What Does The Future Behold?
For most of 2019, the local Fulshear/Katy real estate market stumbled along searching for a clear direction. There were a few twists and turns followed by some relatively mild ups and downs; much like you would find on a children’s roller coaster. Nothing thrilling though, no white knuckle moments nor were loud screams of exhilaration heard. Rather, the market plodded along and neither boomed nor plummeted. So, if this was the market in 2019, what then is the forecast for 2020?
The answer to this question is found in the basic economic fundamentals of supply and demand. As the supply of homes on the market increases, prices tend to soften while Days on Market (DOM) increase. Ergo, when demand exceeds supply then prices rise and (DOM) decreases. So, how will this fact translate to our market? There are four (4) major factors that will. They are:
POPULATION GROWTH:First, in looking at our market area, the dramatic westward growth will continue to be overwhelming. And, nothing is going to stop it. Why? That’s easy, because Houston is estimated to add almost 1.5 million new residents in the next 10-years. As insight, that is about the population of Dallas, San Antonio or Philadelphia! And, west Fort Bend County is where a huge percentage of these new residents will be calling home.So, the unrelenting demand for housing will be a stabilizing factor and will soften any downturns in our housing market.
The market giveth, and the market taketh. Unfortunately, this also means the growth will bring an endless supply of New Homes. That is good news for Buyers because New Homes offer the latest in technology, floor plans, design and finishes. Not so for residents though, as this fact makes New Homes formidable competition for the Resales. As insight, consider how Buyers demand for the latest in new color palettes, quartz counter tops and ceramic “wood” floors have almost instantly dated many Resale homes. In short, there will be a huge demand for housing, yet the New Homes will be absorbing more than the lions share of it. You only have to look at all the new roof tops that have been added in just the last 2-3 years. That means every one of these New Homes was purchased at the expense of a Resale. Thus, the “war” between the Resales and the New Homes will continue battling for the same Buyers.
PRICE OF OIL:Another factor affecting the market is oil. The reason? It’s because we are located in the backyard of the energy capital of the world and the majority of residents living and moving here are energy related. Currently, companies are still doing layoffs (please stop!) and that is hurting not only their employees, but it affects the real estate market adversely too. It puts downward pressure on both buying activity and home prices. The cure? Rising oil prices.
Unfortunately, it does not appear that there will be a significant increase in worldwide demand that will push prices significantly above $70 per barrel for an extended time. A major world event, like the threat of a war in the Middle East or North Korea, would raise prices. But conversely, events like the current concern over the pandemic coronavirus would lower prices. Yet, both would be short term “spikes” and oil prices would probably settle back to the range they are in today. So, I don’t see where oil, a huge driving force, will be any better for the real estate market than last year.
INTEREST RATES & ELECTION YEAR:There are two other major factors that will impact the market. The first is interest rates. I don’t believe they can go any lower. How could they! Surprisingly, when they begin to rise, and they will, that will be good news because this normally serves as a catalyst for Buyers to lock-in lower rates and this results in a stimulus, albeit short term, to the market. The other is the Presidential Election. If Trump wins re-election. If so, there will not be much impact to the real estate market because the nation knows his policies. However, if a “far left” candidate does, or even appears likely to win, then I believe the real estate market will be negatively impacted because of the uncertainty it creates due to everyone waiting to see what is going to happen.
CONCLUSION:So, what is the forecast for our local housing market? I’ve checked my crystal ball and I don’t foresee anything on the horizon that is going to cause the market to move significantly towards either a Buyers or Sellers market. Rather, the market will remain in a degree of reasonable equilibrium.Demand for housing will increase and interest rates will relatively remain low. Importantly, the completion of FM 1093, along with the opening of more retail and restaurants, will serve to transform, not only the physical appearance, but also the addition of more amenities that will make the Fulshear/Katy area even more desirable (is that possible!) All of these factors unite for positive forecast. However, they are offset by fierce competition of the New Homes which will remain a significant challenge for the Resales. In addition, older homes and those not updated will continue to experience even more difficulty in selling.
All of the above only serves to substantiate my prediction that 2020 will only be slightly better than 2019.That’s pretty good though because last year wasn’t too bad, just not great. However, there will certainly be challenges throughout the year. We understand as Agents though, that the lives of our Clients hang in the balance when they are either buying or selling a home. Yet, we live in one of the best places there is to call home, so I’m optimistic about the future and the road that lies ahead.