Houston Real Estate Update: FIFA Effect on Jobs, Oil at 68 Dollars, and What It Means for Buyers

What Is Actually Happening in the Greater Houston Market Right Now

Before you take real estate and mortgage advice from Uncle Chuck watch this first. Rich Bonn with Habayit Home Loans is breaking down what is actually going on in the mortgage and real estate market with a specific focus on Greater Houston because that is the market that matters for the people watching this.

The FIFA Effect on the Jobs Numbers

The labor market data has been looking relatively strong but there is an important caveat that most people are not factoring into how they interpret those numbers. The FIFA World Cup has driven a significant surge in hospitality sector hiring across the country including hotels, restaurants, fine dining, stadium operations, parking, and all the ancillary employment that comes with an event of this scale.

That effect has been real and it has inflated the job growth numbers meaningfully. The JOLTS report showing 7.6 million job openings is 300,000 above estimates and signals a strong labor market on the surface. But the composition of that job growth matters. When FIFA ends so will a significant portion of those positions. The hospitality and government sectors have been carrying most of the weight in recent labor market data and as the World Cup wraps up that tailwind goes away.

Buyers and agents should be aware that the labor market picture may look somewhat different in the coming months as the FIFA effect unwinds and job creation returns to its underlying pace without the event-driven boost.

Oil Prices and the Inflation Pipeline

Oil prices before the conflict with Iran began were sitting at approximately $67 a barrel. They are currently at $68 a barrel which means most of the run-up driven by the geopolitical disruption has been taken back. That is genuinely encouraging for inflation expectations.

However as Rich Bonn explains there is an important timing dynamic that prevents inflation relief from appearing immediately at the consumer level. Grocery stores, Home Depot, Lowe's, and other retailers are currently buying and selling products that were manufactured and transported using the higher energy costs that prevailed during the run-up. Until that higher-cost inventory works through the pipeline and gets replaced by goods produced at lower energy costs consumers will not see the full benefit of lower oil prices in their day-to-day spending.

It is coming. It just takes time for lower input costs to work through the supply chain and show up on store shelves and at the pump.

The Inflation Metric Worth Watching

Fed chair Kevin Warsh has been advocating for the trimmed mean inflation model also known as the Dallas Fed model which removes the most volatile components from the inflation calculation to get a cleaner read on underlying price pressures. Under that framework inflation is currently projecting right around 2 percent which is the target figure that has become the Fed's benchmark standard.

If that reading holds and gains broader acceptance within the Fed as the preferred inflation metric the implications for rate policy could be meaningful. Several Fed presidents have been speaking frequently and the noise level is high but the trimmed mean data is pointing toward a more benign inflation picture than headline numbers sometimes suggest.

What the Houston Market Data Is Showing

Listings are down modestly in the Houston market. Pending listings are down more significantly reflecting the summer slowdown that typically accompanies the period right after school lets out when families are traveling and the normal vacation pattern temporarily reduces active buyer participation.

Off-market listings are running approximately 16.5 percent above last year's levels. That increase reflects sellers who may have decided not to move or whose properties simply are not selling quickly enough to justify remaining on the public market. Closings were down slightly but the prior week was a short week due to the holiday and those timing effects are normal and expected.

Showings are still up which is the most direct measure of buyer interest and activity in the market. HAR.com views are down but that may simply reflect the fact that a significant portion of the Houston viewing audience is currently watching FIFA coverage and ranch dressing reaction videos from European fans discovering Texas barbecue for the first time.

The Bottom Line for Houston Buyers and Agents

The Houston market is not in freefall. Appreciation is running at approximately 0.8 percent which is flat but not negative. There are people waiting and hoping for a down market so they can say they were right. That is not what the data shows and it has not been what the data shows.

Buyers have more leverage than they did a year ago. Sellers are motivated in more situations than they were during the peak. And the macro picture with oil prices near pre-war levels and trimmed inflation approaching the Fed's target is setting up a more favorable rate environment than has existed in the recent past.

Rich Bonn at Habayit Home Loans covers the Greater Houston market weekly with data-driven updates on what is actually moving rates and what buyers and agents need to know to make smart decisions in the current environment. Reach out to Rich Bonn to discuss your specific situation and what the Houston market means for your homebuying or investment strategy right now.

Sources

HoustonAssociationofRealtors.com
FederalReserve.gov
BureauOfLaborStatistics.gov
EnergyInformationAdministration.gov
MortgageNewsDaily.com