At the turn of the year, readers of this monthly newsletter and our twice-yearly River Oaks Market Report may recall we reported positive momentum in this specific real estate market, especially at the high-end. This was a contrarian observation at a time when, judging by the comments of most market participants, we were about to enter the darkest days of a downturn. Sure enough the negativity briefly choked off any chance of a strong start to 2016.
But the true forces of supply and demand finally roared back into play by mid-March. The market was back with vigor – and continued to be so through mid-May at the time this report was written.
Showing activity for properties priced above $2 million picked up briskly in March, flattened mostly in April (tax time and all that) and picked up again in May presaging new contract activity into the summer months.
And at mid-May, while there were more houses on the market in River Oaks than we have seen in recent years, fully 30 percent of those properties were in a pending contract, with most scheduled to close within a month. Inventory was fueling the sales, and qualified pent-up demand was happy to absorb it.
Let’s be clear though: At the lower end of the River Oaks market, demand was very price-sensitive. And, at whatever the price-point, there were no basement bargains from distressed sellers that some buyers had anticipated. The rare bargains were a result of sellers’ desire for a quick and quiet sale rather than any financial distress.
Intriguingly, as a counterpoint, there were a remarkably high number of sales that bypassed contingencies altogether, indicating buyers’ wish to snap up a property with as little inconvenience to the seller as possible.
So, this has hardly been the gloomy market that so many had anticipated.
What is really remarkable, though, is the strength of the high end of this market, which we define as properties priced above $4 million.
By the end of May 2016, we will have seen more sales closed in this sector than in all of 2012, 2013 or 2015. By year-end it is expected that sales will exceed even the record-breaking year of 2014. Throw in a handful of big lot sales, and you have a very strong market.
While we refuse to take the bait of trying to predict the timing of the recovery of the energy sector, we can definitively observe that the smart money is acting as if it can sense the end of the downturn. Time will tell.