It was remarkable to see the high number of house sales that closed in River Oaks in June of 2016. The 12 closings were the most we have seen in any single month since November 2005 and significantly higher than in recent years. (See graph River Oaks Sales All Price Levels.) Also, note that, at current levels, sales for all of 2016 would be expected to exceed any year since the 2008 economic downturn. In the environment of lower oil prices, what accounts for this?
Activity at the start of 2016 was certainly no early indicator of the robust sales that would ultimately flourish in the first six months of the year. The year began gloomily. News in the wider economy was pessimistic, especially in the energy markets. And yet, those of us marketing listings were struck by the number of well-qualified buyers making appointments to view our clients’ houses.
What was even more striking was the fact that the overwhelming majority of these buyers were young and in energy-related professions. Quite a few were relocating into Houston.
All that viewing activity seemed to be just that: buyers looking. When we solicited further action from their agent representatives, we heard all sorts of excuses for not making an offer. “We love the house, but we want to wait before making an offer because ….”
In addition to qualified buyers, one of the other ingredients for a good market was in place. While the overall total inventory level was little different from recent years, at the start of 2016 much more of it included livable houses at the entry level of the market, plus more inventory in the mid-sector of the market, priced between $2 million and $4 million. (See graph River Oaks Inventory $2-$4 million.)
One crucial ingredient was missing, however: confidence. Finally, in the last week of March, with the help of some minor price adjustments, the market broke. Where there had been no offers, suddenly buyers jumped on the inventory priced below $3 million. Pending contracts shot up in April. (See graph River Oaks New Contract Activity All price levels.)
And that was how we came to have one of the busiest six months in the River Oaks market, ever. And it came directly on the heels of a significant downturn in the energy economy.
Then everything went quiet at the end of June, leaving us to wonder what the second half of 2016 had in store.
We will provide our outlook for the rest of the year in the upcoming print edition our River Oaks Market Report and Outlook to be published in early August. To pre-order a copy, click here.