Low Inventory, High Demand
Having a busy housing market comes with a price. Demand is so high that there is not enough inventory available – it is common for buyers to get into bidding wars over properties. Will the same behavior occur next year? And will this affect the affordability on homes? To get a better idea of what to expect in 2014, we talked to two brokers (Vickey Watchel of Imagine Realty and Robyn Jones of Robyn Jones Homes) and two Realtors (Jack Haymes of United Real Estate and Tom Plant of Greenwood King Properties) and asked for their opinions.
HA: How will inventory affect the buyer/seller market?
Vickey Watchel (VA): Houston’s housing market is booming, and I expect it to stay that way for the next three to five years. Inventory is very low, and I’ve never seen a demand like this in the area. We can’t keep up with it.
In some areas where we should have as many as 40 to 50 listings at any given time, we’re lucky if we have 10. And there are some areas with no listings at all. I’ve got three people on a waiting list for one particular area. As soon as the properties come on, the offers come in like crazy.
I don’t think anyone was prepared for this – last year, we knew the demand was going to increase, but this year was crazy. It’s an exciting time, but it’s also a very stressful time. One of my agents wrote five offers in the last four days and lost every single one of them – they even went over the asking price for the last two offers.
It’s very stressful for buyers, and it’s hard for them (especially first-time homebuyers) to understand the market we’re in. They don’t get it right away. They’ve got to lose a couple before they realize they can’t wait. They can’t take another day to let Grandma see the house before they make an offer, and they have to jump in with both guns blaring. It’s a whole different strategy for negotiations.
We’ve even gotten to the point where buyers are writing letters to the sellers, explaining why they want the house so badly. It’s exciting, and we should continue to grow for the next three to five years. We’ve got new companies coming to Houston and a lot of commercial going on, which we haven’t had in a while.
Robyn Jones (RJ): It greatly affects the Katy/Houston market, as the best inventory gets snapped up the first day on the market with multiple offers. Because of this, buyers whose offers are not chosen are jumping to get their offer in on the same day a home comes on the market, which will increase their odds of getting one of the more upgraded homes. It is a grown-up game of “musical chairs.”
Buyers are becoming extremely savvy and aggressive and are putting in their best offers. While this is great for sellers, some of them get too ambitious and over value and overprice their home, leading to a home getting stale on the market. The smart sellers are pricing right, getting multiple offers and closing quickly.
HA: How will affordability affect agents’ clients?
VW: Right now, I’m not seeing that will be an issue as much as inventory. Because inventory is low, prices have gone up, but it hasn’t seemed to stop production. Even though prices are going up, people are still buying. We are in a boom down here. For the next three to five years, I don’t expect it to slow down as far as the increase in value. Once the sellers discover that they can get more for their house, we will have more properties coming onto the market, which will help with the demand.
As we get more houses on the market, it should slow down the increase. We are having four to five offers on a house within 24 hours. The last two I’ve done went way over the asking price.
RJ: The prices in the Katy/Houston area are rising significantly. It certainly affects my clients, as many of them are surprised at how much more they have to pay per square footage for move-in ready homes. Many of my clients need larger homes and the rising prices mean that they will have to move further out then they anticipated, buy a smaller home than they had hoped for, do more renovations then they planned on or give up that pool, media room or third garage space.
That said, because homes are still affordable and interest rates are still low, these clients are still jumping into the market and excited about how much more house they can afford compared to other areas, such as California and Seattle, and other times in history.