October 18, 2021

October’s real estate market trends: why is the inventory so low in Texas?

The fact that the real estate market is hot is not news anymore. It’s something everyone can see month after month. The inventory is pretty low, and the prices don’t seem to find their ceiling. Facing this situation, it’s fair to ask why this is happening and when it will end. To help understand these real estate market trends, Shenoah Grove – also known as the update market lady – hosted a webinar at Real Estate IQ and offered a pretty convincing explanation.

The full-time investor and owner of Texas REIAs analyzed the complete picture of the real estate market in Texas and even shared some thoughts for the next few years. Here, we bring you a summary of her talk.

Texas real estate market trends: what’s going on with the inventory?

“Texas is roughly between the 8th and 10th largest GDP of any country in the world, so there’s plenty of opportunities to invest here. Moreover, 2021 is the best year ever. Our forecast for sales is expected to be up by 10 to 15% compared to 2020,” explained Grove. This is not something new for the Texas market; in fact, she pointed out that Texas has had strong years since 2012.

In August – September, the average sales price in the State was $380,000, and the median sales price was $310,000 – both represented a 17% increase compared to 2020. On the other hand, houses remained on the market for only 25 days, 26 days less than last year. As for the closed sales, they were up 1% and reached 38,797. Furthermore, the inventory was 1.7 months (vs. 2.6 in the previous year), pending sales were down 1% to 37,940, and the total number of active listings was down 27% to 56,979.

“What we’ve been seeing is that there are many properties put under contract the same day they appear on the market, and with multiple offers above list price. What is more, sometimes the buyers don’t even see what they’re buying because they don’t want to lose the opportunity,” Grove described.

In this context, she assured it’s wonderful to buy and hold because the values of the sales prices for the average price in a year-over-year comparison are expected to be up 25%. Why? Well, primarily because of lack of inventory. “When the demand is high, and the inventory is low, you get such big increases in your overall sales prices, and that’s probably one of the reasons we do not see more sales. In fact, there are at least 14 different reasons inventory is so low,” Grove said.

And without further ado, here are these 14 motives:

  1. Uncertainty of what’s coming paralyzes sellers.
  2. Fear of letting potential buyers enter homes since no one is certain that they are healthy.
  3. Avoiding interruptions to routines, zoom meetings, etc.
  4. Low-interest rates motivate buyers and cause owners to refinance.
  5. The last market cycle changed how builders develop.
  6. Labor shortage.
  7. Material shortage.
  8. Prices have gone up for labor, materials, and land.
  9. City permitting and building codes make homes more expensive.
  10. The “Elon effect,” so many companies are moving to Texas.
  11. Some owners want to keep their starter homes as rental properties, like Airbnb’s.
  12. Institutional buyers are looking for opportunities.
  13. Many houses are still not going to foreclosure due to government policies and equity.
  14. The snow/ice storm removed properties from the market.

So, the question now is whether and for how long this situation will last. For the owner of Texas REIAs, this will be around, at least for the perceivable future. To answer this question, she based the analysis on single-family housing permits. Although more houses are being built, for her, “the jump in additional houses is like putting doll furniture in a mansion. It’s just not enough.”

Based on the supply we’re adding to the market right now, I estimate that we’ll probably be in this situation for at least the next three years, and maybe even as long as five years.

Shenoah Grove, real estate investor and owner of Texas REIAs

If you want to find out how Metro Areas in Texas – and Florida, Georgia, and Utah – are performing, you can download Real Estate IQ’s free monthly market trends! You’ll find valuable data to understand what’s going on, last year and last month comparisons, and even insights on our Off Market Leads trends. Just click here and start investing wisely!

Real estate events.

What can investors do in this situation?

No one wants to overpay for a property, especially if it’s part of an investment strategy. For that reason, we always encourage real estate investors to work with off market properties. These listings provide a permanent secondary source of homes that haven’t hit the market yet, so you’ll find less competition, deal directly with distressed homeowners, and even get substantial discounts to wholesale, fix and flip, or buy and hold.

Real Estate IQ’s Off Market Leads make investing effortless for all of us,” revealed Grove. And she does have a good point. Our Off Market Leads arrive at your inbox every day (from Monday to Friday) and provide the freshest data on the market to work with off market properties. And if you’re subscribed to the premium version, it also includes the contact information of sellers and a close relative. So, you don’t have to pay extra for skip tracing!

If you want to learn more about it, you can always ask for a free one-on-one consultation here.

Disclaimer: The blog articles are intended for educational and informational purposes only. Nothing in the content is designed to be legal or financial advice.