Houston Real Estate Update: Iran Conflict Pushes Oil Up 21 Dollars as Buyer Market Conditions Hold

What Is Actually Happening in Houston Real Estate and Mortgage Markets This Week

Rich Bonn at Habayit Home Loans has the weekly breakdown for Houston realtors and buyers covering what the HAR snapshot is showing, what the Iran conflict is doing to inflation and mortgage rates, and what all of it means for buyers and sellers in the greater Houston market right now.

The Houston Market Numbers This Week

New listings are down approximately 5.5 percent. That is normal seasonal behavior for this time of year. As families prepare for the back-to-school transition new listing activity typically pulls back and this year is following that pattern. Pending listings are down. Closings are down slightly though not dramatically. Showings are also down modestly.

The headline data point from this week is that HAR listing views are down approximately 15 percent. That is a more significant pullback in buyer browsing activity and it reflects the combination of seasonal slowdown and the broader uncertainty in the market environment.

Despite the slowdown in activity Rich Bonn's read on the overall Houston market is that it remains in reasonably healthy shape. The market is in more of an equilibrium than it has been recently. Things are taking a little bit longer to sell. Inventory remains elevated which means buyers have genuine ability to negotiate price, seller concessions, and terms in ways that were not available during the more competitive periods of the past several years. This is still a buyer's market in Houston and buyers who understand how to use that leverage are capturing real value.

What the Iran Conflict Is Doing to Oil and Inflation

The war with Iran has escalated significantly. As of last Friday the United States had conducted 13 straight days of attacks against Iran and Iran has responded by expanding its aggression to include attacks on Jordan, Kuwait, and Bahrain. The conflict is spreading rather than containing itself and the financial markets are reflecting that escalation.

Oil prices have risen approximately 21 dollars per barrel over the past 30 days. That is a substantial move and it is feeding directly into inflation in a way that the coming month's data readings are going to reflect clearly.

The inflation mechanism here is straightforward. The Strait of Hormuz handles approximately 20 percent of the world's oil supply. When conflict disrupts flow through that corridor less oil reaches the market while the same number of dollars are chasing it. Prices rise. And because oil is embedded in virtually every cost in the economy the inflationary pressure spreads broadly.

As Rich Bonn explains electricity costs are reliant on oil because of the trucks and workers maintaining the grid. Groceries are reliant on oil because of shipping. Construction costs are reliant on oil because of equipment and transportation. The list of what is not connected to oil pricing is considerably shorter than the list of what is. Next month's inflation numbers are likely to be less favorable than the relatively tame readings the market has seen recently.

Tariffs Adding Another Layer of Inflationary Pressure

On Friday President Trump announced tariffs of 10 to 12.5 percent against the EU and a number of other countries. Tariffs are always inflationary. The intent is to make foreign goods more expensive so that consumers shift toward American-made products. But the immediate effect is that the cost of imported goods rises and American consumers absorb that increase in their day-to-day spending.

The tariff announcement adds another layer of upward pressure on prices on top of what the oil market is already producing from the Iran situation. Both forces are pointing in the same inflationary direction at the same time.

What Is Working in the Broader Economy

Not everything in the data is pointing toward concern. The ICE index for home values is up 0.26 percent. Home sales rose 1.6 percent. And on the labor market front initial jobless claims fell to 187,000 which is the lowest figure in quite some time and reflects a labor market that continues to hold up despite the broader uncertainty.

Layoffs have remained low. With the World Cup now concluded Rich Bonn anticipates some increase in jobless numbers as the hospitality-driven employment boost from the tournament begins to unwind. But the underlying labor market picture remains constructive.

The Bottom Line for Houston Buyers and Agents

The Houston market is doing pretty well in the context of all of this. Buyers have more leverage than they have had in years. Inventory is available. Sellers are negotiating. The tools to make deals work including seller contributions toward closing costs and rate buydowns are accessible in ways they were not during the peak competitive years.

What the market needs to see is inflation taming. If oil prices stabilize as geopolitical conditions eventually resolve the inflation pressure that is keeping rates elevated should ease and the rate environment should improve. Until then buyers who are ready to move have real leverage to use and sellers who are priced correctly are still transacting.

Call Rich Bonn at Habayit Home Loans at 281-841-7234 with any questions about what the current environment means for your specific situation in Houston.

Sources

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