It’s almost 2020, if you can believe it, and the future of the real estate industry is, perhaps, more uncertain than ever. Agents not only will contend with the potential of rising interest rates and an economic recession – the presidential election next year and continued rise of iBuyer companies and other new technologies will further contribute to the reshuffling of the deck for those in the industry.
We caught up with some of Houston’s real estate industry leaders to help us read the tea leaves and predict what the market will bring in the coming year. Without further ado, we’ll leave it to the experts to tell the story.
Will 2020 be a buyer’s market? Why or why not?
Julie Brann: I think 2020 will continue to be a buyer’s market, since there is currently a lot of inventory. I also think a lot of that depends on the oil and gas industry. That industry seems to drive a lot of home purchases. I’m noticing a lot of relocating employees are looking to rent my listings; a few years ago, these might have been buyers. I think companies appear to be taking less risk than they used to.
Chance Brown: It depends on how you look at it. From an economist’s view, one to four months of inventory is a seller’s market. From that standpoint, I don’t believe it will be a seller’s market. I believe two camps will emerge: those who prepare and price their homes to sell and those who think it’s still 2017 and they can put their home on the market and three days later it will sell even though they left their underwear on the floor. That last group will have a tougher time selling.
Sherry Campbell: We have been in a buyer’s market since 2016, so I anticipate that we will come out of it in 2020 and move into a seller’s market by the end of 2020.
Lisa Iglesias: For majority of Houston it will still be a seller’s market, but we’re seeing it less and less so each month. For instance, Houston home inventory is at four months. A balanced market has around five to six months of home inventory. However, five years ago Houston’s home inventory was only at 2.7 months. Already we’re seeing gaps between how sellers and buyers view the market and it’s creating problems. With Houston real estate being hyperlocal, the answer varies for each specific neighborhood. I expect home sales in quality locations to perform well. Whenever turbulence arises, we have a flight to quality. I don’t think that we’ll see “screaming deals,” but I think we’ll have more willing sellers and there will be opportunities for buyers to pick up things in a lull before things heat back up. The stock market, China and upcoming political theater have created (and will continue to create) a lot of drama. I believe the buyers who focus on the fundamentals (good locations, with land, zoned to top-ranked schools with quality layouts) can purchase attractive, long-term investment options.
Where will the hottest communities and neighborhoods be in 2020?
Chance Brown: So much of what happens in the Houston market is based on job creation but overall, I still think the safe money is always going to play into the bigger communities. If you look at the data, smaller pocket communities suffer the most when the market changes. Where there’s doubt when it comes to someone’s largest financial asset, I tend to play it safe and steer them towards bigger master plan communities. You’re going to see a lot of development on the east side. The millennial generation is shaping the market in ways we haven’t seen.
Lisa Iglesias: Close-in Houston neighborhoods with strong appreciation rates the past 10 years will continue to perform well. Smart buyers and investors will always be drawn to areas with strong track record. We also expect top neighborhoods near Texas Medical Center (or with good MetroRail access to TMC) to post very strong growth numbers in the next 10 years. Around $5 billion worth of health-care related projects are currently underway in the area, and health care jobs are projected to double within the next decade. Well-developed suburbs should continue to appreciate well. Areas like Katy, Missouri City, Pearland, Sugar Land and Spring posted very strong land value appreciation rates last year. These suburbs have grown large enough where buyers were willing to pay more for certain lots in prime, non-flooded locations, zoned to top-ranked schools.
Kent Puckett: North and Northwest Houston-acclaimed school districts like Cypress-Fair Independent School District and the completion of highway 290 construction make Cypress communities like Towne Lake desirable locations. Communities in this area are easily accessible and provide just a short commute to major corporate campuses. Growth in Conroe and migration north is making communities like Chambers Creek Ranch an attractive place for those seeking a highly-amenitized active adult community, but in close proximity to the airport, major medical and grandkids.
Julie Brann: I would say some of the hottest communities in 2020 will be the Heights area EaDo. All of my 20-something clients are looking in these areas since they’re close to town and amenities.
What would you like to see the industry or officials do to mitigate challenges to housing and development, especially with regards to flooding issues?
Julie Brann: I would definitely like to see industry and officials work together to mitigate flooding issues. We’ve had a number of rain events over the last few years, and I know so many people who have been affected by the result. It has had a negative impact on areas that flooded.
Kent Puckett: Cleaning out the bayous and expanding capacity in the Addicks Reservoir in conjunction with flow timing to determine detention or immediate release (or hybrid thereof), would be one solution as it relates to developing a parcel within a particular watershed.
Chance Brown: I would love to see someone in some level of government put something together where we have a regional drainage plan that developers have to tie into. Let’s be honest – we live in a swamp. The neighborhood I live in is a little over three years old. Harvey brought 46 inches of rain and we barely had any water in our street because of the great drainage and because we’re built up a little higher, so the water rolls down to the other neighborhood. But I’m not naïve enough to think that the next neighborhood built up higher isn’t going to flood my neighborhood.
Lisa Iglesias: Flooding is an integral part of the Houston housing market. It’s a reality, and we do clients and ourselves a disservice by dancing around it. For agents, candor is key. If you have genuine care for the client, you will be candid about all the pros and cons of a specific property, flooding issues included. It may hurt sales in the short term, but clients who received honest feedback tend to be happier with their decision and by extension the agents who helped them arrive at it. This leads to more referrals and repeat business. When agents help buyers find homes in good locations built by reputable builders, it raises the bar for everyone. This translates to fewer projects or more flood-proof homes in flood-prone areas.
What will be the biggest challenges and opportunities for agents, lenders and brokers in 2020?
Chance Brown: I think one of the challenges is public perception of the agent and the role they play. We’re taking steps in our brokerage to battle that. At the same time, the opportunity is in taking those perceived threats and really being able to communicate your value to clients. For example, clients should understand that if they don’t have someone representing them, they might not know what they’re looking at when they look at a contract. Realistically, most people aren’t capable of that. This is where the vast majority of agents really fail in communicating to their clients.
Sherry Campbell : There are so many interrupters in the industry besides iBuyer programs that are forcing agents and brokers to step up their game and offer more expertise and advice to clients to justify the commission they are earning. We no longer sell houses by simply putting a house on MLS; we have to find more creative ways to market homes and bring buyers. We truly have to become marketing experts as well as contract negotiators. The industry has made it easy for anyone to get a license, but I think that agents will have to go above and beyond the standard education in order to compete in this industry. As a broker, I am being challenged to improve my technology tools, and I am preparing to launch an integrated system combining the CRM, transaction creation and transaction management to help my agents stay more productive and efficient.
Lisa Iglesias: It’s not uncommon for agents and brokers to deal with uncertainties brought forth by political, economic and, recently, climate changes. In the Houston Properties Team, we always deal with this on a case-by-case basis, and we heavily use data to provide clients with the best solution for their needs. Take the recent flooding issues, for example. With the memory of Harvey, Imelda and recent flooding still fresh from everyone’s mind, buyers are generally more wary and more informed about the risks of buying properties in flood-prone areas. Smart buyers know that even if an area has a history of flooding, there are pockets of neighborhoods and subdivisions that remain relatively flood-free. There are good deals to be found in these locations as the general trends affect how high the seller or builder can price the home. A good agent can overcome the uncertainties that come along with this issue and provide solutions that help clients get the outcome they want. The biggest challenge for agents and brokers in 2020 is handling uncertainties while providing the expert-level insight and value that smarter buyers today are looking for.
The full article can be found @Houston Agent Magazine