A Loud Call for Truly New Fresh Inventory

River Oaks is predominantly a supply-driven market. Activity rises and falls based on available inventory, rather than the motivation of prospective buyers. Regional macro-economic conditions affect River Oaks indirectly: They inform buyer and seller psychology rather than act on the more typical forces of actual affordability and economic necessity that we see in other market areas.

This is one of the reasons that, in the Houston real estate market, River Oaks leads the way in a declining market – and also leads the way in recovery. The players in the River Oaks market are the leaders and decision-makers in the general regional economy.

What is happening in this market?

We approximate that the latest cycle in River Oaks residential real estate began in 2018, when the market finally stabilized after a messy few years in the aftermath of the oil price meltdown of 2014. That cycle continued until the summer of 2022, or more precisely, mid-July. While we foresaw a change in market conditions as early as February, the market participants (buyers, sellers, their agents and the lenders) only broke into a chorus of perceived gloom in late-July.

There is no reason to be gloomy.

Just as the market participants’ reaction was behind the curve, so was their assumption flawed.

Seasonal patterns are back

After two years of bouncy and irregular seasonal patterns, thanks to the Covid crisis and its aftereffects, many have forgotten that that the River Oaks market typically shuts down in mid-July, when the well-to-do and many of their agents, leave the Bayou City for cooler places. Customarily, things pick up again after Labor Day. This summer saw wealthy people leave the city earlier than usual and stay away longer than typical.  It was the first chance for a clean getaway since Covid.

The appetite for River Oaks real estate had not vanished. The buyers and sellers had merely vacated, temporarily.

Meanwhile, hair-trigger reactions to news and speculation about interest rates/prospects of recession have added a layer of confusion.

What’s happening now

Buyers for River Oaks real estate are perpetually on the lookout. Many of them are financially highly qualified, but not currently impressed by the offerings.

So, while it was a shock to see that showing activity in the River Oaks area for properties priced at $2 million or higher dropped from the usually dopey August level to very disappointing numbers so far in September (see graph below), it should have been no surprise.

We typically see activity get perky post-Labor Day. This drop of viewing appointments has been additional fodder for the doomsayers.

In fact, showing activity is down only because there is nothing new to see. Through mid-September, there have only been two (truly) new listings this month. (We’re not including re-listings.) One is a house on South Shepherd Drive at the lowest price-point of the market, and the other a highly remodeled house on Olympia that will likely be in contract before you read this letter. Another demonstration that supply is key.

The outlook

Impending sharp interest rate hikes by the Federal Reserve Board of Governors will keep the River Oaks market jittery, until there is the realization that life goes on and that a potentially mild recession is not equivalent to global pandemic or financial meltdown.

Yes, mid-term elections in November will probably result in a tap on the brakes, followed by business as usual within a week or two afterward, whatever the outcome.

But, following these distractions, the buying and selling of property in River Oaks will proceed normally. Phew. We have longed to use that phrase for quite a while.