One sensed a pause in the action as February 2022 got underway.
By mid-January, showing activity in the River Oaks area – the earliest indicator of future sales – was disappointing despite a hectic week at the very start of the year. Subsequently, there were only eight newly pending contracts by mid-February. By contrast, for the same period in 2021 that number exceeded 20.
It’s true that 2021 came on the heels of enormous pressure from the pent-up demand that developed out of the stay-at-home hiatus of the first year of COVID in 2020. By 2021 buyers and sellers were rarin’ to move on to make real their long-term plans for shelter.
Buyers in 2021 were out to bag their dream home, now. Never mind waiting a few years when the timing would be more sensible. High asset prices in their investment portfolios provided the confidence, and sloshing credit markets provided the means.
Sellers were happy to oblige. Not only were they, too, dusting off those long-term plans to, say, move to that place in the country or build a bigger house on a larger lot in River Oaks, but some of them hurried up to downsize and head for the exit.
To see what passes for normal in the River Oaks real estate market one has to look to 2019 and before when around 10 newly pending contracts in the first two months of the year were typical.
So, what’s the problem you may ask. What’s different in 2022?
In one word: inventory. The numbers in the chart above look drastic enough with only 36 houses for sale on MLS as of mid-February. But if one excludes houses that are in pending contracts we are looking at 25 available houses in total.
The kicker: Just eight of those are priced at less than $4 million.
Another eight are $4 million to $8 million. Nine houses are priced above $10 million. (As a side note, there were no MLS sales above $10 million in River Oaks in 2021 – and only a couple of hush-hush side deals above that number).
The current situation reminds me of a typical August in River Oaks real estate. Not much happening.
And when we reviewed the market here back in August 2021 we observed that in the first half of 2021 we were seeing twice as much sales activity as in previous years and that 2021 may turn out be two years of activity in just 12 months. The implication being that, sooner or later, we would run out of qualified buyers.
What we may actually be witnessing is a lack of willing sellers.
Glued to the computer screen we eagerly await news of fresh inventory. Of course, we mean truly sellable houses that normal rich people can afford to buy, not yet another $17,000,000 offering.
While we have not seen many reasonable new offerings in River Oaks lately, we have noticed an awful lot of contracts busting out in the less-expensive market areas surrounding River Oaks and elsewhere. There have already been a couple of break-ups in River Oaks, too.
You would think that slim inventory would prompt buyers to be better behaved.
In fact, in any normal year in River Oaks about 10% of pending contracts terminate before closing. In 2020, the termination rate was closer to 20%, but that was a weird year.
We’re too early in 2022 to determine if this year will be anything but normal based on the data so far. The mood is certainly different.
Call to Action
Unlike the other central Houston market areas where demand stalks the inventory (witness the gaggles of buyers with their agents standing around outside open houses for new listings in West U), River Oaks does things backwards.
Supply generates demand in River Oaks.
Right now, many of those River Oaks buyers who were on the prowl without success in 2021 have retreated. With nothing new to see, they are staying away, albeit having activated their online alerts for new listings and price reductions.
More important, the many other prospective buyers for River Oaks property have not even been out looking, rightly sensing that things were rather heated in 2021 and not wanting to get into a scruffy bidding war over a house.
Many of them are waiting for the right house to come on the market and for things to cool off. On the horizon are the prospects of more subdued asset prices and rising credit costs.
So, if you’re a seller who values good advice like this and have an idea of where you want to go next, make an appointment with Cameron and Teresa to discuss marketing and selling your home sooner rather than later.