Low inventory, low interest rates catalyze “unprecedented” real estate market Sugar Land, Missouri

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In Sugar Land and Missouri City, declining housing stock, coupled with low interest rates and strong demand, boosted average home sales prices. (Claire Shoop / Opinion Newspaper)

Housing and real estate experts in the Sugar Land and Missouri City area said they have never faced similar market conditions in their decades of careers.

Described as insane, vibrant and unprecedented, the current real estate market is driven by historically low inventories, record low interest rates and skyrocketing prices for lumber and building materials, according to realtors and builders.

“I’ve been selling real estate for 30 years,” said Keller Williams Realtor Pam Shocky. “I was there when 9/11 happened; I was close to the dot-com, Fannie Mae and the explosive growth of subprime lending. This is not market frenzy or a bubble like that. This is a collection of several things happening at the same time. “

While this set of conditions is affecting the property market across the country, Jeff Wiley, CEO of the Fort Bend Economic Development Council, said Fort Bend County has always been a desirable place to live thanks to its high-quality public schools and abundant amenities. communities and attitudes towards business.

“In good or bad economic conditions, Fort Bend [County] will be a magnet for growth as long as we maintain our competitive and comparative advantage nationally and regionally, ”he said in an email.

Low housing stock
In Wylie’s 17 years at FBEDC, Fort Bend County has never had such a low housing stock, he said.

Fort Bend County has had a housing inventory in less than six months since October 2011, according to the University of Texas Real Estate Research Center. The Center describes six months of stocks as a stable market.

However, in March and April – according to the latest available data – housing inventory reached 0.9 months and, according to the research center, there were about 1,200 offers on the market.

“This is historical. This is a stunningly historic low inventory level, ”said Sarah Lin Nguyen, Gary Green, a realtor at Better Homes and Gardens Real Estate.

Housing demand is driven by low interest rates and 30-year fixed-rate mortgages, which have continued to decline since 1980, according to the Federal Mortgage Corporation (Freddie Mac).

A winter storm in February also affected housing stocks as some would-be sellers faced flooding and damage to their home and therefore waited to market it, further contributing to the low supply of stocks, Nguyen said.

“It’s just overwhelming to take all the debris and debris that created the perfect storm,” Nguyen said. “I think most of us are looking for [inventory] stay very thin for the rest of the year and pray for no other major events. “

M / I Homes Area President Jay McManus said the low housing stock, coupled with rising prices for building materials, is forcing builders in the area to struggle to meet demand for homes. M / I Homes is building homes in the new Shipman’s Cove neighborhood east of Missouri City.

“We can’t keep up with the demand for inventory,” he said. “We have a huge number of sold homes that we are trying to launch. We simply do not have the ability to accumulate reserves. “

Rising house prices
As the housing stock began to shrink last year and demand in the Houston area increased, house prices rose, Nguyen said.

According to www.houstonproperties.com, in Sugar Land, the average home sales price has increased from $ 350,000 in 2020 to $ 400,000 in 2021. Likewise, the average selling price of homes in Missouri City increased 8.2% from $ 231,000 to $ 250,000 over the same period.

“There are people on the market today who cannot afford a house that a year ago [they] could buy, ”McManus said.

In addition, McManus said the link between prices and interest rates is fragile. According to him, if interest rates start to rise, the purchasing power of home buyers will decline.

“Even half to a point at the interest rate, even though these are historically still very good rates … you just start to lose thousands upon thousands of buyers,” he said.

Nguyen said the rise in home prices has also increased pressure on listing agents tasked with figuring out how to value a home and deciding which offer is best.

“Every nook and cranny has an added stress factor,” she said. “People think it’s just fun and games for listing agents and sellers, but you know there is a lot of added stress … as well.”

Local realtors said another factor driving the current market is the increase in out-of-state transplants moving to Texas. The state welcomed over 537,000 new residents in 2019, according to the U.S. Census Bureau, the seventh consecutive year the state has attracted more than 500,000 out-of-state residents.

Realtor Keller Williams Sapana Patel said she has seen an influx of home buyers wanting to relocate to Sugar Land from California, New York, Virginia and Florida. Likewise, Shocky shared her experience of four families moving to Fort Bend County and each of them moving out of the area.

Out-of-state buyers are often drawn to Texas because of its relative affordability and as more businesses move into the state, said Kunal Seth, head of The Seth Brothers Team, a real estate team that operates in both Sugar regions. Land and Missouri City. In addition, he said, as more people continue to work from home, they have more opportunities to live anywhere.

But it’s not just out-of-state buyers who are driving the strong demand for homes in Fort Bend County. Nguyen said many Houston residents who have lived in the city for a long time to be closer to their jobs are now moving to the suburbs, where they can afford larger homes, have more land and enjoy other amenities.

Construction cost
According to experts, the cost of houses, both new buildings and houses to order, is also rising due to the skyrocketing prices for building materials caused by labor shortages.

At M / I Homes, home construction costs rose 40%, McManus said. In turn, the company’s housing prices rose by 26%. The company is making up for the rest of the cost difference by reducing incentives and opportunities for buyers, he said.

McManus said this is largely due to the unprecedented rise in construction costs. The Texas A&M University Lumber and Lumber Price Report, released in June, showed that the cost of lumber rose 250% year over year between May 2020 and May 2021.

McManus said he has faced rising prices for most building materials, in particular copper and resin, which are widely used in homebuilding.

“For the most part, this increase is not as dramatic as the growth of timber; wood is probably the infamous growth star, ”he said. “The rest of the building’s components have increased in what we would call outrageous, but because the amount of lumber has increased so much, it is relatively moderate.”

The rise in the cost of building materials is a result of labor shortages in manufacturing plants, McManus said. The labor shortage is partly the result of a pandemic that the US Chamber of Commerce said has caused the layoffs or layoffs of company employees, as well as some people who have not returned to work due to increased unemployment benefits.

Bricktown Custom Homes owner Steve Gandy predicts labor shortages will continue to affect the construction industry as developers work to meet the growing demands of the buying market.

“If they move from house to house, they will need more men,” he said. “Labor prices will start to rise, so this is a way to bounce back. It used to be very cheap to build in Texas, but now it is not. “

Competitive market
Patel, who primarily works in the Sugar Land area for Keller Williams, said she first noticed a shift in the property market in January.

“I put a house on the market in the Sugar Land area and 66 families came to the open house,” she said. “Within two days, I received 11 bids for the entire asking price.”

Impact on the Community Newspaper analyzed real estate data from the Houston Association of Realtors for 10 recently sold homes in each of the five Sugar Land and Missouri zip codes. Of these 50 houses, 25 are sold at a price higher than the asking price. In addition, 14 sold $ 10,000 more than the asking price, and one sold $ 50,000 more.

Meredith Canny said her family sold their home in the craftsman-designed area of ​​Siena in April 2021 and bought a new home in the same area in June 2021.

“I don’t know how people buy houses without knowing someone from the inside, because it’s just crazy competition, and bids that exceed the asking price are ridiculous,” said Canny. “At the time, we didn’t know how fast the houses were moving.”

Local realtors say they often prepare their clients looking to buy a home that they may have to submit multiple bids before being selected. This is more true for lower prices than for higher ones.

“In all respects, if you work with a buyer and he gets a home on the first try in this market, it’s very, very good,” said Sonit Seth, group leader at The Seth Brothers Team.

In addition, some buyers opt out of valuation contingencies – most contracts state that if the appraised value of the home is lower than the selling price, the buyer can renegotiate the contract or terminate the contract. This is often done to make the buyer’s offer more attractive to sellers, eliminating the risk of a sale not taking place, Nguyen said.

However, lenders will not make loans in excess of the home’s assessed value. In the absence of a contingency assessment, buyers agree to pay the difference between the offer price and the home’s assessment in cash – a trend that Nguyen said is worrying.

Kunal Seth said that when he represents the seller, he always recommends that they accept the offer in cash, if any. This makes it difficult for first-time homebuyers and low-income buyers in Harris and Fort Bend counties to compete, Nguyen said.

“[Average buyers] may not have money to spare or will not want to save so much money, ”Nguyen said. “These are some of our buyers or consumers who come from out of state because they sold their homes for a higher dollar price. … They usually have more liquid money. “

While local realtors are unsure of how long the current market environment will last – some estimates at least until the end of 2021 and others up to a year and a half – some agreed that buyer fatigue will soon begin to take its toll on the market. …

“Many buyers are very disappointed with how many homes are selling,” Patel said. “Many people get tired of constantly submitting proposals, and then they are not accepted. These people may be taking a break soon. ”

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