Speculation is a natural part of the real estate world. We’re always looking for the next big thing and, at the same time, preparing ourselves for worst-case scenarios. In a post-Great Recession world, can you really blame us? That said, it’s important that, particularly in buy-and-hold real estate investment, we are prudent in our analysis and decision-making.
It’s all-too-easy to have knee-jerk reactions to market changes.
Many investors are feeling some level of anxiety surrounding 2020. With everyone saying we’re overdue for a recession, it’s difficult not to worry. That said, choosing the right markets to invest in makes all the difference in the world.
REI Nation always looks to the long-term. We select markets that have a robust history and great potential. There will always be risk, sure, but our markets are poised for investment success regardless of fluctuations.
Houston, Texas, is one of these markets.
Even though experts are predicting a cooling of the Houston market, it doesn’t spell disaster this year or in any other.
This is what you need to know about the Houston real estate market in 2020.
Investors Must Consider This About the Houston Real Estate Market
2019 Was a Record-Setting Year
Whenever we talk about the ebb and flow of the real estate market, we must consider the context for these assessments. Saying that 2020 will be a year in which the Houston market slows down can sound like a negative. However, we must remember that Houston is coming off of a record-setting real estate year. In 2019, Houston saw a 5 percent hike in single-family home sales over the previous year.
That means that some 89,000 properties were sold in 2019. What about the price? The average home sales price was $305,959 (growth of 2.3 percent from 2018) while the median price was $245,000 (growth of 3.2 percent from 2018).
This price point with the most activity was between $250,000 and $500,000 (up 27.2 percent). However, prices at all levels saw growth. The $150,000 to $250,00 range saw growth of 13.7 percent. Even luxury homes at $750,000 and above saw growth of 12.7 percent.
The real record-setter? Houston saw a total dollar volume of sales reach $30 billion (a 6.7 year-over-year change).
We must consider any predictions about the Houston market with these numbers in mind. Not only was the year strong overall, but it even closed strong. As winter tends to be a slower quarter in the real estate industry, this is significant.
Cooling Isn’t a Bad Thing
With those statistics setting the stage, it’s crucial to remember that the cooling of a market is not necessarily a bad thing. In Houston’s case, any market cooling likely has to do with a long-overdue increase in inventory. Over the course of 2019, Houston saw an increase in inventory from a 3.6 months supply in January to a peak of 4.3 months supply in June and July, it seems like inventory is finally moving in the right direction.
While 2020 started with a 3.4 months supply, experts predict that this year will be the one where inventory truly increases in Houston.
This is a blessing, even if it cools price growth. In fact, cooling can be positive. Leading up to the Great Recession and in the last decade, we have seen how out-of-control prices have led to market implosions. This is primarily where we see investors worrying over prices — in markets like Los Angeles and San Francisco, New York, and at luxury price-points.
Cooling is very much a natural part of the real estate cycle. Houston might not be making so many “best market” lists anymore, but that doesn’t mean opportunity is scarce. It just means balance has arrived.
Be sure to check out: The Houston Economy Question: When a Slowdown Isn't a Bad Thing
Remember, your investment market priorities as a turnkey buy-and-hold investor are going to differ from that of flippers and other types of real estate investors.
Houston is Attractional
Lastly, it’s crucial that we remember the context of Houston. The fact is, this is a city with an enormously diverse economy, a great track record for quality of life, and abundant employment opportunities. Houston is a place where people want to be, live, and work.
Between 2010 and 2018, the Houston-area population saw a growth of 1.05 million people. In fact, the population in the new year reached 6,371,000 — a 2 percent increase over 2019.
Though Houston’s economy doesn’t hold the same draw it did post-Recession (when it was one of the few big cities left relatively unaffected), the cost of living, climate, and other positive factors continue to bring demand and a growing population. If anything, a tempering of homes prices will only encourage more population growth.
Answering the question…
So is Houston in trouble in 2020? Hardly. Though Dallas and other Texas markets are dominating the real estate scene, Houston’s cooling is far from a disaster. If anything, the cooling of the market will help alleviate the affordability crisis and provide more opportunities for a growing population and investors alike.
We know that all of Houston’s market factors point to strength and stability — two key qualities in a great buy-and-hold real estate market.
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