Every time I walk into the Houston Association of Realtors for a meeting, I often think back in time to how the housing market and its process have changed over the years. While many could take a simplistic view with today’s technology, the process has become overall easier for everyone involved in a transaction. The truth poses a different view, especially for those that are first time buyers and Houston relocation. Let us look at the top 5 issues we face and how things have changed.
The Real Estate Portals and “The Data”
I remember entering my first listing in 2000 in a program called Stellar View. This program was so robust and would give you the ability to even post one picture of the home. Fast forward to today: consumers have a multitude of data points and sites to visit which provide them a wealth of information. While this helps advance the process on their own, it sometimes also fills them with inaccurate data and a false sense of encouragement that they can get through the process on their own. While there are some very seasoned buyers who choose to go at it alone, most need the help of a professional to guide them.
CPFB is an acronym for the Consumer Financial Protection Bureau. This governmental agency has enacted a few new rules in the interest of protecting consumers against a few unfair lending practices. According to their regulations set to begin October 1, 2015, consumers must be provided a document called the Closing Disclosure 3 days before closing – something they should always have been provided. While most of my industry is kicking and screaming about these new changes, let me be crystal clear about this one. We brought this on ourselves by not demanding more of our lenders and title companies. Had we given consumers the information in time, this rule would have never been created. Other than the growing pains and adjustments that will need to take place, the biggest effect is we will now see is a 45 day contract to close time. This could greatly impact a buyer who needs to move and buy a home quickly.
The Demise of Affordable Housing
While other markets might have different characteristics, the Houston housing market has seen rapidly rising prices in homes, land, labor, and building materials. In turn, we have experienced a devastating effect on the availability of affordable housing. This has prompted a large segment of the market to become renters for life. I think we all know the long term effects renting has on establishing a permanent place to call home and long term investment. To those not willing to submit to renting, the alternative is to travel further and further out of major metropolitan areas which produce long commute times and less quality time for living.
Escalating Prices and Stagnant Appraisal Values
Within the affordable housing market left in the Houston area, there is a growing disparity between the price a buyer must pay versus the value the appraiser establishes for the home based on the comparable sales. This often leaves a shortage the buyer must cover to make the transaction work. Providing these additional funds can often hinder plans for improving the home along with preserving their savings.
Low Inventory and Large Numbers of Cash Buyer
While we see inventory numbers trickling up some in Houston, they are still just about at historic lows. Homes priced correctly and in good condition often command unbelievable interest and a number of cash offers. To the seller, a cash buyer is often the best choice since there is rarely an appraisal in this type of transaction. If there are no cash offers, many of the remaining buyers are offering large down payments which can be more advantageous to both a buyer and seller in many ways. This squeezes out buyers who have saved 5-10% thinking this is all they needed. This also limits FHA buyers and the brave veterans using their VA benefit.
With all of these challenges, there is still no other investment that provides you with as much enjoyment as a home. Unlike any other investment, a home is something you can use over the lifetime of ownership unlike stocks and bonds. Finally, while there might be some major challenges buying a home, achieving the dream of homeownership is worth the battle. As the great Margaret Thatcher once said, “You may have to fight a battle more than once to win it.” Make sure you are going into battle with a qualified Realtor helping you.