Two-fer One

The twiddling of thumbs traditionally reaches its climax in mid-August for real estate practitioners in River Oaks.

A client recently pointed out that one should try to be considerate when tempted to say that “everyone has gone to Colorado,” since clearly some of us remain on guard in person in the Bayou City. Twiddling our thumbs, that is.

While we eagerly look forward to la rentrée, we take the opportunity to look back on the first half of the year. Or, more accurately in this instance, the first seven months of 2021.

It has been an extraordinary time. Have a glance at the chart below, which shows real estate transactions in River Oaks January through July for each of the past 10 years, compared with sales in August through December. We are using the July cutoff because so many sales that are transacted in May and June of each year are actually closed in July.

(Please note that, in the sales numbers, we are including house and lot sales for which we have verifiable sales prices).

As of 31 July 2021, 83 transactions have closed in River Oaks. That’s more than in all of 2020. Agreed, 2020 was weird because of uncertainty caused by COVID and tortuous politics. The year 2020 was, nevertheless, above average for the past 10 years.

The question on our mind is, if we have already sold more properties in River Oaks by the end of July than we would expect to sell in a full year, what are the prospects for the remainder of 2021? Can the pace continue? The question becomes trickier when the market is showing no traction, drifting in the summer doldrums.

We real estate agents are a twitchy bunch. Many of us are running in circles by mid-August, wondering if we will ever sell another house in our career. Someone has to remind us that it is always like this in August. Relax.

Well, just to keep us on our toes, there was an exception in 2019, when there were more sales transacted between mid-July and mid- August than in any other 30-day period of that year, thanks to a combination of procrastinating buyers and a slew of price reductions in June and July.

Just as when we wring our hands when sales slow during the summer hols, we are equally reactive when explaining the strength of the market. All the talk through mid-July was that it was a hot market because of the price of crude oil, cresting over $75 a barrel on July 13.

Not so helpful as the price heads downward.

When someone says “Look at the price of crude,” I think “Yes, but what’s the rig count?” It is not currently so promising as an indicator of real estate sales in River Oaks for the rest of this year. (The rig count is currently around 385 compared with about 685 at the end of 2019.)

River Oaks is the top of the heap of Houston real estate. But despite being at the top, or perhaps because it is the ultimate early indicator of confidence in the future of the local economy, it requires an underpinning of real economic activity to allow it to thrive.

While the rig count is not great and crude prices are down from highs earlier this summer, when one steps back to look at the broader picture one can see good reason for 2021 to finish out at a record pace.

A new client, who happens to be numerate, said it best. The year of COVID made the movers and shakers of the community think hard about what was important in life. This coincided with the unwinding of uncertainty about some sectors of the local economy, especially energy, and provided some welcome clarity about the years to come.

It was refreshing to hear from a market participant, as opposed to us practitioners who too often cannot see the forest for the trees, that instead of witnessing one year of sales activity in just seven months, we may be seeing two years of activity in 12.