Reading the Tea Leaves

Drawing broad conclusions from market anomalies in River Oaks real estate is usually a mistake. There simply aren’t enough data points to extrapolate likely future outcomes. In other words, it’s a thin market, so don’t try to be too clever by predicting what’s going to happen in the next six months or so.

But every now and then we see intriguing trends that say something about what is going on in the market and how market patterns are evolving.

You have probably heard the old stock market adage, “Sell in May and go away.” Well, it’s no more true today in the River Oaks real estate market than it is today in the stock market.

Here in River Oaks, it used to be more like, “Forget about trying to sell after the Fourth of July. You might as well pack up your bags, go on holiday and put your house on the market after Labor Day.” It doesn’t quite roll off the tongue in the same way, does it?

Look at the chart below. The years 2014 through 2016 were typical of the seasonal pattern we saw prior to the recent Great Recession of 2008-2009: very few new sales contracts in July and August. A small number of procrastinating sellers or buyers transferring into Houston accounted for the little action there was during the summer dog-days.

The years 2010 through 2013 were anomalies brought about in direct reaction to the trauma of the Great Recession. After the real estate market came to a standstill for 18 months, buyers were still feeling trigger-shy, resulting in a delayed start to the selling season for those years (the exception being 2012).

But 2018 and 2019 have been different. Note that we have not yet passed the mid-point of August at the time of this writing, and yet the market has surpassed new contract activity for the summer months 2010 through 2017. Furthermore, the performance in 2019 is looking especially promising, and we fully expect to see August 2019 new contract activity to send the total even higher than 2018. Fact: Eleven out of the 16 new contracts indicated on the chart have been struck since the final days of July.

This is a new pattern, and it is not explained by outlying activity at any particular price point. It is happening at all sectors of the market, from the entry level (i.e. sales below $2 million) all the way through to the high end.

How to explain the change:

  • The market has been getting off to a slower start in recent years. Often this is because the new post-holiday inventory is starting out overpriced.
  • Price adjustments have come late and thick. June and July saw broad-based markdowns at all sectors of the market (perhaps in reaction to the approaching summer).
  • Inventory has been high, and sellers have not been withdrawing for the summer as they used to. There has even been some new inventory in July finding buyers immediately ‒ almost unheard of in the past.
  • The buyers are in a confident mood.
  • Finally, buyers and sellers never really get away today. Alas, in these days of total connectivity, wherever they are in the world, hungry buyers are still plugged in to the River Oaks real estate market. Ditto for their agents. We are torn whether this is a good thing or not.