The only thing churning more intense than my stomach was the salt water in the Gulf of Mexico. The storm surge from Hurricane Ike had most coastal residents scrambling for higher ground and my gut craving Dramamine and that patch that embarrassingly sticks to the skin behind your ear that tells the world, “I am a land lover.” I was feeling seasick without ever leaving dry land.
I confess. I’m a Realtor in Houston, Texas who was a selling machine leading up to the “greatest storm” of my grandkid’s era. I survived the 175 MPH winds of Hurricane Carla, not to mention every hurricane before and after Carla since 1953. So, for me, this hurricane was just going to be another Texas breeze. My grandchildren, however, will tell my great grandchildren someday how they survived the greatest storm of their time. In my case however, the little ones will sit at my feet as I recount how I survived the greatest real estate storm of my time, at least since I came to Re/Max Houston 20 years ago. Now, I’m not talking about Hurricane Ike. I’m referring to the “Perfect Real Estate Storm” that hit Houston all at once and high winds and storm surges are only part of the story.
Ok you ask! Why is a Re/Max Houston professional espousing such negative thoughts about the Houston real estate market? In reality, what you will glean from my personal story here is just the opposite. Actually, now may be the best time to buy Houston real estate, just as it was during the oil crash of the 1980’s. Those who bought homes in Houston then made remarkable profits when they sold just a few years later. Perhaps those who missed that opportunity before now have a second chance to score some great Houston, Texas real estate opportunities. The smart money is doing just that already.
Let me lay all my cards on the table. I’m just going to say it and get it out there. I sold seven homes in 10 days before Ike hit and I didn’t want anything, including Mother Nature messing with my production. There, I said it and there are no take-backs. I was on a proverbial roll. As Forest Gump would proclaim, “I have nothing else to say about that.” The third quarter of the year and the holidays were looking pretty festive especially since I still had other pending sells in the pipeline just about ready to close as well.
Once the storm hit land however, and the aftermath was vividly displayed on the news, I came to my senses and realized how selfish my thoughts have been. My own concerns were insignificant to the impact the storm was having on so many people’s lives. Like the rest of my fabulous neighbors, I got out what yard equipment I still have at my age–a rake–and I began the process of helping people in my neighborhood removing limbs, leaves and offering hugs to those who just needed one. The images on television of the devastation had a much greater impact on the collective psyche of my neighbors than any minimal damage the storm caused us. They were network news and CNN driven hugs. They were some of the same hugs that brought us together after 911. I love those hugs. They are sincere and meaningful hugs which tells the recipient I’m glad you’re ok and I am here for you. I wish terrorists and natural disasters weren’t the catalyst of such an outpouring of affection.
The point is, as the rest of the country was lamenting from its own real estate storm with plunging real estate values to the depth of Davy Jones’ Locker, I was enjoying a robust market for the most part. Since the storm however, the market in Houston at least for the moment has been quiet for real estate professionals as it was when the eye of Hurricane Ike passed directly overhead. That eerie quiet when you know it has stopped now but there is more on the way.
What changed in the Houston real estate market? Why did our thriving market go from one of the hottest real estate markets in the country to the status quo with the rest of the nation’s housing market? Hurricane Ike tore up the Gulf Coast, but over all, the city of Houston and surrounding communities were spared that same devastating damage. Why the sudden slump in Houston real estate values?
There she blows! Here comes the perfect storm! I like to call it the “superfecta.” Like the horse race, win, place, show, and there goes my equity–for the moment I might add. Four significant events hit us pretty much at the same time. As the 1980’s illustrated however, when the next race begins, the Houston, Texas real estate market is the first out of the gate. With the right jockey, your Re/Max Houston professional, The “Bayou City” will be the first to the finish line too.
Of course, one of the four events is Ike. Many gulf coast residents were distracted by storm damage, either to our homes or someone we know. There was much to do and no electricity to do it with. Minimal, fences were down and some shingles were missing–if we were lucky. Either way, it was a pain in the neck. Insurance companies, contractors and handymen had to be contacted. We were all preoccupied. It took months for the posttraumatic stress of Ike to get past our subconscious even if our homes were perfectly fine and undamaged. Buying a home, with the devastation people saw on TV was not exactly a top priority at this moment in time.
Secondly, the demise of the sub-prime market was already beginning to have an affect on the Houston real estate market just as it did to the rest of the country. Foreclosures were piling up and home buyers who could qualify for a loan, literally on one day, were suddenly shut out of the real estate market the next day as lower credit score applicants were suddenly denied low down payment programs previously available. Some programs ended while buyers were on contract waiting to close. “Poof,” programs were just cancelled by lenders and the sale fell apart. The buyer was devastated. Ironically, the seller even had a difficult time believing their own Realtor that a program would just suddenly end. The seller wanted the buyer’s earnest money for having their home off the market for a nonqualified buyer. This is a lesson in simple supply and demand. Take away the demand, add to the supply and it’s a formula for falling real estate values or any commodity for that matter which looses its market.
A third factor affecting the Houston real estate market is falling oil prices. This phenomenon is more indicative to the Houston economy than the rest of the country. The Houston economy is more diverse than it was during the 1980’s oil crunch, but let’s be real–oil drives the Houston economy. At $ 140.00 a barrel, the energy sector is begging for qualified employees. Engineering and oil and gas companies could not hire qualified people fast enough. The demand was so great; these firms had to look to other shores to find enough qualified workers. Cut the price of oil in half in a matter of a few months, well someone “my friend” to borrow a phrase from John McCain is going to get a pink slip. Neighbors who gave me hugs a few months ago now have concerns about “pink slip” rumors at their jobs. I’ve received several pink slips myself from potential clients who have dropped out of the market until economic concerns settle down. A mistake on their part? Just like the stock market, the unwise stock purchaser waits for stock prices to go up and then jump into the market rather than buy when values are still low.
Along with falling oil prices of course, we’re dealing with the slumping stock market, wall-street blues (what a great cop show that was); and the failures of Fannie Mae, Freddie Mac; Ford; GM; AIG bail outs; hand outs and Brett Favre doesn’t play for the Green Bay Packers anymore. When will it all end?
To make a long and tumultuous story short, a lot has happened to the Houston housing market in a short period of time. But, just as fast as you can say, “The Jets are going to the playoffs with Brett Favre,” the Houston housing market will turn for the better as well, just as it did 20 years ago. The smart money will jump on Houston Real Estate before it takes off again. Homes that sold for $ 30,000 in 1988, sold five years later for $ 65,000 in traditional lower value areas. Prices increased dramatically more in higher demand areas such as The Heights near downtown. By year 2005, the same home sold between $ 95,000 and $ 100,000 or for much more depending on the area of town. Own a few of these values and call it a day. The deals are out there now, but it will not last forever. It never does.
The price of oil will go up again. It’s only a matter of time. Hurricane Ike will be a distant memory. Houston real estate values will be off to the races, again.
So, miss the second great real estate opportunity in Houston in the last 20 years and we will see then who needs the Dramamine. I have been seasick before without leaving land. It’s not a pleasant feeling.