The housing boom has not gone bust in Brazoria County.
Even though houses are sitting on the market slightly longer because of higher interest rates, business remains strong, local real estate professionals said.
“The housing market has slowed down but overall is still very strong with sales prices,” Birdsong Real Estate Agent Lucy Ware said. “There are still record high days on the market, but that’s still very low compared to history.”
Days on the market are stretched out after an incredible few years, when homes could be put up for sale and sold within a few days, said Ryan Birdsong, the owner of Birdsong Real Estate. Now it’s taking two or three weeks, he said.
“My biggest indicator is that I look at active listings in Lake Jackson, our biggest municipality in the area, so I use them as a benchmark,” he said. “I don’t think we’re close to a buyer’s market; we’re getting closer to a balanced market, but we’re still not there. Average days on the market are sometimes under 30, and in a balanced market, it is 90 to 120.”
About four or five years ago, Birdsong said the agency would have more than 100 listings at a time. Within the past two to three years, it’s been less than 50 homes for sale, and today it’s about 73, he said.
“Everyone has expectations because of the market, and they think we’re in trouble if we don’t have a buyer within two weeks,” Birdsong said. “We have to tell people to relax, and we find buyers in less than 30 days. Five years ago, if I had told you I had a buyer for you in 30 days, you’d have been ecstatic; now I tell you that, and you’re mad. That’s the hardest part of the market.”
As of July, pending home sales were down 1 percent month-over-month, according to the National Board of Realtor’s website.
“The housing market has slowed after the frenzied activity over the last two years,” said Jessica Lautz, vice president of demographics and behavioral insights. “The frenzy over the last two years was largely pandemic-driven and brought many into the housing market. Currently, affordability is a major constraint to home buyers who face the rise in interest rates and the rise in home prices.”
Pending home sales declined for the second consecutive month in July and for the eighth time in the last nine months, the National Association of Realtors reported.
In June, housing affordability was at the lowest level since 1989, accounting for a 30-year fixed-rate mortgage and a 20 percent down payment, the association said.
“Days on the market indicate this is still a relatively fast-moving market,” Lautz said. “The typical days on the market are 16 days, up from a record low of 14 days over the last two months. Eighty-one percent of homes are being sold in under one month.”
Another indicator of the housing market is the pending home sales index, which is based on accepted offers for existing homes.
In July, the index decreased overall by about 19.9 percent. In the South region, which Texas falls under, there was a decrease of about 1.1 percent in July.
Pending contracts are good early indicators of upcoming sales closings, according to the Realtor’s website.
“In terms of the current housing cycle, we may be at or close to the bottom in contract signings,” said National Association of Realtors Chief Economist Lawrence Yun. “This month’s very modest decline reflects the recent retreat in mortgage rates. Inventories are growing for homes in the upper price ranges, but limited supply at lower price points hinders transaction activity.”
Interest rates have now risen to about 6 percent for a 30-year-fixed mortgage, which makes it harder for younger buyers, Lautz said.
“This especially hurts the ability for first-time buyers to enter the market,” she said.
Interest rates creeping up will affect the market, especially while there is uncertainty after years of them remaining steady, Ware said.
“I think interest rates will settle in the 5 to 6 percent range and be there for a good while,” Birdsong said. “I don’t think that’s a terrible thing. I think we’re getting more inventory going forward, and I think our market will stay strong. I don’t see prices going down at the rate of appreciation.”
It’s driven by inventory, Birdsong said.
There are not enough homes for sale for the number of buyers Lake Jackson has, he said.
“I don’t think that’s a terrible interest rate in the grand scheme of things,” he said. “A difference between a 4 percent rate and a 5 percent rate is about $250. It’s very little.”
Home prices are rising by double-digit percentages year-over-year, but annual price appreciation should moderate to the typical rate of 5 percent by the end of this year and into 2023, Yun said.
“With mortgage rates expected to stabilize near 6 percent alongside steady job creation, home sales should start to rise by early next year,” Yun said.
With the state of the market, buying vs. renting depends on a few factors.
“We still do have people moving in the market for renting. I am a property manager for over 64 properties,” Ware said. “Renting is higher to me than purchasing. The rental rates are pretty high, so that’s good for the landlords. I would say they’re renting pretty fast right now.”
Birdsong disagrees and said renting takes longer, and buying is the better option because of inflation, he said.
It is taken a little longer to rent, and the cost has gotten so inflated, Ware said. What you can rent in the area, you can buy a house for.
Many potential home buyers have been pushed back into the renting market, Lautz said.
“Unfortunately, due to underbuilding for over a decade, there is a limited supply of rental units and homes to purchase,” Lautz said. “Prices have increased regardless of the unit type.”
Within the past few years, the pandemic has touched every aspect of the market, but it had no effect on Ware’s business, he said.
“The market has never stopped for us,” Ware said. “Although it did change from where houses were on the market from three to six months, some even longer, and now I would say an average house is starting to sell within a month.”
Sellers are starting to feel the market shifts because some are paying closing costs and reducing prices, Ware said.
“Those are the things I’ve seen a change in the last couple of months, so that’s good for buyers,” she said.
Inflation has affected home building because of the pandemic, said Doug Kirk, builder and developer for American Crafter Homes.
“There were supply chain difficulties for a short while, which caused delays in finishing some homes,” Kirk said. “With inflation, we’re dealing with material cost increases since the pandemic. They are back to their pre-pandemic numbers, but they’ve more normalized and are well off their highs as far as material goes.”
Concrete is still an issue with a 60 percent cost increase, he said.
Kirk has projects in Sweeny, Brazoria, Jones Creek and throughout Southern Brazoria County. All of the homes they built and finished have sold, he said.
In Jones Creek, Kirk sold houses while they were only halfway through construction, he said.
“There is a housing shortage here like never before because of the influx of people,” Kirk said.
As for future developments, Kirk is proposing a new 38-home subdivision off of FM 1459, he said.
“I have projects in Brazoria,” Kirk said. “It’s an old subdivision that’s probably 30 or 40 years old with lots available in the back, so we’re building those out.”