Katy Texas Real Estate Market October 2016

It was another rough month for the Katy Texas real estate market. Sales were flat during the month of October, but area home prices were not so fortunate. Home sales volume was flat within Katy ISD and for the Houston area as a whole during the month. New home sales volume did fare better in Houston, rising 9 percent, compared to a decline of 5 percent in the Katy area. The strongest segment of the market continues to be the affordable price bands, homes priced at $250,000 or below, where demand is solid and quality inventory is limited.

One thing that should be painfully obvious to even the real estate cheerleaders at this point is the undeniable fact that area property taxes are pounding the Katy residential real estate market. Weak job/wage growth has combined with spiraling residential property taxes to create a significant cooling effect on local market values. This is particularly noticeable in the luxury home space where the top-down price compression seems to be increasing. Both Cross Creek Ranch and Cinco Ranch, two of Katy’s largest and most popular master-planned communities of the last several years, saw average sale prices plummet from October of last year. The average sale price in Cinco Ranch declined by more than $60,000, and the average closed sale price in Cross Creek Ranch was almost $100,000 lower year-over-year, falling to a level not seen since 2013.

Both communities saw average price per square foot decrease by 7 percent or more. It looks like the mean reversion for local home prices is getting serious as buyers look for more affordable housing options…

These kinds of numbers certainly contrast with the media shills and development-oriented spin artists who recently suggested that area home values continue to climb. Of course the actual numbers make sense when you consider the anemic employment market…

Katy’s single-family lease market was a mixed bag in October. Rental activity was flat north of I-10 on stable prices. Katy’s relocation market south of I-10 saw a 17 percent increase in volume, but average rents declined 7 percent from last year. You could probably now walk less than a mile before you found an apartment development willing to offer two months of free rent, so these softening rents are not surprising.

How long will the mean reversion take? That’s anybody’s guess. I suspect it could get a whole lot meaner before the Katy real estate market improves in any sustainable manner. Mortgage interest rates aren’t going to help in the short term, but they could ultimately head lower as the market comes to grips with a weak economy teetering on recession. We’ve already hit peak auto. That was confirmed today when GM announced they would be laying off 2000 people.

Remember, every day is not a great day to buy a home…Some days are better than others!

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