When Natalie Wells and her husband put their Westchase home on the market in November 2020, they were worried the coronavirus might scare off would-be buyers and their older home would take a while to sell. But after one day of showings, they netted five offers all above the asking price.
Good news? For a short time. Then, they were faced with the challenge of finding a new home in one of the most frenzied markets Houston has ever seen. Homes were coming under contract faster than they could make lists of properties that interested them. When they got there on time to make an offer, they were outbid.
They finally landed their dream townhome in East Downtown, but there was a catch: they had to lease it back to the sellers while the sellers searched for another home. Wells and her husband, Michael Crone, stayed with family briefly and then spent two-months in a 400-square-foot Airbnb before moving into their property.
“It was such a roller coaster of emotions to really not know what your future was going to look like,” said Wells, 33. “It was probably one of the most stressful things that we’ve ever done.”
The couple experienced both sides of a red-hot real estate market that set records for sales and prices in 2021, building off an equally torrid 2020. Sales of all homes, including condos and townhomes, jumped 13 percent in 2021 to more than 130,000 — only the third time in history that sales surpassed the 100,000-units threshold, the Houston Association of Realtors reported Wednesday.
Prices for single-family homes climbed more than 15 percent to a record annual median of $300,000.
“I’ve never seen anything like this in the time I’ve been in real estate and I hear the same thing from those who have been in real estate decades longer me,” said Jennifer Wauhob, chair of the Houston Association of Realtors Chair and team leader with Better Homes and Gardens Real Estate Gary Greene. “This has just been a two-year period that is unlike anything we’ve seen before.”
Those two years may well be remembered as a remarkable time when listing prices acted as a starting point for bidding up the relatively small numbers of homes on the market. Multiple offers above asking prices were common. Buyers waived contingencies and paid thousands of dollars in additional fees — all for the privilege of buying a home.
While 2022 may not see the same scorching hot growth, real estate experts expect this year to be another strong, competitive year for homebuyers battling escalating prices, tight supply and rising interest rates.
The agency Houston Properties Team Keller Williams is forecasting prices to rise from 3 percent to 7 percent this year, far below the gains in 2021, but still solid, said Shannon Poindexter, broker associate with Houston Properties Team. Inventories are projected to rise modestly, but remain low for the next four to five years, added Holly Hernandez, realtor associate.
Rates for a 30-year-fixed mortgage last week averaged 3.22 percent, the highest since May 2020, according to Freddie Mac, the government sponsored mortgage company. But rising rates, which are still expected to be historically low, are unlikely to deter many buyers in Houston, experts say.
Jeff Tucker, senior economist at Zillow, said he sees few signs that inventories will rise significantly, noting that many economists expected inventories to start to normalize last year, only to be disappointed.
“As long as those conditions remain the same on the ground, [there are] just very few options to choose from for buyers,” Tucker said. “We feel like we have to predict that’s going to keep causing prices to rise.”
The residential real estate boom began after COVID-19 lockdowns started to ease in spring 2020. That’s when a perfect storm of pandemic-induced remote work and migration trends combined with historically low-interest rates to spark an explosion of sales that made an already short supply of homes even shorter.
Faced with a competitive market, bidding wars became common with buyers willing to fork over sometimes tens of thousands of dollars above asking price.
“In a lot of cases, in a lot of neighborhoods and areas,” said Chance Brown, broker/owner of CB&A Realtors, “the listing price is the starting price, as crazy is that is, especially in Houston, which is not known for that.”
Stuart Hall, 52, and his wife, Rosa, learned the hard way that homes in The Woodlands were particularly competitive.
“Basically, as soon as a home went up, we were there, along with dozens of other buyers,” said Hall, a project manager.
The first offer they made on a home was $15,000 above asking price, but they lost out to buyers paying about $50,000 above asking, Hall said. Lesson learned. When the Halls found their next dream home, made an offer about $30,000 above listing price, with the condition that it had to be accepted within 24 hours.
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“The stars aligned, and the heavens opened,” Stuart Hall said. “It was a miracle when our real estate agent Shannon (Poindexter) told us we had it.”
While it’s still possible to see long lines out the door in open houses and bidding wars popping up, many agents said the market doesn’t feel as frenzied in recent months.
But certain sub-markets and price points have hardly cooled, said Julie Yau Tam, managing broker at Lyn Realty. Homes selling in the $200,000 to $250,000 range remain in high demand, real estate agents said. Three-to-four-bedroom houses in “nice, suburban areas’ such as Tomball, Cypress and Katy are particularly competitive, Tam said.
For example, Tam said some homes in good school districts in Katy received 85 offers early in 2021. This past December, a roughly $249,000 home Tam helped sell in Katy received about 15 offers — which Tam described as “amazing.”
The buyer of that home, however, didn’t think 15 offers were so out of the ordinary. Christine Salazar, 25, a makeup artist and social media influencer, said at times she competed against 40 or 50 offers as she and her husband searched for a home nearly every day for more than seven months.
“In the beginning, we were putting offers every week. It was so exhausting,” Salazar said with a heavy sigh. “I was like, ‘You know what, I’m done, this is taking too much of my time, it’s ridiculous.’”
When she and her family found the home in December, they not only offered $9,000, but also a quick closing and an option fee of a few thousand dollars — a nonrefundable fee paid to the seller that is usually around $100. They waived the financing contingency.
Salazar was shocked when her offer was accepted in December and closed a couple weeks later.
“It was so many mixed emotions cause I wanted to cry,” Salazar recalled. “We finally did it.”