Today’s Houston Chronicle has an article that describes a declining Houston real estate market - again. While I find the reporter’s work to generally be of acceptable quality, today’s article is less helpful or reliable.
In fact, it skates along the ragged edge of “if it bleeds, it leads” journalism.
Several things about the article that bear sharp criticism.
First, the most prominently quoted Realtor is someone who has only been in the business a year. I know Realtors who have been in the business ten years who don’t understand market fundamentals. She’s advising clients not to list? Why is she given voice?
Listing and pricing property for a Realtor is part wizardry, part gut feeling and part solid research. My best Realtor buddy has what she calls “Susan’s Rule of Pricing; if it hasn’t sold in a month, it’s priced too high.”
There are several examples in the article that are designed to “show” that the property market in Houston isn’t doing so well - that we’re following the rest of the nation down the toilet.
Mais non, I say to you. Do you remember my article back in January about the appraiser whose seminar I attended, and that his position is that the worst housing value performance was in partially developed, new neighborhoods where the builder was still building?
Now, go back to the Chron’s article - notice that each of the “bad” value examples are .. partially developed new neighborhoods where the builder is still building.
Now, a 1700 sq foot house in Timbergrove for under $300K? That’s a steal, and no wonder she’s getting a lot of traffic.
Let me give you an example - in 2005, I lived in a huge four bedroom house in Country Village. Great house. Needed a lot of work; probably more than ten years’ deferred maintenance. The house was pending foreclosure, as the owner hadn’t been making payments for a good long time. I made a short sale offer to buy the house; I did my research and determined that the house was worth a maximum of $235,000 in the next five years, and that work was needed - so I offered $210,000. They declined, and countered at $265,000.
I moved. Four months later, they sold the house for $195,000.
Now, a week ago, I found a glorious example of the identical floor plan from the same builder, about a mile and a half to the north of where I was. I looked up the listing, and they’re asking $575,000. Okay, it’s in terrific shape, but the SAME floor plan (with slightly fewer square feet) sold for $67 a square foot, and the one being offered currently is listed at $167 a square foot.
Here’s one of the real issues in the real estate market in Houston, one that my Realtor friends are talking about. People are pricing their homes far too high, and then complaining about the market when they don’t sell.
The house listed at $167 per square foot is on a corner lot to a primary surface road (big negative,) and is ONE HUNDRED DOLLARS PER FOOT HIGHER THAN THE MARKET. Even if one takes property condition and that it’s a slightly better neighborhood into account, it won’t appraise. Ever. And it will languish, extending the statistic with HAR for property time on the market, and the Chron will dutifully write about how everything’s gone to hell in a hand basket.
If someone makes a financed offer on this property of which I speak, lending rules will now require that there be at least two comparable sales within a mile of the subject property that support value. Meaning, at least two homes within a mile have to show that the house is worth the price from the last ninety days.
The SMART Realtors, the ones who have a good business, are the ones who look for comparable sales BEFORE turning in a contract offer. And, the ones who refuse to list a house at an unsupportable price just “to see if it sells.”
Through it all, our local media follows the national media trend and focuses on what doesn’t work. Does anyone remember the late 1970s, when Houston (and, thereby, Dallas) had economies that were contrary to the national climate? Our reporters were touting our cost of living, our opportunities, and how exciting it was to be here.
We’re again in a similar climate. I note that the Chron’s article reviewed the opinion of a Texas A&M researcher about how people in Houston are “afraid to make a move, because of the possibility that the oil industry will be punished after the national election.”
Uh, hello? Were any of you paying attention to politics inside the Beltway? They aren’t interested in doing ANYTHING but hoovering up every free dime that the corporate lobbyists can shill out. Congress is unwilling and/or unable to do ANYTHING to make change happen, and you think that this is a valid point how?
Did Congress and this government set the price of oil today over $100 for the third day running?
Have any of these people talked to people in the oil industry?
In three weeks, Singapore Airlines begins non-stop service from Houston to Moscow and thence to Singapore to service the OIL industry. Our Sonangal Express flight operated by World is going to up-gauge to a 747 (according to a charming World employee who works that flight.) My friends in the oil patch are feeling fairly confident (albiet more poorly paid than before.)
I don’t hear ANYONE holding back because of speculation that the oil business will be punished, save for a single expert at A&M.
Why didn’t they ask Barton Smith?
Simply put, if you price a home consistently with other, similar homes in that neighborhood, it’s going to sell. If your Realtor pre-screens proposed buyers to make sure that they have a loan, it’s going to close. The Chronicle’s own research tool shows that, in established neighborhoods, prices are moving upward consistent with the pace of inflation and sometimes higher.
If you “think” your house is worth a certain value, if you have something really unusual or out of character for the neighborhood, if you don’t pre-screen borrowers for loan approval, you’ll have trouble.
If you’re thinking of selling your home, look for a Realtor with a successful history of business in the neighborhood in which you’re selling. Take the small steps to make the house show as well as it can. Price it according to neighborhood trends, and not what you “need” to make on it, or what you “think” it’s worth.
This ain’t San Jose, California two years ago, folks. It’s good old Houston, Texas, and we haven’t had disco price increases outside the loop since the early 1980s.
And, thank God we haven’t. It gives us a foundation of stability from which to move forward.