Temperatures are cooling in Houston, but the political environment is heating up as we prepare for the most contentious presidential election in over a century.
Real estate sales typically cool during the fall by 9.8 %, according to a study by BTIG, a research and analysis company, and during an election year, sales typically decrease by 15%. However, 2020 has not been a typical year, and in fact has been one of the most challenging years I have experienced in my lifetime, with a global pandemic, record unemployment, and social unrest.
While COVID-19 has negatively impacted many businesses, home sales have been increasing by record numbers this year, and we have not seen them slow down yet but there could be a slow down around the corner for us.
Why would home sales slow during an election year? I often ask this question myself and there really is no logical explanation other than the fact that people buy homes (or anything else) when they are confident that the economy will remain strong and home values will go up. The decision to wait until after an election is usually short-lived as BTIG determined “This caution is temporary and ultimately results in deferred sales, as the economy, jobs, interest rates and consumer confidence have far more meaningful roles in the home purchase decision than a Presidential election result in the months that follow.”
What could impact our home sales in Houston more than the election are low oil prices. We may as well call out the elephant in the room- most of the major oil companies have announced major layoffs worldwide, and let’s face it, Houston’s economy is still 30% reliant on the oil industry. I wish I could offer assurance to our clients that the housing market will remain strong, but I will instead take the position to approach this market with caution.
The Houston real estate market tends to follow the oil industry by 6-12 months, so sales could remain solid for another 6-12 months, especially if interest rates remain low. Also, please remember that our housing market is hyper-local, which means that while the home sales in the suburbs remain strong, some markets like the Energy Corridor and the Woodlands have not yet recovered from the last oil downturn in 2015.
Homes that are freshly updated or that offer amazing outdoor space seem to sell in any of these markets, but the other word of caution is that even these homes are extremely price sensitive. Over-priced or outdated homes will linger on the market, so please talk to a real estate professional about what you can do to sell your home.
Written by Sherry Campbell