The market was hot, now its not. Part 1 - what’s happening and who’s moving?
What’s happening to the housing market Eddie (Perdomo)? Should I stay or should I move?”
“Eddie, tell me what I should do. I’m thinking about buying, it’s a buyer’s market right? Surely now is a good time to invest - I’m coming off the fence.”
And so it went on all week at our social gatherings. Question after question being fired our way.
BTW, Eddie, Kim's husband, is not involved with real estate outside of being married to her. Even so, people still hope to pick his brain with the aim of gaining insight into the property market.
With that desire in mind, we’ve tried to answer the main themes of those questions in this month’s Perdomo Properties’ Real Estate Insight blog: The market was hot, now its not. Part 1 - what’s happening and who’s moving?
Hope this helps.
Crazy good times
Well, it’s been a crazy good market since 2012 in the areas we cover - predominantly 77024, 77079 and 77057. We have seen single family home values increase by as much as 35-50%* - for Houston, that is incredible. The South’s LA or San Francisco without the bubble factor.
Clearly an opportunity to lock in some profit by selling.
However, with the low oil price taking effect, we are feeling the shift from a seller’s to a buyer’s market. Projections for how long this will last are as uncertain as the oil price itself. On the positive side Houston does have a vibrant downstream industry and continues to diversify. Both are slowing the decline somewhat.
This offers the opportunity to trade up at a smaller marginal increase on home values to get the edge when we get “crazy good times” again.
We sold a house, just before Christmas, in 14 days, full asking. Our clients had done some impressive renovations over the years and followed our “top-tips guide to getting the best price for your home”. (email me if you’d like the new and updated version)
Lot’s of people are still moving home. But why?
Although slowing, people are still buying and selling homes. Whether or not this is a good idea in today’s market depends on your circumstances: Here is a list of what we see as the top 10 reasons people are moving.
The top two reasons in our areas seem to be schools and investment return. SBISD has been and continues to be one of the most highly rated school districts, which means people want to enter our zip codes and then often move closer to their schools. We are also very fortunate to have esteemed private schools.
Unsurprisingly, we are already getting inquiries from people who want to move into these neighborhoods and take advantage of the slowing market.
2. A GREAT investment
We probably don’t have to say, but a 50% hike in home value is worth a lot more if your home’s starting point is a lot higher. Houston is increasingly becoming like the west coast cities of LA and San Francisco where people trade houses to get ahead. Sometimes it feels like we are becoming financial planners as well as realtors. That’s why we keep a close watch on the market so that we can brief our clients on potentially interesting investment opportunities.
3. Drawing down on the college fund
Refinancing or selling can unlock the cash you need to pay for your kids to get through school. With fewer children at home, selling and downsizing means no increase in monthly mortgage repayments. That’s a huge plus, right?
4. “SHOW ME THE MONEY!”
Cash in some equity, live for now. With the potential value increase in your home, you could have a significant lifestyle boost, yet still avoid the higher monthly payments with a move to a smaller house or in a less expensive subdivision.
5. The Fed can make you move
Indications of higher interest rates often nudge people to move, thereby taking advantage of locking-in lower mortgage rates. "When interest rates are thought to be escalating, we see a wave of activity with people getting off the sidelines" said Budge Huskey, president and CEO of Coldwell Banker Real Estate.
6. Live a little
I think we all know, only too well, that having very little disposable income after housing and other costs (mortgage repayments, bills, tax, etc) can be tough to sustain long term. We call it “mortgage fatigue”. Moving to a smaller home in the same neighborhood can have a huge advantage - reducing debt can take a load off the mind and help you sleep better. May even create a sense of new-found freedom.
7. Job transfer
The oil industry is probably one of the most global. Executives get on the international merry-go-round and Houston is often a port of call. Many end up buying and staying here.
PLUS, as many of us know, commuting in Houston can eat up tons of potential family time. Most people would prefer not to spend two hours in traffic every day. We are very lucky being in the energy corridor.
8. “WE NEED MORE SPACE!”
Need we say more? Many families do not want the hassle and risk of remodeling/extending their home. Often the result can be overwhelming and time consuming. Typically, it makes much more sense to upgrade to more space or build your own – you know what you’ll get.
9. “We are rattling around in this big ol’ house”
The kids have grown up and flown. The cost and difficulty of maintaining a large home increases significantly with age (home and owner). At this point it can also be more comfortable to liberate some of the home’s equity. “Treat yourself, you’ve worked hard, take that dream vacation.”
Similar are the deferred maintenance costs that can come round and bite. People are moving before this lurking monster raises its ugly head. New roofs, drainage, kitchen, plumbing - any can be eye-wateringly expensive.
Communities are attracting many couples and individuals. These planned communities have wonderful amenities coupled with social activities offering carefree living for people age 55 and over.
11. Getting away from it all
Some people desire a change and selling their home can unlock that door. Who doesn’t dream occasionally of buying lakefront or beachfront property, a ranch or even a home in the mountains? Let your years of home ownership and equity turn into the vehicle for realizing dreams.
In summary – it’s a great time to lock-in some profits and take advantage of the buyer’s market.
If you want to realize some cash or invest for the future, now seems like a good time to consider moving.
Same could be true if you have large repayments and the career prospects are looking increasingly uncertain. Two of our clients recently decided to hedge their risk and sold up.
Thanks for reading and, as always, any comments gratefully received.
*Information and data regarding single family home value increases was obtained by HAR/MLS based on zip code of all single family homes sold between 9/1/2012 – 8/31/2015. Information deemed reliable but not guaranteed.