We are coming to the end of the third quarter, and over the last year, the residential real estate market has seen a shift in home values. In Baytown, TX, the housing market has actually seen quite a drastic shift, with housing prices increasing 6.1% in the last 12 months. The current median home value as of September 2018 was $145,200; the prediction is in – housing prices are anticipated to rise another 3.8% within the next year.
The question remains: what is causing this increase in home values? What does it indicate for homeowners’ futures?
What Is Causing the Increase in Home Values in Baytown?
Before we delve deeper into this question, it is important to note that the US economy has supported low interest rates over the last 12 years, spurring buyers to enter the market now rather than later. Years of low rates and enthusiasm in the market have impacted every facet of the industry – take a look at some of the far-reaching effects below:
- Since the 1950s, Baytown has witnessed continuous annual population growth. Despite Hurricane Harvey, which economists anticipated would have had a negative effect on a community like Baytown, the town is experiencing population growth. More residents means higher demand for housing – and with low interest rates, people are motivated to buy rather than rent.
- The Baytown unemployment rate is 35% higher than that of the United States. However, over the last year, Baytown has seen an increase in the job market by 0.8%, which has translated into higher incomes for residents. Higher income ultimately results in more buyers as well.
- Demand is still outweighing supply. Following Hurricane Harvey, many homes were destroyed – and unfortunately, many still have not recovered. The economic challenges that the residents of Baytown inherited following the hurricane made recovery difficult. Many individuals did not have the insurance policy to completely cover the damages, while others were financially strapped and stuck without a solution. Many of those who had the proper insurance did not want to take on the responsibility of fixing a new home – so they have opted for buying one instead.
The continuous increase in housing prices may in turn trigger a seller to hold off – they may believe that although it is a seller’s market now, that they should wait to sell at a higher price. However, a higher price does not always indicate a seller’s market.
Risks of Waiting to Sell:
1. Interest Rates Are Rising: With rising interest rates, buyers tend to lose motivation to purchase – essentially, the community tends to be pushed towards renting. Higher interest rates not only make it challenging for affordable monthly mortgages, but they also make it more challenging for individuals to qualify for the lenders.
2. The Drop is Coming. The future of the real estate market is impossible to predict; although analysts expect a continued increase in home values, there is always uncertainty. With lower interest rates and a hot market, sellers are guaranteed to get top dollar for their property right now. Nonetheless, waiting in hopes of a higher return can be risky. If the economy has a sudden shift, sellers could lose all potential.
3. Housing Prices Rise above Inflation Rates. Inflation rates in the US are generally between 2-3%, averaging at 2.7% as of August 2018. The increase in housing prices was a drastic 6.1% in Baytown – this means that housing prices are increasing double the expected amount. Overall, this decreases the number of viable buyers – unless an individual’s salary matches this 6.7% increase, they may find it challenging to obtain a loan for the home values, creating a shift toward renting.
The Baytown Market
Generally speaking, this market is a challenging one to read. Home prices are increasing, job growth is rising, and unemployment is declining – to some, this may indicate a continued seller’s market. Still, rates are shifting so significantly that the economy may not keep up with the housing market. If the trend continues, sellers may stop losing the advantage and ultimately lose profit on their homes.
If you are a seller, this may be the most profitable time to sell – especially since interest rates are anticipated to see two more bumps before the end of 2018. With uncertainty on the rise, it is time to get your home evaluated.
We here at Gulf State Homebuyers would like to provide you with a free home evaluation. We offer competitive prices, quick closes, and a friendly staff. To get started, just contact us, and we will set you up with a qualified representative.