The Texas real estate market has come crashing down. Or has it?
Days on the market are up, home prices are down, but it’s not all doom and gloom. Is that the case for all major Texas housing markets? Or are some doing better than others?
What should buyers and sellers be doing right now? What should they expect in this housing market?
We’ll dive into the state of the Texas real estate market with Real Estate Real Fast host Aaron Jistel.
- Peaking into the Fall 2022 Austin housing market
- What can we expect to see in the Austin housing market in the next five years
- Overview of other major Texas housing markets in Fall 2022—DFW, Houston, San Antonio
- What new listings can teach us about the state of the housing market
- How mortgage rates impact the housing market and buyer preferences
- What to expect if you’re a buyer looking for a lower mortgage rate
- Why the current housing market is different than what happened in 2008
- Here’s how you should approach buying a home in 2022
- How the stock market affects real estate
- Are homes still receiving multiple offers?
- How the housing market affects the rest of the economy
- How to approach the current housing market as a seller
- Final advice for buyers in the current housing market
- Are buyers pulling out of contracts at the last minute?
- How to vet real estate agents as a seller
- Follow ListingSpark on LinkedIn, Twitter, Instagram, Facebook, and YouTube
- Connect with Aaron Jistel on LinkedIn
[00:02:50] Peaking into the Fall 2022 Austin housing market
The Austin market has cooled down significantly since 2021 and early 2022. There is more inventory available and home sales are down. Even though the market has adjusted it’s still a high demand market with 2.9 months of inventory, well below a balanced market of 6 months of inventory. And housing prices are still up!
“In August, the median home value in the greater Austin metropolitan area was $496,000 and that’s up 5%. New listings are down 6%, so there are less homes coming onto the market than there were this time last year.
And for a lot of reasons, that’s actually a good thing.”
[00:07:11] What can we expect to see in the Austin housing market in the next five years
If you’re an Austin home buyer, there is a lot of good news. Even though there is a market correction going on, the current rate of new homes does not match the growth in Austin. Combine that with the fact that the cost to build homes in Austin is still high and you get a market that’s still worth investing in.
“From simple economic terms, our demand is still. Higher than what our supply is going to be able to accommodate. That’s a good thing if you’re going into a recession to know that you are going to have this surge of demand that’s gonna continue, that is gonna help our housing market. In 2008, Austin and a lot of parts of Texas came out relatively unscathed.”
[00:08:58] Overview of other major Texas housing markets in Fall 2022—DFW, Houston, San Antonio
Austin is not the only market that’s behaving relatively well compared to how the housing market is trending. Dallas-Fort Worth, Houston, and San Antonio are also doing relatively well. While houses are not selling as fast, it’s still below a balanced market. And prices are still going up a bit.
“It’s kind of wild how similar every market is behaving. The major markets around Texas were some of the strongest housing markets in the country for the last decade. And so it’s not too crazy that they’re all seeing similar numbers and similar data points because they’ve all been so strong lately.
So everybody’s feeling the effects of what’s going on right now, but again, it’s still positive to see that home values have still climbed this year. Nationally active listings are up 26.9%. So what we’re seeing in Texas is pretty much what we’re seeing nationwide.”
[00:11:25] What new listings can teach us about the state of the housing market
New home listings have dropped by 10% nationally. Even though some are concerned that home listings dropping means a drop in prices, it hasn’t really translated. Home prices are still up nationally so there is still some positive news in the housing market.
“It’s pretty evident the market has cooled down a lot quicker than a lot of people expected. But like I mentioned before, that doesn’t mean that the values have cratered.
The data shows homes are still worth more than they were last year. We can’t guarantee that that won’t change. I think a lot of people will tell you that will change and that everybody should expect a housing bubble or a recession that’s gonna pull the housing market down and values will eventually fall.
I think it’s very possible and even likely that that’s gonna happen, but it just hasn’t happened yet.”
[00:12:48] How mortgage rates impact the housing market and buyer preferences
Just because mortgage rates rise, doesn’t mean buyers expect homes to drop by a similar amount to keep payments close to equal. When rates rise, buyers who still want to buy will sacrifice some of their wants in order to get into a new home.
“What ends up happening a lot of times is that a $500,000 house doesn’t just become worth $375k or $400,000. The buyer of that $500,000 house starts looking at a $400,000 house or a $450,000.
They start to curb where they’re spending and they start to loosen up a little bit on what they’re looking for. They start to sacrifice on their wishlist. So maybe they don’t get as big of a house, maybe they don’t get it in the same neighborhood, at the same school zone, but it doesn’t automatically just mean that a $500,000 house is gonna be $375,000. That’s just not how it works.”
[00:17:45] What to expect if you’re a buyer looking for a lower mortgage rate
While rates are expected to go down, it’s important to remember that they might not. If you’re a buyer, don’t buy a home you can’t afford because you expect the rates to go down. That can put you in a tough financial position if rates don’t drop to where you need them to be for what you bought.
“You’ve heard the term, you marry the house, you date the rate. I hear that get thrown around all the time. That’s actually a very dangerous comment because I think it can be used very flippantly sometimes, and it can make buyers feel like they’re being talked into a decision that maybe they shouldn’t.
So my disclaimer is you should never buy a house you can’t afford. We cannot guarantee rates will come down or come down as fast as we might think they will. So you should never buy something you can’t afford.”
[00:19:04] Why the current housing market is different than what happened in 2008
The last time there was a housing market crash in 2008, lenders played a big role. They were giving out a ton of loans. This time, we’re seeing pullback from both buyers and sellers which is helping to keep the housing market from crashing in the same way it did in 2008.
“If you look back in 2008, we had this absolutely massive amount of inventory. There were so many homes on the market, and then the bubble burst. The bubble burst last time because we had crazy lending. Anybody could get a house if they wanted. It was crazy. It was the wild west.
So you had tons and tons and tons of people buying houses that they shouldn’t have. We had tons of people trying to sell their house with little to no equity, because we weren’t seeing homes appreciating the way they are now. And that was just a recipe for disaster. It was a tidal wave of foreclosures and we just aren’t seeing that right now.
So what we’re seeing is, homeowners and builders alike are pulling back and they’re just saying, ‘Hey, now’s not the time to sell, so I’m gonna sit on the sidelines.’ And that’s actually keeping inventory a little bit lower than it was the last time we had a housing correction.”
[00:21:56] Here’s how you should approach buying a home in 2022
If you’re buying a home in 2022, you need to know you’ll have to hold it for a few years potentially for it to gain value and survive a market downturn. You shouldn’t expect that you can just flip a home next year for a big profit. Unless you’re a seasoned investor, stay away from buy and immediate sells in this market.
“If I’m just your average homeowner, and I think I’m gonna hold onto this house for at least three to five years, if not seven to 10 years, you’re probably gonna be fine. History will show you’re probably gonna be fine. Even if we have a housing correction that lasts two years you’re still gonna be able to withstand that and you’ll probably be fine.
So if you think you’re gonna be in and out within a year, I’d probably rent.”
[00:23:58] How the stock market affects real estate
The stock market and real estate market don’t correlate 100% directly but there is some similarity. People who have lost money as the market has gone down may be less confident in making a big purchase like a home.
“Two years of market gains in the DOW have been wiped out. NASDAQ’s down about 30% from the beginning of the year. S&Ps down about 25%. Here’s how that correlates to the housing market. People look at their overall net worth, they look at their financial healthiness in all of their assets.
And when their 401k or their mutual funds or whatever they have invested in the stock market comes down, their confidence as a buyer might drop. Now, whether or not they’re using those funds for buying homes or not, it’s affecting their psyche. It’s affecting how they’re looking at their overall financial health.”
[00:25:14] Are homes still receiving multiple offers?
Multiple offers are not as common in the current housing market. Since days on market have increased, some sellers are dropping their home prices. Even though you may have to wait longer to sell a home, it’s still relatively not that long.
“It is clearly getting a little bit more challenging to sell a home, which is something that we just haven’t been used to seeing in forever.
So the data, again, it’s still not all doom and gloom. 30 days on the market is not that big of a deal. 60 days on the market really is not that big of a deal in the grand scheme of things. When we talk about the housing market and a recession, there are correlations. A lot of times the housing market is a leading indicator, not a lagging indicator.”
[00:27:13] How the housing market affects the rest of the economy
The real estate market has deep impacts on not only buyers and sellers. Realtors, lenders, title companies, insurance providers, builders, inspectors, plumbers, electricians, appraisers, and the lumber industry are all affected as a result. Watch out for those trends to see how the market plays out.
“Housing is a leading indicator to the future effects of a recession. So look at everybody that’s involved in real estate. So when housing starts to come down, ‘What happens to realtors, lenders, title companies, insurance providers, builders, inspectors, plumbers, electricians, appraisers, the lumber industry?’
So we’re just now starting to feel the effects of the correlation with the housing market and the economy.”
[00:28:31] How to approach the current housing market as a seller
If you’re a seller, you need to be paying much more close attention to the market. Understand that you might not be able to sell your home as fast. You also need to keep an eye on similar homes in your neighborhood and around your home. Keep an eye on that data and use it to influence your own list price. Also, don’t be surprised if you need to offer concessions to close.
“We’re already seeing builders now offering a 3% and a massive bonus. They’re offering huge incentives for the design studio. Free upgrades, help with closing costs, things like that. Builders are doing whatever they can to sell their inventory right now.
The resale market can do the same thing. You can offer a bonus to a buyer’s agent to bring you a. You can offer a credit to go towards the buyer’s closing cost. There’s all kinds of things you can do to incentivize both buyers and their agents.
Price drops are not only good to help you sell your price and get within the price range you should be.
It’s also incredible for your visibility. And so what I mean by that is every time you do a price drop, you’ve got this pool of buyers that has a safe search set up, or the realtor has a safe search set up, and every time you do a price drop, an email hits that buyer’s inbox and says, ‘This house just did a price improvement or a price drop.’”
[00:34:23] Final advice for buyers in the current housing market
Don’t be afraid to buy just because rates are going up. If you find a great deal, consider going for it. Just make sure you’re planning on playing the long game with the property. Many lenders are also offering great deals to get people into homes now. Just make sure that whatever you get though, you can still afford it even if rates don’t change.
“If you’re gonna be a homeowner and you’re gonna make this investment in yourself, which by the way, for a lot of people, their home is the number one way for them accumulating long term wealth, you need to be informed. You should understand what it’s gonna take to be effective and successful for selling your home.
You should understand what your different options are and you need to find good people and surround yourself with good information and good data so you can make calculated decisions.”
[00:38:51] Are buyers pulling out of contracts at the last minute?
Buyers have pulled out before closing in the current market. If you’re a seller, consider offering an extension in exchange for additional funds that go in earnest money. Still, people are willing to forgo their earnest money because of the market.
“You want to be careful of being too strong. You don’t wanna push a buyer away, so you don’t wanna be so aggressive that it kind of pushes them off the deal completely. But you wanna look at it and explain to them why you’re doing it and say, Look, I want to give you extra time.
I wanna make this deal work, but ‘I can’t continue to push the closing date out without making sure that I have something to make sure that my costs are taken care of.’”
[00:43:25] How to vet real estate agents as a seller
In this market, it’s even more important to vet your real estate agent. You need to ask them about their experience, what they’ve done recently, and more. The agent you pick could have a big impact on your final sales price and days on the market.
“You’d be amazed how many people don’t ask any questions at all. Questions like, ‘How long have you been in the business? How many houses do you sell a month or a year? What are some of the things that make your services, uh, beneficial to me? What are your fees?’
We’re gonna have a large volume of agents that haven’t gone through this. So what you wanna make sure is, do they have the right mentors? Do they have the right team behind them?”
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