After a long break of writing market reports due to work, life, loss and more life, I’m back. Of all the market reports I have written the last 18 years, this by far is the hardest. We are all familiar with the term March Madness so I am nicknaming this report September Madness. The reason this report is so complicated is we are comparing three unique Septembers. September 2016 was affected by the presidential election, September 2017 was the aftermath of Harvey and September 2018 is trying to compare itself to the other two and find its own reasons for a slowdown. It’s almost like trying to compare an 8 track tape with a cassette tape with a CD. All unique in their own way.
September 2018 showed a sharp decline of 6% in single family sales. While any 6% drop would cause great concern, it is an even greater concern when we compare the drop to the year before when the city was still devastated from Harvey. While sales in September 2017 showed a 4.2% gain compared to the previous year (right before the 2016 election), it is hard to correctly allocate what caused this increase. Part of the increase was due to sales that were originally set to close the previous month but were delayed due to Harvey. A small part of the increase was due to homes purchased by flood victims who no longer were planning on living in their flooded homes. An unknown percentage was due to these two reasons along with being compared to the extremely slow month prior to the presidential election in 2016.
When looking at statistics, there are often dueling theories in which the cup is half empty in one and half full in the other. The latest stats demonstrate this as well. When we look at the year to date volume, we are actually 5.6% ahead of last years volume. This shows that generally, 2018 has been a great year for home sales…. says the cup is half full theory. The “cup is half empty” theory and the reality we see on the ground is these stats are completely irrelevant for anyone trying to sell their home in the current market. Current sellers gain nothing by the profits made by those who sold earlier in the year. Current sellers who are seeing their homes have few showings and watching prices fall gain nothing by how fast or easy the other homes sold earlier in the year. The vast network of real estate providers including title companies, lender, inspectors, Realtors and more are also feeling the effect of the slow market.
As in life, there are winners in every down market. In this case, the clear winners are those in the market to buy a home. Unlike 2013 when buyers had to raise their bids above asking price, not ask for any repairs and cover any shortage the appraisal price, buyers can now offer competitive offers, and negotiate repairs and appraisal issues. Another positive thing about the market is buyers and Realtors should have more favorable interactions with high volume production builders who on occasion, use a good market to implement some not so friendly policies.
In looking towards the future, I think there are two key influences we will see change our market. First is the midterm election. While both parties offer completely different economic plans, we just need to get the election behind us. It’s unlikely that the political fear mongering and bickering will end after the election, but at least we can get on with our lives. The second factor we need to watch is the rise in interest rates. The national average is now up to 5%. While this is still historically a low rate, the rapid jump in rates of over 1% in less than a year is negatively impacting affordability. The big question is will we see enough of a “price correction” too allocate for the higher interest rates? To combat both of these factors, sellers will either need to price their home head of the market correction and not “chase the market down” or have the patience to wade through our current conditions.
To see more of my comments regarding the market, please view the interview I did with the Houston Business Journal – Harvey, interest rates, seasonality: Houston Realtors talk home sales slump