The week after Labor Day is the traditional start of the Houston real estate market’s second wind, especially in River Oaks. All was going to plan until Tropical Storm Imelda hit the city in the third week of September. Then the market curled up and went into a deep sleep.
A quiet last week of September was followed by a silent week to start October. This is the time of year when the market is typically in full swing ahead of the year-end holidays, corporate bonuses and efforts to close before December 31.
What was going on?
Research into showing activity and new contracts for high-end residential real estate in the central Houston market areas – that is, Memorial, Tanglewood/Galleria, Memorial Park, River Oaks, Upper Kirby, West U/Southampton/Museum District – revealed that not much of anything was happening anywhere.
A swift round of polling fellow real estate agents confirmed the diagnosis. “We thought it was just us the market was ignoring,” was the sentiment of more than one. And sellers, typically, assumed that there was something wrong with their house.
Readers of our River Oaks Market Report know that we have been tracking new-contract activity in River Oaks for many years, comparing the year-on-year numbers to help discern market trends within the subdivision. For a change, we thought it would be instructive to compare the numbers for the four main areas in central Houston for a single month – October 2019. In other words, we would go beyond our usual boundaries and see what’s happening in neighboring areas.
The findings were startling: In October 2019 there were more than 180 properties priced at $3 million or more in those areas actively marketed on MLS. By the end of October there had been only two new contracts. (A third property had gone into contract but fell out within a few days.)
Well, we have heard of buyers’ markets, but clearly something else was going on here.
October 2019: Inventory of $3 million+ MLS listings vs. Sales Contracts
While this inactivity was so prevalent in the high-end central markets, other sectors were chugging along: West U priced below $1,500,000 and entry-level suburban markets were busy with high turnover. The Heights was hot with brisk sales. High- and mid-rise new construction starts were back in vogue.
Buyers and sellers who had to get on with their real estate obligations were doing so. Others, who could afford to do nothing, were sitting on their hands.
It was probably no coincidence that national political matters came to a head in Washington on September 24 with the announcement of the impeachment proceedings. By mid-October, Houston agents and sellers at the high end were mournfully predicting that the malaise would continue until the November 2020 elections were over.
It is typical for markets to hit pause two or even three months ahead of a contentious national election. We saw it happen in 2016. But even discretionary buyers and sellers are not going to hold their breath for 13 months, unless something else is afoot. Is there?
We reviewed the generally good local economic news.
- The fundamentals of the Houston economy are likely to remain sound for at least the coming year.
- Oil prices are steady, if not heady.
- The prospects for the national economy have moved from certain recession to probable slowdown.
- Most important, there is plenty of money in the pockets of well-to-do Houstonians. When their confidence returns, so will the high-end real estate market.
Then, suddenly, it was as if the bugle sounded, telling us it was safe to leave the bunker. As November 2019 got underway, there was a palpable change. As of today (mid-month November) new-contract activity in the $3 million-plus market was three times higher than in all of October. Showing activity has picked up, too.
The market is still not operating at a level that will allow it to make up the ground lost in September and October, but we are confident that the year will end on a strong note and that it will start up sooner than usual in January 2020.
Strictly for the statistics wonks, the following two charts break down the market price points for October and November 2019.