If you have been following our blogs at all, you can see that there is and has been a change in the market since the Summer. Q3 and Q4 of 2022 are not the same as Q3 and Q4 of 2021. We are going to go over the HAR report that released 12/14/22 and give some insight on what this all can mean for you as the investor, potential pitfalls to watch for and how to pivot your investments to continue to grow your wealth.
Let's get the obvious out of the way first. As compared to 2021, Houston has been down for 8 straight months. Remember, this is compared to 2021, the most crazy market we have seen in most of our lifetime. Home sales fell 30.4% compared to November of 2021. If you compare this to November of 2019 though just before the COVID19 pandemic, we are down 8.4%. I mention this not only because HAR does, but to gain a comparison to a similar market.
All SFH price segments declined in November but saw another solid gain in SFH Rentals. This gain in the rental market is most likely attributed to the inflation and rate increases we all have been seeing for the second half of this year. Those who were in the market to buy a house are more likely today to stay where they are at and/or look for a rental property to see where rates go in the future to maximize their buying power.
Well, that should bring housing prices down.... right? No, we still have a staggering supply issue. Not only in Houston, but in Texas and the entire country. Houston still is holding much stronger than most markets as it does in any market shift.
Prices rose 5.8% in November to a average price of $403,589 and 7% median price increase to $332,000. Prices are still rising as sales are falling. Those investors who are thinking that there is going to be a huge shift in lower home values is going to be waiting for some time if not forever. It is important to note though, that the investors that rode the appreciation wave from Nov 19 to 2022 may not see the same record setting increases we were accustom to for the last 3 years either. This is more of a steady increase.
Pending sales have decreased 28% and Active listings is up 51% compared to November of 2021. That sounds alarming, but remember, we are in a correction and not a crash. If you compare our current active inventory today, we are still below pre-pandemic levels.
Today, we sit at 2.9 months of inventory. At Jet Lending, we feel 3 months of inventory is a balanced market between the buyer and seller where as national economists feel 6 months is a balanced market. Nationally the market sits at about 3.3 months of inventory. What does this mean for you as the investor? You are more likely to be able to start negotiating again. Days on market went from an average of 35 to 48 days to sell a home.
We mention "pre-pandemic", so lets go over that. We mentioned above that November sales are only down 8.4% form November of 2019. The median price in November of 2019 was 27.4% lower at $241,000 and the average price was 26.4% lower at $297,070.
One more thing to add with all this data, what do you do as the investor? If you are a house flipper, you need to start considering your all inclusive hold time. That includes not just your interest rate, but utilities, hoa payments, and closing fees to sell. You need to prepare to hold these properties longer and price them right. This is not the time to try to change the market with a new top listing. Be conservative in your projections and price to sell with good finishes. If you are a landlord, same thing applies to you when you are renovating but also know that you have to hold some money to the side for that refi. As rates and conditions change for these DSCR loans and non-DSCR loans, you have to be prepared that the LTV and rate you may have seen when you started may not be there for you when you refi, so plan a head. In pivoting markets, this is where you see the biggest wealth gain. Those investors who are willing to continue to invest and change their business plans to fit the market they are in are going to continue to get their return in my opinion. This is why so many investors schedule time with us to go over their options and plans and get with a team that really cares about how they come out on the other end. You are still in a great market, in a great demographic, in an area that jobs are growing. Don't miss out.
