What the HAR.com Weekly Snapshot Is Telling Us About Houston Right Now

Rich Bonn at Habayit Home Loans has the weekly Houston area real estate update and this week there is more to discuss than the market numbers. There is a debt conversation that every Houston homeowner with a low interest rate and a credit card balance needs to hear.

Starting with the HAR.com weekly activity snapshot. New listings are up almost 2.5 percent year over year. Pending listings are down which makes sense as closings are processing through. Off-market listings are also down. Closings showed a slight decrease on paper but the actual number tells a different story. Nearly 1,500 families closed on new homes in Houston last week. That is not a slow market. Showings are down slightly and listing views are down as well and Rich attributes both directly to back-to-school season. Families are shopping for school supplies this week not houses. The activity will return.

The Elephant in the Room: Credit Card Debt and the Solution Sitting in Your Home

American credit card debt and consumer credit lines are at historically high levels. The debt load is real and for many Houston homeowners it is creating monthly pressure that feels impossible to escape when minimum payments barely touch the principal.

Here is what most people with a two or three percent mortgage are not thinking about. There is approximately 35 trillion dollars in home equity sitting available across the country right now. That equity is a resource. The question is how to access it without sacrificing the low interest rate that makes the existing mortgage so valuable to keep.

Rich has a direct answer. You do not have to touch your first mortgage to access your equity.

If you are self-employed a bank statement home equity line of credit qualifies you based on actual business deposits rather than tax returns that have been optimized to minimize taxable income. If you are a traditional W-2 borrower a regular home equity line of credit accomplishes the same thing. Either way the existing first mortgage stays exactly where it is at the rate you locked years ago.

The strategy is straightforward. Use the HELOC to pay off the credit card balances that are accumulating interest at rates that can exceed twenty percent. Then redirect the monthly payments you were making toward those credit cards to the HELOC balance instead. Because the HELOC rate is dramatically lower than credit card rates the same monthly payment pays down the balance far faster. You get out of debt without touching the 2.5 percent rate. You stop watching credit card balances grow despite making payments every month and start watching a lower-rate balance disappear.

What Is Happening in the Economy That Affects Houston Buyers

Jobless claims fell approximately 6,200 this week which signals a reasonably healthy economy overall. The challenge is inflation and specifically where it is coming from. Oil prices are the primary driver and that dynamic is directly connected to events overseas that have been moving energy markets throughout the year.

The Federal Reserve and Washington attempted a form of mini quantitative easing last week by buying back treasuries to push interest rates lower. The bond market rejected the move. The reasoning from bond investors is straightforward. The last time this much cash was injected into the economy inflation followed. The economy is already in an inflationary environment. Adding more liquidity risks making inflation worse not better and bond investors are not going to accept lower yields in exchange for higher inflation risk. The market is not letting Washington control the outcome and rates reflected that response.

Why Waiting for Rates to Drop Is Costing Buyers Real Money

If you are waiting for interest rates to drop before buying in Houston the math deserves a close look.

On a $500,000 home with three percent annual appreciation the home will be worth approximately $515,000 next year. The incremental cost of a rate that is 1.5 percent higher than your target translates to additional interest expense over the year. But $15,000 in appreciation on a property you do not yet own does not benefit you. It benefits whoever owns the home.

When rates do eventually come down and Rich believes they will settle in the fours and fives rather than returning to the twos and threes the competition that has been sitting on the sidelines will flood back in simultaneously. The bidding wars. The offers over asking. The appraisal gap clauses. The inability to get an offer accepted without waiving contingencies. That environment is what returns when rates improve and everyone who was waiting decides to act at once.

Buying now captures today's price. The refinance opportunity arrives when rates improve. You cannot refinance what you paid for the house.

This is Rich Bonn at Habayit Home Loans. Have a great week Houston. Call 281-841-1723 with any questions about HELOCs, bank statement programs, or what buying or refinancing in the current market looks like for your specific situation.

Sources

HoustonAssociationofRealtors.com
FederalReserve.gov
MortgageNewsDaily.com
EnergyInformationAdministration.gov
Investopedia.com