CQ Brief: April Edition

CQ Brief: April Edition

April Market Update

Say hello to Spring time! This year is already flying by, so it's crucial to stay up to date with the housing market.
 
Not only that, we also have all the information you need to keep up to date with what's going on in Houston! From activities, to news, business, and more! We find it crucial to know what's going on around us when selling houses in the Houston area.
 
What's Happening in Houston?
 
Hermann Park is increasing its green footprint with a $52 million project. The highlight of the renovation will be a 26-acre play garden designed to inspire and engage young minds with a space-themed area.
 
 
 Massive waterfront development to take place near Downtown Houston. East River will feature roughly 1 million square feet of commercial and residential space to be developed in phases over the next 20 years.
 
 
 Experiences that bring together people are becoming a growing trend and opportunity in the real estate and retail industries. Competitive socializing venues have grown by 386% since the beginning of 2021, according to new research featured in Cushman & Wakefield’s The Edge magazine. “This concept not only provides much-needed, out-of-the-home experiences with friends, but also a unique opportunity for landlords looking to revitalize their assets and fill large vacancies at the same time,” according to the report.
 
 

Development Spotlight

Welcome to Modern on Baer. With only a few homes left, these modern, three-story homes are located in the prime Houston area. The homes feature wide-plank luxury vinyl flooring, dine-in kitchen garnished with stainless steel appliances, modern quartz countertops, euro style cabinetry, and more!
 
    
 
 

Tighter Credit and Rate Hikes

Big Story Data
 
Banks are tightening their credit standards to hold more liquid assets on their balance sheets, so they may be less willing to lend out . However, credit has been tightening for over a year now as interest rates have risen, and banks also often sell their mortgages by way of Mortgage-Backed Securities (MBS), so they don’t have to hold the long-term loans on their balance sheets. If a creditworthy homebuyer qualified for a loan before the bank failures, they almost surely still qualify today. In the short term, we don’t expect major mortgage rate moves due to the Silicon Valley Bank and Signature Bank failures.
 
The Fed, which coincidentally met right after the bank failures, chose to raise their benchmark rate by 0.25%, rather than the anticipated 0.50%, in a continuing effort to combat inflation. The Fed chose the smaller 0.25% hike because banks were already tightening after the bank failures, so the Fed had less of a need to do so as well. Inflation is still well above the 2% target, although it’s coming down steadily. At the current rate at which inflation is dropping, it should be back to the target rate in about a year. One caveat that could slow declining inflation is OPEC’s surprise announcement that they are cutting oil production, which will cause gas prices to increase over the next few months. All this to say, interest rates will remain elevated and volatile over the next 12 months, and, more specifically, mortgage rates will likely hover around 6-7%.
 
The 30-year average mortgage rate has been above 6% for six months now, and a significant number of buyers are finally coming back to the market. According to the National Association of Realtors (NAR), sales jumped 14.5% in February, the largest month-over-month increase since July 2020, breaking the 12-month streak of declining sales. We attribute three main factors to the increase: (1) the initial sticker shock of higher rates has worn off, (2) the time before buyers refinance has shortened, and (3) typical seasonality has returned. As rates shot up in 2022, affordability plummeted, causing a huge number of potential buyers to get priced out of the market or, at least, reassess purchasing a home. As inflation continues to decline, the Fed has offered a clearer picture of their path. They will raise the federal funds rate through 2023 to around 5.5% and then lower rates by about 2% over the course of 2024 and 2025. Buyers, who are expecting to refinance, therefore, have more of a timeline for when they can expect lower rates. The monthly mortgage cost is reduced by 10% for every 1% decrease in the mortgage rate, so buyers can greatly reduce their monthly cost as rates fall.
 
Different regions and individual houses vary from the broad national trends, so we’ve included a Local Lowdown below to provide you with in-depth coverage of your area. In general, higher-priced regions have been hit harder by mortgage rate hikes than less expensive markets due to the absolute dollar cost of the rate hikes. As always, we will continue to monitor the housing and economic markets to best guide you in buying or selling your home.
 
Info via HAR 
 
   
 

Spring buying season ramps up

 Every year, by at least March, we expect to see inventory rise after a high number of new listings come to market, which easily accommodate the increase in sales we also tend to see in the first half of the year. Inventory in Greater Houston, along with sales, rose in March. As new listings continue to increase, inventory will likely follow a similar trend as last year. Typically, inventory grows in the first half of the year, peaking in the summer. Greater Houston inventory didn’t decline significantly in the second half of the year due to sharply declining sales. We expect inventory to look more like a bell curve this year, especially since mortgage rates, although elevated, will likely be more stable than last year. Even with sales trending higher, they are still far below last year’s level. As demand increases in the second quarter, competition among buyers and likely housing prices will climb with it. However, if active listings unexpectedly plateaus or drop in the second quarter, we could easily see home prices rise significantly into the summer.
 
Total inventory has remained stable during the first quarter of 2023, which is normal because inventory typically ramps up significantly in the second and third quarters of the year. Even though sales and new listings are rising, the buying boom from June 2020 to June 2022 created the current market conditions of fewer buyers and sellers coming to market. Homeowners generally aren’t buying and selling properties year after year; the median homeowner tenure is about 13 years, according to Redfin. It’s reasonable, therefore, to assume that if an outsized number of sales happen in a two year period, far fewer sellers will come to market in the year or two after that event. For homeowners that either bought or refinanced in 2020 or 2021 with historically low rates, the prospect of moving and financing at a much higher rate isn’t appealing.
 
Interest rates have been elevated for enough time that buyers are more comfortable re-entering desirable markets like Greater Houston’s. Sales jumped 32.9% from February to March with the higher inventory, which is up 17.8% year over year. Buyers aren’t facing anything similar to the hypercompetitive 2021 market, but competition is certainly ramping up. New listings fell by 9.1% year over year, while sales declined 21.7%. We expect significant inventory growth in the second quarter of 2023 because of new listings outpacing sales, which is the seasonal norm.
 
Info via HAR
 
.
 

Key Takeaways:  

  • Major trend reversals: Home sales rose 14.5% month-over-month, breaking the 12-month streak of declining numbers, while the median sale price increased 0.5% after a seven-month decline. Additionally, the median price per square foot rose during the first quarter, landing only $8 below the all-time high.
  • Bank failures sent a shockwave through the banking system, causing the Fed to increase its benchmark rate by 0.25%; however, mortgage rates, which are hovering around 6.5% for 30-year loans, remain largely unaffected.
  • The housing market is still dealing with low inventory and fewer new listings, which is causing more competition as buyers come to the market during the spring/summer season.
  • Single-family-home inventory in Greater Houston rose in March, as more new listings came to market, showing signs that inventory will follow normal seasonal trends.
  • We expect more muted price growth this year than from 2020 to 2022 after single-family-home prices declined slightly and condo prices rose in the first quarter of 2023.
  • The market firmly favors sellers after Months of Supply Inventory declined sharply, as sales increased and homes sold faster month over month.
Info via HAR
 
 Make sure to check back every end of the month for a new CQ Brief update! 

Recent Blog Posts

Stay up to date on the latest real estate trends.

CQ Brief: April Edition

Goodbye April and hello May! The end of the month came fast, meaning it's time to have another monthly market update. Mortgage rates fell slightly in March, closing th… Read more

CQ Brief: March Edition

Happy Easter! Can you believe March is already over?! From Foodieland coming to NRG this upcoming weekend to new developments in the Cypress area, we've got you covere… Read more

CQ Brief: February Edition

March is here and we all know what that means, Rodeo time!! If you are a Houstonian, or new to Houston, you know that the rodeo is a must to attend. It's also time to … Read more

CQ Brief: January Edition

A new luxury high-rise off Buffalo Bayou promises coveted low and elite perks, and the $75 million Valencia development has started selling homes near new Manvel Town … Read more

CQ Brief: December Edition

Happy New Year, Houston! We closed out the holiday season with a slight drop in average sales price for single-family homes. Check out what else is happening in Housto… Read more

CQ Brief: November Edition

It's officially holiday season! From going to see holiday lights to the average sales price going up, we have you covered for the month of November.

CQ Brief: October Edition

Happy Halloween! The Ren Fest is back and a must visit. Meanwhile, the average sale price of homes has dropped by almost $10k.

Events

November 9: CE Class with Tim Hessler

Reading Personalities. If you plan to attend please rsvp to [email protected]

Events

October 25: Thomas Homes Broker Open

Join us October 25 as we showcase this new community! You can also enter to win Rockets tickets.

Let's Talk

We’re Here to Guide You on Your Quest