Every month, we like to review the HAR report and let you know what is going on in the market, give some insight, and tell you whats trending so you know how to pivot as an investor.
The word "pivot" is key here. Where ever the market goes, there is always a way to make money and improve your wealth. Changes in market conditions, rates, and other variables just gives you the insight you need to see how you need to deal with asset classes, exit strategies, and how to structure your investments for the profits you are aligning.
On September 14th, the Houston Association of Realtors (HAR) made their August 2022 report. They report that home sales fell 16.9% from 9,918 in August 2021 to 8,241 sold in August 2022. In one housing segment, $500,000 to $1MM, rose 10% where all other declined. The smallest out of the declining homes sold were between the $250,000 to $500,000 home prices.
Let's look at that deeply. Are we seeing higher sold property amounts in the $500K to $1MM price point since that is the inventory that is readily available? Are the $250K-$500K home sales softening since buyers are nervous about how the economy sits, rates, and their buying power reduced with the current state of volatility? Most likely yes to all of the above.
There is no secret that we have been in a market crash for years, but instead of 2008 sub prime crash, its been an inventory crash all across the US and if you have been looking for a house to live in or invest in Texas, finding a property has been different then when you were purchasing in 2016-2019. When you consider consumer confidence in a market, a portion of your home buyers in the $250-$500K arena my be hesitant and still look to rent as they try to wait for calmer seas in the financial markets. But exactly the point we are making in the beginning, prepare to shift exit strategies and asset classes in markets. There is no secret that if you really want to have independent wealth, it's not in the flip game, but it's in the time where you are positioned to hold assets, collect revenue, but really wait for the appreciation of that asset to set your wealth goals.
Another thing all consumers and investors have to consider, is that not only is the market just slowing down and rates going up, but think of what you are relating those numbers to. Rates are at the percentage of pre-pandemic rates, housing is returning back to pre-pandemic numbers. We are not crashing, we are normalizing. This is not a time to run for the hills. The past 3 years of appreciation and low rates were not sustainable and you are seeing a normalization of the market. Transactions are still being done, business is still being done, just not as the insane 30% asking on a SFH in 3 days as it was 6 months ago.
On the average SFH price of a home, it rose 8.7% in August of 2022 to $411,671 just below the record $438,591 that was set in May of 2022. The median jumped 10.8% to $341,950 which was also below the all time high of $354,440 in June of 2022. This market is still showing very valuable signs of a healthy market.
All this going on with interest rates increasing and inflation increasing. Think about that as an investor. This is not the time to pay much attention to national news on the housing subject. Get in with a good REI group, education yourself locally on local trends, local needs, local data so you can plan your investments accordingly. You as an investor are in a very unique position. You live in a stable market where jobs are increasing, population is increasing, housing is decreasing. I used to say this to my clients when I was closing loans, but in the 1849 California gold rush, there were tons of people that came west searching for gold, but the ones that made the most money were the people selling axes, shovels, ect. Find out what a market needs and supply it. Texas needs more houses to rent, sell, live in. Be the supplier in this economy and you will see how it can change your wealth. At least, thats my opinion.