Rich Bonn's Tuesday Houston Market and Mortgage Update

Rich Bonn at Habayit Home Loans is back with the Tuesday market update Houston has come to expect. This week there is genuinely meaningful news on both the Houston real estate side and the broader mortgage and economic picture including an oil price development that matters more than most people realize for where rates go from here.

What the Houston Real Estate Numbers Are Showing Right Now

The headline numbers are better than the doom-and-gloom narrative suggests. Closings are down approximately 3.8 percent year over year which is real but not catastrophic and is meaningfully less severe than what many market commentators were predicting. Showings are down just around one percent. Listing views are down about seven and a half percent. Pending listings are down. Off-market listings are also slightly lower.

New listings are up. That supply increase combined with softer demand metrics puts Houston firmly in buyer's market territory right now. More sellers than buyers is the defining characteristic of the current environment and for buyers that means one thing above almost everything else.

Negotiation.

Rich is direct that insulting lowball offers are not the strategy. Walking into a million dollar listing and offering two hundred and fifty thousand is not negotiation. It is a way to end a conversation before it starts. But strategic negotiation around seller contributions toward closing costs, rate buydowns, and other concessions is very much on the table and buyers who understand how to use those tools are capturing real value in the current market.

The example Rich walks through is worth understanding. Negotiate the seller paying closing costs. The purchase price may be slightly higher but that seller contribution can be directed toward buying down the mortgage rate. A lower rate produces lower monthly payments that compound in the buyer's favor for the entire life of the loan. The slightly higher purchase price is a one-time number. The monthly payment savings is permanent.

The other important data point from this week is that appropriately priced homes are still selling quickly. Rich received a contract that morning on a home that had been on the market two days with multiple offers. The market is not dead. Sellers who price their homes as if it is still July 2021 will sit. Sellers who price at current market reality are still generating competition.

The Fed Hike and What the Two-Year Treasury Is Signaling

The Fed hiked rates last week and the question everyone is asking is whether more hikes are coming. Rich points to the two-year Treasury as one of the more reliable leading indicators for Federal Reserve rate decisions. The historical pattern is that the two-year Treasury tends to move ahead of actual Fed fund rate changes and the current level suggests at least one more hike this year with the possibility of additional increases in the following year.

The notable exception to that leading indicator pattern was during the period when Federal Reserve leadership characterized inflation as transitory. Rich has thoughts on that characterization and he shares them with characteristic directness.

Oil Below One Hundred Dollars and Why It Actually Matters for Mortgage Rates

Here is the genuinely good news in this week's update. Oil prices have dropped back below one hundred dollars and are sitting around ninety-three dollars per barrel at the time of recording. Two factors are driving that decline. The East-West pipeline in Saudi Arabia that was damaged by a Houthi attack is expected to reopen within the week restoring that supply. And diplomatic movement between the United States and Iran including a planned meeting or proxy negotiations at the United Nations in New York is creating the possibility of reduced geopolitical tension in the region.

Why does oil matter for mortgage rates? The chain runs from oil prices to transportation and production costs to consumer prices to inflation to bond market expectations to mortgage rates. When oil prices decline the inflationary pressure that has been driving bond yields and mortgage rates higher eases. If the good news on the energy front holds inflation should begin responding and rates should eventually follow.

The Carry Trade and Why Rich Is Watching the Yen

Rich raises a more sophisticated economic concept worth understanding even if it feels removed from the everyday housing decision. The yen carry trade involves borrowing in Japanese yen at extremely low interest rates, currently around one percent, and investing those proceeds in higher-yielding US Treasuries. The trade works as long as the differential between Japanese and US borrowing costs remains favorable.

The risk is that if Japan is forced to raise its own interest rates the economics of the carry trade deteriorate and investors who have been in it begin selling US Treasury positions to repay yen-denominated debt. Large-scale selling of US Treasuries pushes Treasury yields higher which pushes mortgage rates higher. A weaker dollar resulting from capital flows out of US assets would also be inflationary.

This is not an immediate crisis scenario but it is something to monitor as a potential source of upward pressure on mortgage rates that has nothing to do with domestic inflation or Federal Reserve policy.

What Rich Thinks Right Now

This is a wonderful time to be a buyer in Houston. The market conditions, the negotiating leverage, and the strategic opportunities available through seller contributions make this environment genuinely attractive for well-prepared buyers who understand how to use the tools available to them.

For sellers the market is more challenging and pricing discipline is the most critical factor in whether a listing generates activity or sits.

For sellers who want to become buyers Rich has a specific program worth knowing about. Buy now and sell later. Not buy now pay later. This structure allows a move-up buyer to purchase the next home before the current one sells which is particularly relevant in a buyer's market where the purchase-side advantages are meaningful right now. Self-employed borrowers are welcome to reach out specifically as Rich has programs designed for that qualification profile.

Call Rich Bonn at Habayit Home Loans at 281-841-1723 with any questions. Have a great week Houston.

Sources

HoustonAssociationofRealtors.com
FederalReserve.gov
EnergyInformationAdministration.gov
MortgageNewsDaily.com
TreasuryDirect.gov