Is the Shifting Market an Opportunity or a Challenge for Texas Homebuyers?

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The housing market in Texas continues to boom. Although certain markets have seen a slowdown due to tighter mortgage rules and the rise of more stringent lending standards, the Lone Star State remains one of the hottest real estate markets in the country. That said, it’s not all upside for homeowners looking to purchase a home or those considering investing in real estate as an asset. Whether you’re a first-time buyer or seasoned investor looking to add properties to your portfolio or rental income generator. Understanding how housing trends affect you as an individual can go a long way in helping you make informed decisions moving forward. Here are some insights that may help you understand and adjust your strategy accordingly.

Is the Shifting Market an Opportunity or a Challenge for Texas Homebuyers?

The Lender’s Playbook

After years of improving underwriting standards, the lending industry has returned to its roots. Lenders are using more conservative underwriting criteria, raising rates, and tightening down payment and income requirements. One major change that has occurred over the past year is the replacement of the GSE’s mortgage insurance program with a mortgage insurance premium (MIP). This change is having a serious impact on the housing market and will further dampen the expected growth of home prices over the next few years. MIP is a percentage charge that lenders now require borrowers to pay to the FHA to fund mortgage insurance. This is intended to cover the difference between the expected cash flow of the mortgage and the expected value of the property upon foreclosure in the event the borrower defaults. This change means that homebuyers will now have to pay a surcharge on the mortgage amount. If a homebuyer has a $200,000 mortgage, they now have to pay a $4,000 MIP to the FHA.

Speculative Investing

With the hot real estate markets of the mid-2000s came a new wave of investors looking to cash in on skyrocketing housing prices. This risky investment model was fueled by the belief that real estate prices would only continue to rise. At least until the next economic downturn. Although real estate has rebounded in many areas of the country. Many markets are seeing slower growth. This is especially true in states hit hardest by the Great Recession, like Texas. To

take advantage of the rising market, speculators purchase a large number of homes in an area and rent them out. They make a small profit each month by collecting the rent while remaining at risk of losing a significant amount of money if the market crashes. Due to the high inventory levels that have resulted from low mortgage rates and the fact that many speculators are flipping properties instead of actively holding on to them. Many markets are seeing less interest from speculators compared to the mid-2000s. This may be a good thing as it may mean that home prices are closer to their true value.

Is the Shifting Market an Opportunity or a Challenge for Texas Homebuyers?

Seller’s Market

As supply has outpaced demand, the majority of Texas’s major cities have deemed themselves into a seller’s market. This is a term used to describe a market where it is relatively easy to find a motivated seller and make a sale. This phenomenon occurs for a variety of reasons. One of the biggest reasons is that people are trading in their homes for a new ones, or are downsizing a bit. Also, an increasing number of baby boomers are now in their retirement years. Downsizing from large homes to condos.

It Pays to Know Your Market

Texas’s large population and high median income make the state a prime candidate for robust demand. However, the rise of the oil and gas industry has caused a lot of volatility, negatively affecting certain regions of the state and significantly affecting other areas.

Inventory Matters

As home prices continue to climb, more and more homeowners are finding themselves underwater. More than half of all mortgages in Texas are currently underwater, meaning homeowners owe more than their home is worth. This means that these homeowners are often looking to sell their homes, but they also have a lot of competition. If you’re looking to buy a home in Texas. It’s important to understand the impact that high inventory levels have on the market. The lower the inventory, the more likely you will be able to negotiate a lower price with the seller. However, low inventory levels can also mean that pricing is extremely competitive.

The Bottom Line

No matter which market or type of property you are considering, understanding the trends that are shaping the market can help you make informed decisions moving forward. The same is true for real estate investors and real estate agents. Make sure to educate yourself so that you can make the most of any opportunities that arise in the future.