February Newsletter

  1. Mortgage rates are rising more gradually as markets wait for the Fed to clarify their timetable.
  2. Home price growth should return to normalcy, to around 5% for all of 2022.
  3. In the near term, buyers are rushing in with the hopes of securing a low interest rate before the next Fed increase.
  4. Expect a strong seller’s market, which means if you’ve been thinking about listing your home — there’s no time like the present.
  5. The big wildcard is the permanency of work-from-home policies or even hybrid models of employment.
  6. With the spring home shopping season right around the corner, expect inventory and sales to pick up over the next few months.

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February Residential Market Review: Courtesy of Har.com. Please click on the logo to learn more.

HOUSTON — (February 9, 2022) — The $1M+ housing segment dominates January sales, home prices continue to rise, and inventory remains low… — The Houston real estate market charged into the new year carrying the positive momentum it sustained throughout 2021, with the strongest sales activity at the highest end of the pricing spectrum because there is little to no inventory available below the midrange. With an inadequate supply of new listings to meet consumer demand, inventory overall remains at historic lows, and steady pricing increases coupled with rising mortgage interest rates create uncertainty over what lies ahead for the market in 2022. According to the Houston Association of Realtors (HAR) January 2022 Market Update, single-family home sales rose 7.1 percent with 6,451 units sold compared to 6,024 in January of 2021. Renters also kept the lease market in positive territory in January. Homes priced from $1 million and above drew the greatest sales volume increase for the month, registering a 52.2 percent year-over-year gain. The $500,000 to $1 million housing segment came in second place, surging 47.1 percent. That was followed by homes priced between $250,000 and $500,000, which rose 36.1 percent. Once again, the heavy volume of high-end buying and lack of inventory of homes under $250,000 pushed overall prices upward. The average price of a single-family home rose 16.2 percent to $377,738 while the median price shot up 17.9 percent to $310,000. While both figures represent highs for a January, they are well below the historic highs reached last year. Sales of all property types were up 9.3 percent year-over-year, totaling 8,134, and total dollar volume for January jumped 28.1 percent to $2.9 billion.

February Commercial Real Estate Highlights: Courtesy of BISNOW. Please click on the logo to learn more.

Texas’ ‘Business-Friendly’ Marketing Is Paying Off As Corporate Relos Roll On…

Houston – February 1, 2022

From office guys “carrying the lunch bags of industrial guys” in Austin, where $1B Tesla’s Gigafactory is just the most prominent example of the city’s industrial boom, to Dallas-Fort Worth’s ascent to become the national “headquarters of headquarters,” Texas is having a moment in the sun. Over the past two years, since the onset of the coronavirus pandemic, the state has gained nearly 100 corporate headquarters, according to Ed Curtis, CEO of YTexas, a business network for companies expanding in or moving to Texas. The organization, which held its annual State of Real Estate event late last month, predicts more sunny days ahead into 2022 as companies renew focus on the Lone Star State amid rapid growth in its metro areas, especially in the suburbs. Leading the pack of Texas cities garnering relocations is the Dallas-Fort Worth metroplex, which is rapidly tacking on more Fortune 500 company headquarters, and is expected to soon become one of the largest metros in the U.S. Texas has long promoted itself as a business-friendly state. Amid major companies relocating to Texas, like Tesla and Hewlett Packard Enterprise Co., real estate is seeing a boost. “By 2030, they were forecasting that the DFW metroplex would be the third-largest metroplex in the country, behind New York and LA,” said panelist Russ Anderson, president of Briggs Freeman Sotheby’s International Realty, citing Freakonomics. Freeman also sounded a note of caution. “It’s hard to imagine infrastructure and new construction being able to absorb that much growth and still provide the same quality of living that makes it so valuable to all of us today,” he said. Large manufacturing companies moving or expanding to Texas are setting up shop in suburban or rural areas outside of major metros, as seen in Samsung’s $17B chip plant in Tyler. For that reason, the Greater Houston Partnership, Houston’s primary chamber of commerce, is ramping up efforts to coordinate with other area communities to market Houston for company headquarters. “Overall, Houston is doing well, and I would add, we’ve really upped our economic development efforts in the last two to three years. But the competition is stiff and getting stronger,” Greater Houston Partnership Board Chair Thad Hill said at the 2022 annual meeting on Jan. 28. Houston suburb The Woodlands was highlighted by YTexas for its partnerships and pro-business attitude, with U.S. Rep Kevin Brady, who represents a swath of Houston that includes The Woodlands, touting the region’s push to return to normal operations after Covid-19 lockdowns. “Communities like ours [are at an advantage], at a time where Americans now have rethought their life and work balance,” Brady said at the YTexas event. “Quality of life has dramatically exploded up the list of criteria. Communities that don’t understand that will lose.” A comparative rise in commercial rental rates in other states and high demand will keep Texas as a prime destination for companies seeking a new home.
“So long as there’s demand — and I think there will be demand in Texas — that will continue to spur development, and it will continue to provide great returns for developers,” Jay Lamy, principal and co-founder of Austin-based Aquila Commercial, said at the YTexas event. Contact Lane Gillespie at lane.gillespie@bisnow.com

February Mortgage News & Education: Courtesy of thebalance.comPlease click on the logo to learn more.

There are two words that often flash in the minds of loan officers when a self-employed individual applies for a mortgage: high risk. There’s a stereotype that self-employed borrowers have less predictable income when compared to the stability afforded by salaried employment. Because of this, self-employed mortgage applicants usually have to meet a higher threshold of lender requirements to secure a mortgage loan. But, it is not impossible. Here are several ways to help you get prepared before applying for a mortgage.

1. Assess Your Business and Personal Finances: Before you begin shopping around for a mortgage, it is crucial to take stock of your business and personal finances. And it’s important to keep track of whether you have filed personal versus business income separately, or together, to help the lender and yourself during the mortgage application process. Simply put, make sure your sources of income are documented. When considering a mortgage application from a self-employed borrower, the bank will not only evaluate your financial health but the state of the business (likely your main source of income) as well. Here are some questions to ask yourself:

  • How large are your existing business and personal debt obligations?
  • Does your business earn enough income on a regular basis to easily cover potential mortgage payments and other debt payments?
  • What monthly mortgage payment budget can your business support?
  • If you pay yourself a regular salary, how much could you comfortably pay each month and still have enough to live on?
  • Can you show at least two years of steady—or preferably growing—income from being self-employed?
  • How much can you comfortably afford to use as a down payment and to cover closing costs?

Be honest with yourself in answering these questions, as the lender will require proof of the above if you choose to proceed. In particular, your debt-to-income (DTI) ratio will be central to whether the bank approves you for a mortgage, and at what cost. The standard DTI requirement is 43% or lower. It’s also important to track your business’s finances using professional software or even a simple spreadsheet to show the lender because they will seek proof of income flows. Knowing every aspect of your business’s financial health is key to this process. Investing time in this first step will help you determine your eligibility, nail down your price range and increase your odds of getting a mortgage faster.

2. Check Your Credit Score: Your credit score, which is based on your debt payment history, will determine if you get the loan and under what terms. The FICO score is the most commonly used metric lenders use to evaluate your risk as a borrower. The score will typically range from 300 to more than 800—the lower your score, the higher your interest rate will be and more difficult to get approval on a mortgage. A lender will typically grade your score in the following ways:

  • Exceptional: 800-850
  • Very Good: 740-799
  • Good: 670-739
  • Fair: 580-669
  • Very Poor: 300-579

You can check your credit score as often as you’d like without damaging it, as it only requires a soft credit check. Further, you can typically check your credit report once a year for free at AnnualCreditReport.com. However, each credit bureau is offering free weekly credit reports until April 20, 2022, due to Covid-19. Owning a business should not directly impact your score, unless you took out a personal loan or line of credit. In addition, some business credit card issuers report all of your account activity to the credit bureaus.

3. Do Your Due Diligence When Choosing a Lender: Not all mortgage lenders are created equal, especially for loans to self-employed borrowers. Large traditional banks usually have strict credit standards and a rigid process for mortgages that might not suit a self-employed applicant. Online lenders might be less risk averse but demand a higher interest rate. Consider smaller banks that specialize in mortgage lending and can offer a personalized service, rather than being at the mercy of an algorithm. Another option is working with an experienced mortgage broker. A broker who has a history of working with the self employed can more easily guide you through the process and save you the legwork. Mortgage brokers leverage their network on your behalf, with an understanding of your unique circumstances to find you more lending options faster.

Additional Resources: Here are a few references that we have found helpful in understanding our markets and economy… 

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