the market. Lots of solid activity for homes priced right. It seems most move-in ready homes go under contract within the first 7-14 days of listing.

- A good example of whats going on out there - One of my current listings in Bryan priced around the $300K mark. We had very active stream of showings that ended up receiving 4 offers within the first 10 days

- Keep an eye on the days on market, its been holding steady around the 80-90 mark as inventory levels have ticked up slightly.

News:
- College Station Leaders looking to redevelop a few areas
- College Station wants to revitalize the Texas Drive on the East side of Campus
- Employment in BCS is on an uptrend besides market headwinds


Bryan:


College Station:



B/CS - MSA:


Brazos County:

Year over year numbers really look they are going to start to decrease.

RebAg13 said:

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Year over year numbers really look they are going to start to decrease.

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Closed sales down or 0% in every one of those diagrams.

And active listings up in most

I think he's referencing pricing

Right.

Everything else indicates pricing should follow. But I'm not an expert.

This guy has good updates. I have been following him for a while. He is a realtor from Sacramento, CA but he does other markets. Today he released a video on the Texas market updated as of December 9. Austin is in a world of hurt according to the numbers.

This is the website he uses and you can choose the metro areas interested in and choose the parameter you want to see.
https://www.redfin.com/news/data-center/

We bought right before the jump in rates. Of course I think it all is a mess of complexities in decision making.

Should my family have waited to buy until prices came down? Maybe, but then I'd be looking at 5.5%+ rates vs 3.5% rates. If they remained this way then -$200,000 drop in price is effectively neutralized.

Of course, you dont want to be paying for a home that is technically worth less than what you paid. If we intend to stay put for 5+ years and the market is back to where it was by then...we're ok with that.

Olag00 said:

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Just making sure I am reading your post correctly but I don't think a 200,000 drop in price would be neutralized by the increase in rates.



Excluding taxes & insurance:


$600k house with 3.5% rates is $2944 payment ($996,000 total of payments)


200k drop would be $400k with 5.5% rate is $2437 payment ($839,000 total of payments)

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Right, so you are comparing $600,000 vs $400,000 borrowed. I was sort of assuming a 20% drop in purchase price = loan.

Try $600,000 at 3.5% vs $480,000 @ 5.5%

or

$800,000 3.5% vs $600,000 5.5%




Anyway, to your exact point

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new listings which are also hard to come by since people do have the lower interest rates and not selling.

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This is what we've been noticing as well. People are not being forced to sell (or walk away ~2008) of their homes because they aren't upside down or out of work. Instead, they've made the decision to sit tight. It's hard to find the gem you want.

It's hard until inventory builds over time. Real estate is slow moving.

I like data, and had a bit of free time this afternoon, so I put together some graphical representations of some data from Houston (since 2004 when the data gets a bit fuzzy). If anyone wants the excel file to play with, my contact info is in my profile, I'd be happy to share.

Some food for thought:

• We are clearly "over trend" with regards to pricing. Average price growth YOY is 5.0% from 2004 through today. If you look at pre-Covid numbers only, our market averages 3.8% price appreciation annually.
• Check out the chart that just tracks months of inventory (second chart). While we only have data back to 2004, the historical average is 4.5 months, and we are sitting at just 2.9 months today.
• Taking this a step further, if you look at the relationship between months of inventory and pricing, there is a pretty clear correlation, both forward and backward looking. These next two charts seem to indicate that we will be up something like 7% a year from today in Houston.
• Our perspectives are skewed. 25 of the lowest 25 months worth of inventory for this market have come post-Covid. We are so used to crazy low inventory numbers, which bottomed in March and April of this year at 1.3 months, that 2.9 feels like a buyers market to some. In reality, 2.9 months puts us at roughly the 17th percentile, 3.5 months would roughly be the 30th percentile, 3.8 months would be the 40th, and 4.5 months is roughly the 50th percentile. This explains the "fastest inventory buildup of all time" stat. Of course its the fastest percentage-wise...We were sitting at just 1.3 months back in April.

Olag00 said:

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My problem is even though inventory is up, I can't find anything I like so I am just waiting for new listings which are also hard to come by since people do have the lower interest rates and not selling.

The hard part is getting pre-approved for the payments at these high prices with the high mortgage rates. This is effectively why the prices are coming down, it is just harder to get buyers pre-approved.

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The reason prices really aren't falling across most of Texas is that owners have cheap debt, and most of the buyer pool like yourself that decided to wait it out are renting (causing rental rates to spike 10%+ since this spring), so sellers don't have to sell, so they aren't. I'll lease about rental 4 homes this month and next where the seller probably would have preferred to sell, but because they won't achieve peak pricing and terms from this past spring, they are just renting instead, waiting for conditions to improve. Hell, I had two sellers of homes priced at $1.5M+ tell me in the last 6 months that they were willing and able to just let their homes sit vacant until the next cycle if they didn't hit their numbers (and both did after about 60-90 days on market).

Said another way, anyone here willing to sell their $600,000 home for $400,000? Or their $800,000 home for $600,000?

The only thing that will put a stop to this is people losing jobs en masse, and that hasn't happened yet here, despite the Fed's drastic actions.

Finally, I want to be very clear on what I'm saying. My projections are not "realtor pump". (FWIW I make about 10x the money when I sell a house versus when I lease the same house so this trend has cost me a lot of money personally). I think this (my projections) is absolutely the worst case scenario for our housing markets, and I would much rather have a correction for the overall health of the markets. What is happening is going to rob a generation (and future generations) of wealth, and start the state down a path that I don't like the outcome of. Your children likely will not own their home in Texas in the future unless you pass it down to them, and that scares me.

https://www.linkedin.com/posts/clare-losey_homeprices-austin-dallas-activity-7011009198704517121-zT82?utm_source=share&utm_medium=member_ios

Red Pear Jack said:

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https://www.linkedin.com/posts/clare-losey_homeprices-austin-dallas-activity-7011009198704517121-zT82?utm_source=share&utm_medium=member_ios

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thanks for posting. Nice concise way to look at some of the major Texas markets.

Presumably that wealth gets transferred the next generation.

The more extreme is what you see happening with Germany and italy. They have more homes than they know what to do with. Come visit and buy a home for $20,000.

USA population is heading that direction, albeit more gently. Perhaps urbanization hides it more in city centers.

Yep. The money gets passed down when your grandparents die. And then the reason they have homes out their rear is because the young people flee to other countries because there is no opportunity for them. I have a great Italian client who works here and invests his families money here because there is nothing for him there.