It is often an indicator that the crest of a market cycle has been reached when everybody and their brother-in-law are offering real estate opinions and advice. And, while there is currently a proliferation of armchair quarterbacks practicing without a license – enough, you may say, to fill NRG Stadium – we believe that there is still some life left in this ebullient market.
It’s funny though that, when we hit a lousy market, the brother-in-law is at a loss for words. But we’ll leave that for a future article, whenever it is upon us again.
That is the main point: Real estate markets go through cycles, and we have been on an upward trajectory since the start of summer 2020. Front of mind these days is the expression “better lucky than smart.” And it’s true enough, in the short term at least.
But for those of us interested in the outlook for the coming months and years, an analytic look at the numbers can help put things in context. Having said that, all the statistics and graphs in the world will not reliably predict the future.
Except, perhaps, this one.
You don’t have to be a statistics wonk to see something unusual happening in April and May 2021. Showing activity at the high end is going through the roof. When we took a closer look, we could see that it wasn’t just the same realtors shopping around the same buyers to the same listings.
The current diversity of buyers and agents is remarkable. A multitude of new agents are coming fresh out of real estate school, lured by the talk of a hot market and easy earnings. Woe betide.
We should note here that a plague of newly minted real estate agents is an indicator that the market cycle has moved a step higher on that peak: Now your brother-in-law has acquired a real estate license.
What cannot be denied, though, is that skyrocketing showing activity to a broad base of qualified buyers will result in more new sales contracts and closed sales at higher prices. Then, hopefully, fresh inventory will be lured onto the market to meet the demand, attracted by the higher prices.
Getting back to reading the tea leaves, we looked back 10 years to see the last time we saw such energetic house-showing activity in River Oaks.
It was May 2015. Can anyone remember that far back? Here’s a reminder: In the second half of 2014 OPEC puts the squeeze on shale. Oil prices plunged 60 percent. Real estate markets in Houston slowed way down in 2015. And yet River Oaks activity peaked in May 2015. The Memorial and West U areas not so much.
Back to the present: In early 2020 OPEC and Russia decide to go head-to-head just in time for COVID. Oil prices plunge into negative territory. Real estate markets stop dead. And yet gradually, starting in the summer of 2020, activity has climbed steadily. All major high-end markets in Central Houston, with the possible exception of Tanglewood, are hitting all kinds of records. It’s very different to 2015.
How is it different now? What is the interaction between showing activity, new pending contracts, closed sales and the effects on future inventory? These are the question we answer for our clients, for whom “it’s a hot market” or “it’s a slow market” are simply not good enough.
And, to be frank, neither are algorithmically generated reports produced at the click of a button.
In addition to producing and analyzing original data, we actually call around to find out who is buying, why people are selling, how tough are negotiations, how many contracts are busting out (this is important), and who is out there looking to buy or sell in the near future? These facts color the data. Throw in the best marketing in town and you have, in a nutshell, our job description.
What we can say about this current market is that it is being fueled by abundant funds to pay for it, plus the fear of missing out. There is a lot of cash sloshing around.
It will only be sustainable if the local economy is productive and resilient. There is a limit to how long even River Oaks market participants can get by with investing in the stock market or minting non-fungible tokens. At some point there have to be broad-based strong real earnings locally. We are always optimistic but are watching closely.
Your questions and comments are most welcome. So is your business.