Houston's homes are selling fast, and valuations have soared for real estate in all of Houston’s neighborhoods. There were 73% more homes sold in 2020 compared to 2011. The price per square foot jumped from $83 in 2011 to $133 in 2020. And while this may help Houston homeowners breathe a sigh of relief, those hoping to get in on the market for the first time may be having second thoughts.

Below is everything you need to know about navigating Houston’s seller’s market.

What is a seller’s market?

A seller’s market means there are more potential buyers than there are available homes for sale. In a seller’s market, current homeowners have the upper hand and can negotiate just about whatever they want in a transaction. A seller’s market can develop hyper locally (i.e. when a new development causes an influx of new buyers to a neighborhood) or across an entire city.

With that said, the current seller’s market in Houston isn’t caused by short-term factors. It’s the result of historically low interest rates and an overall shortage of properties to buy—especially for first-time buyers. Combine the supply shortage with low mortgage rates, and you have a red-hot seller’s market on homes for sale throughout Houston, including neighborhoods like Heights, Spring Branch, and others.

Let’s talk numbers

Currently, the average sale price for homes in Houston is $285,000, which is up 11% over last year. Using those numbers, if you own property valued at $350,000 last year, you now have an additional $38,000 in equity on your home due to the increased home valuations. Last year, the average Houston home was on the market for 31 days before it sold. This year, most homes for sale in Spring Branch are selling in about 2 weeks. If you’re a buyer, be ready to move quickly with your offer. 

A bidding war typically occurs exclusively in a seller’s market, because when supply is short, homebuyers are competing against one another for properties. While a bidding war primarily helps the seller, buyers can also use it to their advantage for homes for sale in Heights or Spring Branch. The buyer does not have to disclose if they are in multiple negotiations, but the seller must provide a disclosure in their counteroffer if they are negotiating more than one deal at a time. While a property is under negotiations, it is considered “off the market” and will not receive any new interest. So as a buyer, you can start the process early without penalty and have no need to rush. The seller will want to rush things along because the longer their property is on the market, the less negotiating power they have.

How to negotiate in a seller’s market

Naturally, negotiations look different in a seller’s market than in a buyer’s market. When there are more properties for sale than there are people to buy them and homes are sitting on the market for a longer period of time, the buyer can set the terms. They can ask for the seller to pay closing costs, demand repairs before closing, and ask the seller to come down on the purchase price.

In a seller’s market, the opposite is true. The seller can get away with not completing all the needed updates for the property, or pushing for an earlier closing date, or demanding buyers pay above the asking price. Before you list your property or make an offer to buy a property, be sure to understand the procedures and timeline for negotiations. Use counteroffers. Don’t expect the initial bid to be accepted, and prepare your counteroffer when you prepare your bid.

The short answer is: yes! If you’re looking for an investment property, leases on townhouses and condominiums in Houston are up almost 7% and rent rates for single-family homes are up by almost 10%, which equates to higher cash flow on your investment. In the past ten years, Houston real estate has appreciated by nearly 60%, and due to supply shortages, home values are expected to continue their upward trajectory in the next year. The earlier you invest in homes for sale in Heights or Spring Branch, the better off you will be. Also, with mortgage rates as low as they are right now, it’s a great time to invest if you find the right property. Whether you’re a first-time homebuyer, a homeowner looking to upgrade, or an investor looking for additional property, now’s the time to lock in a low-rate mortgage and watch your equity grow. 

In a competitive market, an experienced agent makes a tremendous difference. Houston real estate agents experienced with negotiating a seller’s market will be able to navigate each deal with more knowledge and expertise. They’ll have a track record in the Houston market for being trustworthy and dependable, and agents with specialized experience in purchasing investment properties can help you understand the unique process of acquiring and maintaining this type of real estate. Most importantly, they will have the objectivity and negotiating skills to make your dream of owning Houston real estate come true—whatever your budget may be.

The local realtors at Miles and Company have deep experience in Houston’s seller’s market and pride themselves on delivering the best data and customer service to their clients. Even if you’re only at the beginning of your journey to homeownership or diversification, contact Miles & Co. with all your questions about the Houston real estate market.