The first “slowdown” Houston has seen in recent years has come at a time with diminished inventory, record-high prices, increased interest rates, and rising inflation. These trends helped Houston increase its supply of new listings, which boosted the inventory to two months – the most plentiful supply of homes since November 2020. Note, however, that this is still incredibly low inventory!
According to the Houston Association of Realtors, “Once again, the $500,000 to $1 million housing segment drew the highest sales volume of the month, registering a 22.0 percent year-over-year sales volume gain. That was followed by homes priced from $250,000 to $500,000, which rose 2.4 percent. The luxury segment – consisting of homes priced at $1 million and above – saw its first decline in two years, slipping 2.3 percent in the number of sales throughout the month.”
The $250,000 and below market is still struggling to renew its inventory, causing those looking in this price range to consider more expensive properties, rent, or look for alternative financing methods that provide the ability to compete with investors.
Overall Housing Performance
There are still many positives in the market!
Some areas are seeing a continuation of the past two years with quick sales, multiple offers, and escalating prices. According to the Houston Association of Realtors, “The average price of a single-family home rose 11.0 percent in June to $436,425 – slightly below the previous month’s record high – while the median price jumped 13.2 percent to $355,000, which is the highest median of all time.”
In the Townhouse/Condominium sphere, we have seen the first decline in sales in almost two years, dropping over 15% year over year. At the same time, the inventory fell from a 2.4-month supply to a 1.7-month supply, the average price increased 4.7 percent to $259,557, and the median price rose 2.7 percent to $220,000.
What is Going on with Mortgages?
The Federal Reserve recently met and just announced a 75 basis point (bps) increase to the Fed Fund Rate.
What impact is this going to have?
First, the Fed Fund Rate is not directly tied to mortgage rates therefore, an increase of 75 bps doesn’t mean mortgage rates go up by 75 bps. Mortgage rates follow the bond market and are only indirectly impacted by the Fed Fund Rate. Second, the entire market expected the Fed Fund Rate increase based on previous comments by the Fed therefore, the 75 bps increase has been baked into the market for a while now.
When the Consumer Price Index (CPI), a report which measures inflation, came out last month and measured inflation at 9.1% instead of its estimated 8.8%. Numerous experts expected that the Fed Fund Rate increase could be 100 bps instead of the 75 bps we actually saw. Furthermore, despite the increase, the comments from Jerome Powell (Chairman of the Federal Reserve) were overall positive.
Within the lending environment, we have seen rates come down into the mid 5’s. “On a positive note, I believe rates will level out in the low 4’s in the near future,” says Josh Anderson.
Labor Shifts & Mortgage Lending
According to the National Real Estate Post (NREP) and the Department of Labor, the size of the independent contractor workforce is on the rise. The NREP went on to say that in 2016 there were 9.6 million self-employed people in the US, and in 2020 that number had grown to 15.8 million. They are estimating that between self-employed (business owners), independent contractors, free-lance, etc. that 50% of the population could be employed through non-traditional methods. This is extremely important to know because these employees typically need non-traditional loan programs. A mortgage professional who is flexible/knowledgeable in a multitude of lending products and employment scenarios is now a MUST-have!