“Slow and steady growth is probably the best description for housing over the coming year,” she said. “This was the case for most markets in 2015, although there were some that experienced double digit growth in sales prices last year.”
Inman is interviewing industry thought leaders to find out what’s next in 2016. Here’s Sarah Jones, a Realtor at Bamboo Realty in Houston.
Are you optimistic about 2016? The economy? Why?
I’m temperately optimistic about housing and the economy in 2016.
The housing market? Why?
Slow and steady growth is probably the best description for housing over the coming year. This was the case for most markets in 2015, although there were some that experienced double digit growth in sales prices last year. In those markets, price appreciation was largely driven by an imbalance in supply and demand — there were plenty of home buyers but not enough homes on the market. This was especially true in major job relocation markets like Houston, Dallas, Denver and San Francisco. For 2016, home prices should continue to rise but more modestly as supply and demand balance out.
Looking at other factors, from everything I’ve read, job growth will continue in 2016. Interest rates will also remain at or near historic lows (more on that later), which is another positive for housing. There will also be new entrants into the housing market — largely millennial first-time homebuyers. Even though they have been slower to enter the market compared with past generations, they now represent the largest share of home buyers and that trend should continue in 2016. Overall everything points to another year of steady growth in the housing market.
Your success? Why?
We help people without the preconceived notion that it is always better to buy. This has been a foundation for our success in reaching millennials — we are ready to serve them whether they choose to rent or buy. There have been so many headlines about the millennial generation being saddled with student loan debt as the reason homeownership rates are so low. Why not open our minds to the idea they may prefer renting for reasons of convenience and flexibility?
What are you worried about?
What am I worried about? That we might be onto something with Bamboo as a brand even outside of real estate.
We had some branded hats made for an event over the summer and we now have people from outside the firm asking if they can buy one. We’ve seen pictures on social of young kids and teenagers wearing the hat and their friends are asking where they got it. We’ve even had former agents send messages that they still rep Bamboo even though they have gone on to another company.
It’s nothing we planned for or set out to do, but it looks like we will be developing a line of streetwear in 2016.
How much do you fret about global events?
While I track global events and am passionate about issues of poverty, health and equality, I don’t actively worry about these or some unforeseen global shock that may occur. It just isn’t where I direct energy or brain power right now.
Will mortgage rates go up or down next year?
Mortgage rates will increase in 2016, but it will be a gradual adjustment of no more than one percentage point over the year. The Fed has kept its benchmark rate near zero for the last seven years, and it has been nearly a decade since the last rate hike.
However, the Fed has been signaling for some time that it plans to increase rates, and at this point the market has had plenty of time to prepare. Even with mixed economic indicators — strong jobs data but a somewhat sluggish housing recovery — look for the first incremental increase by first quarter of 2016.
Which market are you in?
I’m in Houston, where all eyes are on oil prices, which remain low after taking a nosedive in the second half of 2014. Despite the price drop and subsequent layoff of thousands of industry employees locally, the housing market has remained on an upward march, setting new median home price records month after month.
However, in October we saw a 10 percent decline in single family volume versus the prior year, the first significant decline since the drop in oil prices.
Will unit sales go or up or down in your market?
Even though the Houston economy is far more diverse today than it was during the oil bust of the 1980s, it would be impossible to say that the current downtown in oil prices will not have some impact on the local housing market. Unit sales will go down in 2016 due to loss of jobs, fewer relocations and an overall skittish market.
Will home prices appreciate in your market next year?
Home prices will largely flatline across Houston, with mild declines (less than 5 percent) in some submarkets next year. Keep in mind we are coming off record highs, so this cooling off will feel more like a downturn to some real estate agents and consumers.
In Houston, we have already seen an increase in inventory and days on market in many areas and price categories, and that will eventually translate to flat or lower prices as we shift from a seller’s market to a buyer’s market.
In 2016, demand for homes in the lower price ranges will remain robust, largely driven by new entrants to the purchase market including millennial first-time homebuyers.
Next year, I expect a decline in the number of move-up buyers will impact the mid-priced market, those homes priced between $400,000 and $700,000. We should see an even larger decline in the number of luxury home sales over $1 million next year.
Will agents be more productive next year? Why? Or why not?
Our agents will be more productive next year. When we opened our first out-of-state office in Denver, we had to sit down and think hard about which brokerage functions could be performed centrally versus those that made more sense locally. We have spent the better part of this year building out agent tools accordingly and are now ready to capitalize on size economies as we continue to grow.
We are also starting to see our first clients move through the homeownership cycle to selling. What I mean by that is early on in our brokerage history, we served only renters. As those renters started buying homes, they came back to us because we already had the relationship.
Now that we are six years in, some of our early homebuyers are now ready to sell. We are closing sales every month where the client has done three or more transactions with the firm. It’s pretty remarkable to see these relationships evolve organically.
What will be the biggest source of real estate leads next year?
At our firm, online leads have been the number one lead source over the last several years, and we don’t expect that to change in 2016. However, our marketing efforts are shifting from marketing properties to instead providing more in-depth neighborhood data and more robust agent profiles.
This is a long-game, content driven strategy for us. Everyone else is marketing properties, and yet Zillow, Trulia and realtor.com dominate property search. So we are laying it down and instead spending time to thoughtfully present neighborhood expertise and capitalize on the growing number of people who find their agent online with purposeful marketing that highlights our agents.
Are you making plans to expand, contract or maintain your business this year?
We will be growing again in 2016 by expanding market share in the cities we are already in as well as expanding to new cities next year. Look for one new corporate-owned location and our first franchise location by the end of the year.
What is your biggest challenge in the coming year?
Our biggest challenge in the coming year is growing while staying true to our roots and finding better ways to communicate and share resources across our different markets. We have watched other firms start out in rentals, and as soon as they get a few home sales under their belt, they mentally move to a “sales first” mentality. We never want to lose sight that rentals is our special sauce.
Also, as more people realize that serving renters can be both rewarding and lucrative, we expect new firms will enter the space. Some of the larger brokerages are starting to develop leasing divisions or hire leasing experts in-house. It would not surprise me if a big-name brokerage pursued the purchase of a rental firm. We have the challenge — and the opportunity — to continue as market leaders in rentals while growing the sales side.