Bob Hale, CEO of HAR.com shared this article from the Wall Street Journal and thought it was very interesting. It says that three million U.S. households making over $150,000 in income, still choose to rent instead of buy a house. A combination of factors has led to a large increase in high-earning renters during the last five years, according to the U.S. Census Bureau. While the median income for all households was nearly $71,000 in 2001, there were about 44 million households that rented. Of that number, more than three million households had an income of $150,000 or more, which was an 87% increase from 2016 to 2021. The rising property prices coupled with rising mortgage interest rates have put homeownership out of reach of even relatively high-income households. The city that experienced the largest increase in high-income renters was Austin, which rose by 154% during the five-year period. But, even with the number of high earners growing, some still choose to rent instead of to buy because: they cannot find a house that meets their needs, they want the flexibility to remain mobile, or they want to rent first after moving to a new city.
For a summary of Houston’s Rental Market, see the picture of this article. These numbers reflect rentals for single family homes, and townhouse/condos. Numbers are up for category!
January is the most popular month for economic forecasts. Economists analyze the data from the previous year, crunch data, and create trends to guess the future of the economy. So far in the first two weeks of January, I have heard several different forecasts from various different people. All of them have very interesting perspectives and reasonings and I will share some of what I heard.
First of all, COVID stimulus package after package after package (there were 3) injected too much money into the economy. In addition, the extremely low interest rates (under 3% for mortgage rates at one point) encouraged heavy spending for everything including home buying. In all, the government injected $5.4 trillion of stimulus money into the economy, effectively over-stimulating the economy. This resulted in inflation. But overstimulating the economy was not the only thing that caused inflation. Labor shortages also caused prices to go up. Why did we have labor shortages? Because COVID made some people decide to retire early or to quit their salary jobs. The labor shortage also caused prices to go up. Other causes that affected our economy last year included: the war in Ukraine which disrupted supply chains, the spike in COVID cases in China, an extraordinary cold Europe using more than expected natural resources. So here we are with high inflation.
In an attempt to control inflation, last year, the government raised the interest rate 7 times in a row with sometimes quite aggressive increases (June 2022 they hiked it 0.75%!). The logic is that increased interest rates makes it more painful to borrow money, hopefully resulting in less spending, hopefully resulting in lower prices. The housing market has definitely seen a difference. Home sales are down 9 months in a row here in Houston.
What we need to be careful of is to not confuse this situation with a full blown recession. Once the general public believes we are in a recession, it affects their behavior and they become conservative and stop spending. Their thoughts and behaviors can create a kind of recession that actually is not there yet. The economist for the Greater Houston Partnership believes that even if we do have a recession, it will be short and shallow in Houston. He cites purchasing managers still ordering supplies, no significant uptick in claims for unemployment, no uptick in layoffs, and car sales are actually up. This means that companies are not slowing down, and people are not losing their jobs, and that people are optimistic about keeping their jobs. Hopefully interest rates will stabilize and that will stabilize inflation. Once inflation is under control, affordability will come back, not only for homes but also for simple things like a bag of potato chips (now as much as $6!). To see the extremely interesting Economic Forecast by Patrick Jankowski, Chief Economist for the Greater Houston Partnership, click here.
Having a reliable lender is critical in our real estate business. One of our most trusted mortgage lenders is AMCAP Mortgage, Laura Haines. She is a local lender very familiar with working with our Japanese buyers. We like her because she is very communicative, answering her phone, text, and emails almost as quickly as Susan does! We also like her because she is trustworthy and competitive. When buyers say they are ready to buy a house, our first request is that they contact a local lender like Laura, so that the lender can assess their income and debt, and give out a a pre-approval letter. This pre-approval letter will say how much of a house you can purchase (max purchase price) and will also say how much of a down payment you can afford. This is helpful for when we select houses to look at, to make sure they are within budget, and when we submit your offer, to prove to the seller that a lender has reviewed your finances and believes you can qualify for a loan. If you are thinking about buying a home, contact us so we can connect you with Laura first!
Last Friday, Dec 2, Laura held her annual Christmas party at her beautiful home in Kemah, TX. The subdivision is called Clear Lake Shores and there are many cute coastal themed homes there. Laura loves Christmas and her house was decorated more beautifully than the most beautiful Christmas store! Can you believe throughout the house, including real trees and decoration trees, she has a total of 89 trees throughout the house!? It was so fun for Team Annoura to attend the party to meet so many other realtor friends at the same time. Thank you, Laura!
Many people have noticed that the soaring interest rate has calmed down recently and often ask us how the real estate market is going. Do we think it will crash? Will there be many foreclosures? As of Dec 1, the interest rates were around 6.5%. Data shows that mortgage rates may have peaked. After surpassing the 7% threshold in the second week of November, rates are finally moving down as inflation is cooling. Forecasters say if inflation continues to slow, rates may stabilize near 6%. While pending homes sales (the number of homes under contract) have now fallen for 5 straight months, forecasters believe that buyers will be back around the beginning of the year as the FHFA just raised the conforming loan limits for 2023 from $720k to $800k, a 12% increase. The main reasons the market won’t crash nor will there be many foreclosures like in 2008 are: there were 8 million job cuts last time where this time there is not, W2 payroll jobs were at 130 million whereas now there are 158 million, subprime loans were prevalent back in 2008 whereas now there are virtually none, inventory on the market was around 3.9 million whereas now there is only 1.1 million. In short, forecasters do not think the market will crash in 2023.
The National Association of Realtors (NAR) just released some very interesting data from research taken between July 1, 2021 and June 30, 2022. The report came out in early November and revealed many interesting trends:
1. First-time buyers drop to an all-time low of 26% from 34% just a year ago.
2. The age of first-time buyers (36 years old) and repeat buyers (59 years old) hit all-time highs.
3. How far a buyer moved jumped to an all-time high of 50 miles from a range that had been steady between 10 to 15 miles. (Probably in thanks to remote working trend and affordability + quality of life)
4. The share of all-cash repeat buyers jumped from 17% to 27% in the past year.
There is an impressive Flight Museum near Clear Lake called the Lone Star Flight Museum. Over the Labor Day Weekend, Susan and Koh brought Zach to check it out. The Museum had a $10 entrance fee special with free hot dogs and kids games on Labor Day. Inside the museum was a display of many actual airplanes, many donated to the museum, some owned by private owners and on rotation for viewing. There are excellent signs with explanations to teach us about the airplane’s facts and history. I must be getting old because I actually read them and thought they were pretty interesting! Koh and Zach did the flight simulator and they loved it. Susan went to check out the brand new Minuti Coffee Shop, where she met several of the museum managers who were stepping in to run the busy coffee shop during the Labor Day rush. If you are considering a visit, consider going on October 15 for their Hangar Bash event. They will have a cook team on site smoking BBQ and serving local craft Saint Arnold Beer, a live band, silent auction, and full museum access. For details and tickets, click here: https://lonestarflight.org/hangarbash2022/
