January is the recognized month of the year for all of the real estate gurus to publish their forecast for the Houston housing market in the year to come. After carefully reading a few forecasts, I noticed some were based on fact while some seem to come from a crystal ball. So in response, here is my forecast of the 2015 housing market based on my experience as a Houston Realtor.
Overall, I predict it is going to be another great year for the housing market thanks to major contributing factors which all seem to be colliding at the same time and at times, circling around the price of oil. I see prices leveling out with demand dropping a bit to produce an overall 2% rise in the average price and a 15% drop in sales. For those who want to know the basis for my predictions, here are the reasons below:
Houston Real Estate Forecast
- We cannot ignore what is going in the oil markets. While Houston is not solely dependent on this industry as we were in the 80’s, it nonetheless still represents a large portion of its economy. Luckily with employees in the oil and gas industry spread throughout the city, we will not see a huge dip in any one single area.
- Another concern is not just the loss of jobs, but loss in profitability of the companies stockholders and owners which could trickle down to the housing market. With revenues dropping, we are already seeing certain sectors of the market start to slow.
- Due to the extreme low supply and high demand of housing last year, we have thousands of renters who originally intended on being buyers. With a slower demand this year, we could very well see those renters return to the purchase market to fill in the gaps caused by the loss of jobs in the oil and gas industry. My predictions are mainly based on this one factor alone as it fills the market with some additional demand.
- When we subtract the current round of layoffs against the forecast of job growth slowing to 67,000 predicted for this year, this will take some of the demand out of the market which could greatly benefit the housing market by eliminating rapid and unsustainable prices.
- January also marked the beginning of new the Fannie Mae guidelines regarding appraisals. To spare everyone the full story, there will now be greatly added scrutiny on appraisals especially when buying a home that is priced above the average for the area. This will no doubt produce “low” appraisals which will either render certain homes harder to sell or require a potential buyer to come up with more funds to cover the difference in appraisal vs. contract price.
While these contributing factors will push and pull the markets in different directions, they could help bring the Houston market back under control. During the last couple of years, we have seen rapidly escalating prices, bidding wars, and overall general dissatisfaction with the buying process. With a minor slow down in sales, this will lead to 2 results. First, this slow down will allow the market to level off to the point where sellers can still expect to see an enjoyable appreciation rate. Lastly, buyers will have an easier time searching for and buying a home without rushed decisions or settling for homes with significant problems or having to choose a home they do not like in the long run. In closing, remember to check back here December 31, 2015 to see if my predictions of the Houston Housing Market were true.