The rain has cooled temperatures in Houston and may have caused a slight cooling in home sales, but we are still in a Seller’s Market, despite what appraisers are reporting.
I recently was up against multiple offers for one of my buyers in Katy, and the offers came in well over 10% above the asking price! We thought we had the upper hand when we agreed to waive the appraisal contingency (the buyer was willing to purchase the home even if the appraised value was less than the Contract price), but it seems like all the other buyers also waived the appraisal.
As the saying goes, a home is worth what buyers are willing to pay for it, and in today’s market, the homes that are offering outdoor space and are move-in ready are commanding a higher price than what the current market indicates. In real estate terms, this is an appreciating market.
The stumbling block in this market is that the appraisals have not caught up with the market yet, so we are seeing appraisals coming in 10%-20% less than our Contract prices. Many appraisers are not seeing the sold comparisons to support this recent surge in prices, and there is not enough supporting evidence for them to factor in an appreciating market yet.
Appraisal issues on home sales may continue for another 6 months until the pending contracts turn to sold, so buyers today must have considerable cash reserves in order to compete in today’s housing market. Remember, the bank will only give a loan based on the appraised value of the home, so if the appraisal falls short, you will need to bring additional cash to the table.
In the meantime, I continue to watch the inventory levels in Katy and the Energy Corridor, and the inventory seems to have increased by about 30% since May. In the Spring, we saw inventory levels drop to a one-month supply, but we are now closer to a 2 month’s supply of inventory in the suburbs of Houston.
As inventory levels go up slowly, the forecast is that interest rates on home mortgages will inch up as well; however, coming up from all-time lows, low-interest rates will keep mortgage payments affordable despite rising home prices.
By: Sherry Campbell