Pandemic has not slowed local housing market; demand still high, supply low
A global pandemic has not stopped the upward real estate market trend in Fredericksburg.
Local real estate agents reported in May that the future of the market was uncertain, but as the third quarter nears its end, sales have never been better in the Hill Country.
In the first quarter of the year (January through March), the Multiple Listing Service reported 70 home sales.
Sales totaled $29.7 million with a median sale price of $332,250, according the Central Hill Country Board of Realtor’s MLS.
In the second quarter, 46 homes sold in the city limits, totaling $23.3 million, with a median sale price of $398,500.
Two years ago in 2018, there were 118 homes sold in the first half of the year, totaling nearly $43.1 million.
A year later at the halfway mark, there were 128 sales totaling over $48.8 million.
Lower interest rates have been part of the fuel for the real estate market engine, revving up sales, according to Greg Oehler, broker for Texas Hills Realty.
According to the National Association of Realtors, home sales across the country exhibited a similar pattern with a 20.7% increase in May but remained subdued on a year-over-year basis.
According to Wells Fargo, interest rates for 30-year fixed mortgages are at 3.063% APR, while a 15-year rate is at 2.829% APR.
NerdWallet published APR rates as low as 2.976% for a 30-year fixed rate.
Low mortgage rates bolstered demand for first-time homebuyers, which accounted for 35% of national sales in June, according to the Real Estate Center at Texas A&M University.
The center also reported that low mortgage rates support the year-over-year increase but the effect of that stimulus may dwindle if persistent unemployment shrinks the number of qualified buyers.
“However, increased pricing has limited first-time buyers,” Oehler said. “I am not seeing as many first-time buyers as one might expect, given the current rates.”
He estimates that only 10% of buyers are purchasing homes for the first time.
Oehler believes the local market is significantly different than markets in other areas.
He also said that lenders and title companies have remained busy with refinancing existing mortgages for those taking advantage of the lower rates.
Hill Country Titles reported more than double the number of refinances in June. In June 2019, the company had 14 refinances and in June 2020, there were 32.
July saw an even bigger change with just eight refinances in July 2019 and 43 a year later.
August saw a comparable number with 2019 reporting 20 and 2020 having 38.
Over the last six months, Fredericksburg has seen a significant increase in demand for real estate but little inventory.
There are many fundamental challenges facing the housing market during the pandemic, according to Real Estate Center at Texas A&M research economist Dr. Luis Torres.
“The months of inventory for existing homes plummeted to a record low of 2.5 months, exacerbating shortages, particularly at homes priced less than $300,000,” Torres said. “The number of new listings hitting the market stabilized, but lagged year-ago levels by about nine percent. This imbalance has housing affordability implications.”
Torres said that while sales surged over the summer months, the number of new listings hit the market has not matched recovery, worsening the state’s housing shortages, particularly for homes under $300,000.
“More people are scrambling out of densely populated areas in favor of smaller crowds and low interest rates,” Oehler said. “More people are working from home and do not have to put up with all the negative factors of living and working in a big city.”
Oehler estimates that about 70-80% of buyers are coming from larger cities. Many buyers see Fredericksburg as a desirable place to retire to after visiting for several years. Others move out of highly populated areas because of politics, taxes, rising crime rates or feeling too crowded.
Demand for properties listed under $300,000 has been high for several years but the properties are a rare find in Fredericksburg, Oehler said.
In mid-August, the MLS showed 19 homes priced less than $300,000 out of 93 total listings.
Of those, 15 were priced at $1 million or higher. The average list price was $606,395.
“We tend to have less and less residential inventory priced below $300,000,” Oehler said. “Demand may be high, but inventory is low.”
He added that buyers think a good market will last forever but with low inventory, buyers have to act fast.
“Some property owners get caught up in the euphoria of a good market and think it will last forever,” Oehler said. “Over time, conditions that fuel the engine can change and have dramatic effects, some rather quickly.”
According to the Real Estate Center, homes sold in June through the Texas Multiple Listing Service, surpassed 29,000 for the first time since August 2019.
“Texas’ housing market rebounded after two and a half months of sluggish activity amid the economic shutdown,” said Dr. James Gaines, chief economist for the center. “June housing activity recovered substantial pent-up demand.”
After accounting for seasonal factors, the state’s MLS sales increased 34% relative to May but remained below first-quarter levels.
The median price for existing Texas homes jumped from $235,000 to $250,000 in June.
“While June was a positive month for sales activity, the resurgence in contracted coronavirus cases and hospitalizations could reverse the recovery and remains the greatest obstacle to the housing market,” Gaines said.
With the COVID-19 pandemic, real estate agents are adapting to how they sell properties.
Agents are offering virtual tours, taking more photos and offering drive-by viewings for their clients.
“Often, agents drive to showings in their own car while buyers follow behind them,” Oehler said. “Inside the home, if they cannot keep a safe distance, they wear masks and gloves.”
In May, Oehler said buyers tended to look more online for most of their decisions and came to view the properties once they had narrowed them down, rather than looking at a large amount of properties in person.