19 Jul Texas Real Estate Market Update – July 2020
What’s On the Horizon
For Real Estate in San Antonio?
Whether you are a homebuyer, investor, or are starting or relocating a business, Texas offers a lot of benefits for real estate ownership. 2020 is shaping up to be a great year for buying property in the San Antonio real estate market.
Real Estate Supply & Demand
Texas home sales are down in response to COVID. The 4% drop is not nearly as bad as the 10% national drop in housing sales. Many experts are still on the fence about what will happen to the real estate market in Texas but are hopeful that the downward trend will be short-lived. The state of Texas has been booming in recent years, in many areas. The growth in available housing has now slowed, which creates perfect conditions for buying property before another period of rapid growth begins.
What will the supply of available property be like in the coming months? There is an increasing group of homeowners who have received mortgage payment relief, which means they don’t have to pay their monthly payments now but will have to double-up on the payments later. There could be a wave of foreclosures coming, for people who cannot catch up with their mortgage payments.
Legal action may cause some hiccups in the timing of market availability. Bankruptcy courts could tie up property for a while, as could probate courts tangle up the property of COVID victims meeting an untimely demise. Other real estate owners may be forced to liquidate property for a variety of reasons that involve court delays.
The pent-up demand for housing from the first and second quarters of 2020 – paired with lower mortgage rates – may actually cause an increase in building permits and house sales in the short term. However, the long-term impact of the disruptions to our economy remains to be seen.
New Tesla Factory Location: Austin, Texas!
A bright spot on the horizon for the San Antonio/Austin area is the plan to relocate the California Tesla plant to Texas. Tensions between Tesla owner Elon Musk and authorities in California erupted when his Fremont plant was forced to close and remain closed due to COVID-19. Musk declared that he would move his headquarters to Texas and has recently announced that the move is official.
The Tesla move to open a brand-new factory in our area, to produce cybertrucks, will bring many benefits. Besides directly providing a lot of jobs for our region, the move will also likely spawn complementary businesses nearby. Mirroring other companies fleeing California’s high taxes and governance for greener pastures, we welcome Tesla to our community. Austin, Texas already boasts the highest average house price in the state around $400,000, compared to $300,000 in other major Texan cities, and $200,000 elsewhere. Great time to buy in San Antonio!
The silver lining: A dip in the economy usually means lower housing prices.
Declining Oil Prices Hurt the Texas Economy
The United States relies on Texas to provide 41% of its crude oil, and Texas depends heavily on revenue from oil production. A downturn in the worldwide oil market – for any reason – causes a temporary dip in the overall economy of Texas. Oil prices in general, and COVID-19 in particular, have been the biggest culprits.
COVID-19’s Effect on Oil: The end of the first quarter of 2020 saw the beginning of sharply decreased economic activity due to stay-at-home orders and working from home, plus whopping levels of unemployment because entire industries closed down (such as department stores, bars, gyms, and entertainment venues). Fewer people driving to work means fewer people burning fossil fuels – not to mention the drop in demand for oil by the airlines and by truckers hit hard by the disruption in the supply chain.
The price war between Russia and Saudi Arabia: When the pandemic began, oil was in high production; when the economies of most countries slowed to a crawl in response to the COVID-19 crisis, there were suddenly very few buyers for all of the oil on the market. The Organization of Petroleum Exporting Countries (OPEC) attempted to limit worldwide production in order to keep oil prices up. Russia was also asked to limit production but refused, which led to a price war between Russia and OPEC (primarily Saudia Arabia). They have now reconciled and agreed to reduce production, but the damage to the Texas economy has been done.
Texas provides over 30% of U.S. oil refining, in 30 refineries statewide, along with significant exploration and drilling operations. Property values in areas surrounding oil production and refining facilities will likely continue to drop. The silver lining: A dip in the economy usually means lower housing prices. This allows those who have the money to buy low, and watch their property values rise as the oil market recovers.
Impact of COVID-19
The impact of the Coronavirus can be seen in declining home sales, which is usually an indicator of a good buying opportunity for residential, commercial, and investment properties.
The COVID-19 pandemic has greatly impacted many facets of our lives including real estate. With parts of the economy closed or reopening slowly, many Americans are out of work or underemployed.
Many are adhering to social distancing guidelines or sheltering at home these last few months. Applications for unemployment and other forms of assistance have skyrocketed in the last few months. Applications for mortgage loans have dropped in many areas, but applications to refinance are at a high everywhere due to lower rates.
Another issue is foreclosure protection as the number of Americans who are foregoing mortgage payments has increased. Texas had provisions to stall foreclosures until the end of May, which have expired for many Texans.
While these factors may have created a certain amount of pent-up demand – and could trigger a temporary surge in buying as things begin to open up – all indicators point to a great buying market for the coming weeks and months, as the full impact of COVID-19 unfolds.
The impact of the Coronavirus can be seen in declining home sales, which is usually an indicator of a good buying opportunity…
Texas offers many benefits to residents, businesses, and investors.
Benefits of Investing in Texas Real Estate
Texas offers many benefits to residents, businesses, and investors. There are no income or property taxes levied by the state, although cities and other local governments collect property tax based on property value, known as an ad valorem tax. Compare this to states like California and New York which layer state property and income taxes on top of local government taxes. Local tax rates vary with the number of schools, the scale of public works projects, and other issues involving the levels of service property owners receive.
Key Metrics to Consider
- Home Sales are down by at least 4% and dropping
- The mortgage interest rate for a 30-year fixed rate is below 3.5% – still hovering around the lowest rates in recent history
- The 10-year yield on treasury bonds (thought to be one of the safest investments) was around 1.8% at the beginning of 2020; now it is less than half that rate – below 0.7%
- National unemployment is expected to exceed 20% before the pandemic is under control, and unemployment numbers for Texas fall right in line with the national rate
- The Texas Leading Index (a measure of economic outlook) is down by almost 12%.
These factors combine to create a buyer’s market in real estate in and around San Antonio.
These factors combine to create a real estate buyer’s market in and around San Antonio
There are no certainties in the economic marketplace, but motivated sellers make it a buyer’s market in Texas. Signs point to a coming recession in which property values might drop even more. Should you wait and see what happens to property values or buy now while rates are low?
Click below to get a feel for the current San Antonio real estate market, but keep in mind that searching for the perfect house is a big deal.
Step up your game by having me monitor the Multiple Listing Service (MLS) for you, so you can react quickly when a great property becomes available.
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2241 NW Military Hwy STE 302
San Antonio, TX 78213
Federal Reserve Bank of Dallas: https://www.dallasfed.org/-/media/Documents/research/econdata/texaseconomy.pdf
U.S. Energy Information Administration: https://www.eia.gov/state/print.php?sid=TX
U.S. Census Bureau: https://www.census.gov/construction/nrc/pdf/newresconst.pdf
Texas A&M University Real Estate Center: https://assets.recenter.tamu.edu/Documents/housing-reports/Texas_Housing_Insight-202005.PDF
Zillow Research: https://www.zillow.com/research/daily-market-pulse-26666/
Mansion Global: https://www.mansionglobal.com/articles/new-york-residential-transactions-hit-nine-year-low-prior-to-coronavirus-fallout-214898
Business Insider: https://www.businessinsider.com/map-us-states-coronavirus-case-totals-cases-per-capita-tests-2020-5
Houston Association of Realtors: https://www.har.com/content/mls
The Washington Post: https://www.washingtonpost.com/business/2020/05/05/number-homes-sale-new-homes-listed-falls-nationwide-april-report-finds/
The New York Post: https://nypost.com/2020/05/24/unemployment-rate-could-remain-in-double-digits-through-election-wh-adviser/