The city continues to attract plenty of interest from buyers outside Texas
Closings in Houston’s housing market were higher in July than the same month last year – but an uptick in inventory is helping boost buyer prospects and shift the advantage away from sellers.
The number of single-family home closings across the city increased by 1.8% month over month in July, according to the Greater Houston Partnership, although a flood of new listings has generated “ample” choice for hopeful buyers.
While sales activity is still muted by historical standards, there’s been little sign of a crash in recent years even amid rising interest rates and affordability challenges facing borrowers, according to a loan advisor based in the city.
Melissa Tubau, of Lock It Lending, told Mortgage Professional America that business had been “consistently busy” throughout the year, and particularly after mortgage rates started to fall in recent weeks.
Activity has been brisk on both the refinance and purchase side, she said. “We’ve definitely seen an uptick in the refinance market due to the drop in rates that’s happened over the past couple of weeks,” Tubau said.
“I would say purchase has remained pretty stable but we have a solid purchase market in Houston anyway with so much relocation that happens from out of state.”
Why is Houston so popular among buyers from outside Texas?
The city is an attractive hub for homebuyers searching for an affordable option in an increasingly challenging national market, with its housing costs consistently ranking near the bottom of the 20 most populous US metros.
The cost of owning a house in the city is 17.8% below the national average – and 84.7% lower than the average of the 20 metros with the highest population. Only St. Louis, MO ranks below Houston among those metros for housing affordability.
That’s made it a magnet for buyers from outside Texas – not least because while some are able to keep their out-of-state jobs and work remotely, the city also has a “very solid” jobs market that’s accessible to plenty of movers, Tubau said.
Attention from outside buyers is having another impact on the housing market: “[A lot of] people that are selling their properties from out of state tend to have a lot more equity and upfront cash,” she added, “and so of course that affects the market as far as cash buyers and things like that.”
What’s top of mind for loan officers in the current market?
Amid a recent market shift that’s seen mortgage rates fall – to an average of 6.44% for a 30-year fixed offering at last reading – educating clients and adding maximum value has been especially top of mind for Tubau.
MBA vice president and deputy chief economist Joel Kan reported that mortgage rates declined for the fourth consecutive week, with the average 30-year fixed mortgage rate now at 6.44%.
— Mortgage Professional America Magazine (@MPAMagazineUS) August 29, 2024
Read more: https://t.co/laHXzUFnST
That can involve a frank discussion on whether a home purchase makes sense for a borrower in the current environment. “You don’t need to be pushing people to buy homes constantly,” she said. “I don’t feel like that’s what our role is, because it’s a huge commitment. It’s a huge debt.
“So I go more along the lines of educating people as far as the interest rate [goes], whether or not you should be spending money buying points right now… just general overall financial education rather than trying to sell or convince someone to take the deal.”
Another important point for borrowers to note: while mortgage rates are on the way down, they won’t necessarily slide significantly further in the event of a Federal Reserve interest rate cut, set to arrive in September.
That’s because bond markets already price that likelihood into their bets on the rate cut outlook, with benchmark 10-year US Treasury yields projected to end the month 30 basis points lower than the end of July.
Caution on the interest rate outlook is something Tubau has been eager to stress to her clients, even despite growing optimism that about multiple Fed cuts ahead. “Rates have already been coming down, so I think people are expecting [them] to fall off a cliff,” she said, “and it’s just not realistic, since they’ve already kind of been adjusting for it.”
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