What Does A Slowing Market Mean For Sellers in Houston

The Houston housing market appears to be slowing and there are some key factors that contribute. (Don’t worry, the housing market isn’t crashing; just slowing.) The fed rapidly raised the prime rate throughout 2018 and the US stock market appears to be pulling away from bull-ish behavior. These two things coupled with rising mortgage interest rates and already high-priced homes are leading to a decline in buyers. Many potential buyers were priced out in 2018 with high home prices and rising interests alone. People are still buying, but they’re being a little more cautious with their money. Financial forecasters predict a market crash for 2020 and people are acting accordingly. So, what does a slowing market mean for sellers in Houston?

Longer Days on Market

Depending on the price point, correctly priced homes in Houston have typically gone under contract within a finite period of time over the past two to three years. For example, a home in the entry-level price point of $250,000 to $350,000 could be expected to be under contract approximately 30 days after listing. A home in the luxury price point of $800,000 or more has typically taken about 9 months or longer to enter escrow. With fewer buyers currently shopping for homes, and those that are shopping for a home are choosing to take their time, sellers should expect that it will take more time to sell their home.

Price Adjustments

Price adjustments are going to be a key component to selling homes in the luxury price point of $800,000 or higher. This sector of the market already has the smallest number of buyers, and add to this that it will now take longer to sell, motivated sellers will make price adjustments sooner and more frequently. I anticipate that by the end of 2019, we’ll see a 10% reduction in the listing prices of luxury homes. For example, a home that was listed at $800,000 in 2018 will be listed for $720,000 at the end of 2019.

Lower Offers

Some sellers will refuse to make price adjustments, but that won’t stop buyers and buyer’s agents from presenting lower offers. By the end of 2019, sellers should expect bonafide offers that are greater than 10% below the listed price. Rather than balk at these low-ball offers, sellers should start negotiations with a counter offer. It has been more than a few years since sellers even had to entertain offers much below the list price, but things are changing.

Negotiations

We are going to see buyers asking for more contributions and concessions from sellers. Historically, we have seen buyers pay for surveys, appraisals, HOA transfer and document fees, and closing costs. I believe more buyers are going to start asking sellers to help with these costs.

Bidding Wars

This applies almost exclusively to homes and condos under $350,000.  You may also see bidding wars with luxury homes that are priced competitively. The $350,000 and under sector has the largest number of buyers and the lowest inventory of homes. First-time buyers and investors both compete for homes in this price range.  In general, real estate is always a wise investment. However, when the stock market is down, real estate is a much safer investment option. Studies show millennials are the largest segment of buyers right now, but with student loan debt, the budget isn’t incredibly high. With two large groups competing for the same homes, I expect that homes priced correctly will fly off the market. As the inventory continues to decrease, we’re going to see more and more multiple offer situations.  I believe this will carry over into 2020 and by 2021, we will see some stabilization. Once owners of these entry-level homes can sell and get into a middle to luxury price point, inventory will increase and the bidding wars will start to decrease.

More Investors

This also applies exclusively to homes and condos under $350,000. As I mentioned above, the stock market isn’t looking so great right now. So, we’re going to see investors putting their money into real estate. Selling a home to an investor is a bit different in that an investor isn’t emotionally controlled by any particular home. The numbers work or they don’t. This is great because their offers are straightforward and there isn’t a lot of back and forth. It is my belief that if the market continues to shift towards a buyer’s market, and if the US economy does experience a 2020 market crash, we’re going to see more and more investors in the Houston area.

The above are just my predictions. Houston tends to fair well during most market adjustments and I think we’ll continue to do just that. We always have people moving in and around Houston, and that isn’t going to change. People always change jobs, families grow, or kids go off to college, and these are all reasons to buy or sell regardless of what the market may be doing. If you are thinking about selling your home, I would love to discuss your options with you!