THE SCOOP: The changing “unsustainable” housing market | Business weekly

People like to put economic gains and struggles in a political context, but in reality government has little to do with either. While they can create welcoming environments with low taxes, discount programs, and other incentives, consumers and leaders determine how well things turn out.

One possible exception is the US Federal Reserve, whose interest rate decisions affect every facet of our financial lives. This is evident in the Brazoria County housing market, which is going from white-hot to smoldering.

That was one of the dominant messages at last week’s state of the economy luncheon hosted by the Economic Development Alliance for Brazoria County. In addition to regular data briefings from Donald Payne Jr., a panel including JoBeth Prochaska of commercial developer Weitzman, residential real estate specialist Josie LaChance of Birdsong Real Estate and Josh Brian, Brazoria County Market President for TDECU , discussed the current environment. .

The magnitude of the effect of Fed interest rate hikes in curbing inflation extended to all three of their businesses. Making it more expensive to borrow money inhibits business expansion, the cost of building major developments such as Weitzman’s downtown Manvel increases and prevents families from being able to buy new homes. It all depends on the loans to happen.

“For us, interest rates are scary. It’s not catastrophic, but it’s scary right now,” Brian said. “A lot of bankers and a lot of borrowers haven’t seen rates go up. We see a lot of things related to some sort of index. We don’t see a lot of fixed rate products being offered.

“Banks are trying to protect their balance sheets right now. You ask any banker, and it is. Liquidity is key right now. Going out to borrow money right now is extremely expensive Getting that 4 or 5% business loan just isn’t available right now.

While the cooling of the housing market is a consequence of rising interest rates – the average cost of a conventional 30-year fixed rate mortgage in Texas last week was 7.684%, about double from its level at the start of the year – it is also caused by the unprecedented periods in which the Fed has kept its benchmark rate below 0.25%.

This made it easier to borrow and people could afford more homes, driving up house prices and making it a lopsided market in favor of sellers, LaChance said. This is no longer the case now, as the market has moved closer to equilibrium.

“Q3 has slowed down a bit. Inventory has grown a lot,” she said, adding that inventory is around three months away. “Most economic real estate professionals would say a balanced market is between three and four months, so I think it’s good for buyers and sellers. Sellers still get the best price – our average sale, even in Q3, is still higher than it was, but we have more inventory, so buyers have more options. There is still some negotiation going on.

Prochaska expects retail growth to be strong, especially in the southern part of Brazoria County, even as it becomes more expensive to build and open a new storefront.

“If you look at the huge growth that’s happened in Brazoria County, there’s inevitably a retail shortage here,” she said. “You look at housing growth, you look at what’s been done, you look at volumes in Pearland, volumes in Lake Jackson and Clute, you just see there’s a real need for more retail. We are very optimistic.

This optimism is rooted in the reality that people still want to move to Brazoria County, and educating them about today’s economy will be part of a winning strategy.

“People are going to have to make adjustments,” LaChance said. “I’m going to call the last two years with these really low interest rates the exception to the rule. It was not the norm. I think we’re really balancing out more, and I’m glad we’re still in single digits.

“We only talk a lot about interest rates, but there is much more than that. When you compare a $300,000 house to a $500,000 house, maybe they can’t afford the $500,000 monthly payment anymore. Maybe they need to save more money. Maybe they’re buying a house for $300,000 or $350,000. … I don’t think the interest rate is going to stop people from moving.

Thinking about buying a $350,000 home may seem out of reach for many people, but that’s the reality in the county right now, LaChance said. Sharing data compiled by Alamo Title, the average selling price of a home in the county has jumped from $245,000 in 2017 to $353,000 now, a jump of 45%. In the last year alone they have increased by about 10%.

And it’s not all about inflation — it’s about demand.

“I think for the past two years people were just moving for fun,” LaChance said. “I think they were cashing in their principal quickly and transitioning without adjusting the payment.”

That said, continuing on this path was “unsustainable,” she said.

Payne’s presentation included a cold truth that even a vibrant region like Brazoria County is not immune to inflationary pressures. Data shows economic growth has slowed over the past three months, putting the county halfway to meeting the definition of a recession.

“There are a lot of challenges right now for the economy and for inflation; it’s unlike any previous periods of inflation,” Payne said.

“I don’t expect to see the inflation rate come down anytime soon because of all this uncertainty we have,” he said.

These uncertainties include the war in Ukraine affecting supply chains and energy prices, OPEC’s decision to cut oil production by 2 million barrels per day, and the aftermath of COVID still unwinding.

Inflation was 9.5% in the Houston-Galveston-Brazoria area, he said, which is just a little higher than the national rate. The positive of this is reflected in sales tax revenues for the county and its communities – higher prices mean the amount of tax paid increases.

“We’re back to just above where we were before COVID,” Payne said.

What should be noted is that while the economy is slowing down, it is from peak conditions. The number of hotels and motels is down, but this is a record high in 2021. Building permits fell from record highs in February and March, but are at the 10-year average , said Payne. Employment is on the rise, with 7,000 jobs added last year and 28,000 post-COVID.

Payne did his best not to be “pessimistic”. The numbers confirm a mindset that economic conditions in the county are far from dire. The data shows economic strength, but a decline from levels so supercharged they simply could not be sustained.

Doppio, the new coffee and energy drink company we told you about a few weeks ago, is ready for a soft opening at the end of the week. Its official opening is scheduled for Monday. A few scraps of paperwork and final inspections prevent locals from getting delicious coffees quickly.

Created by Lake Jackson volunteer firefighter Brandon Gee, it will be opposite Bahama Buck’s in the small mall across from the Kroger store in the Woodshore Mall near Discount Tire.

People took notice when IBC Bank closed its branches in Brazoria County, leaving only ATMs and a website to serve customers locally. What then becomes of its old annex buildings?

In Lake Jackson, it’s been sold and should have a new occupant by the end of the year, deputy town manager Meagan Borth tells me. Great American Mortgage will call the building at 212 That Way.

A company called TKRE Freeport LLC purchased the old Freeport branch – which could use a new Google photo since the one that appears makes the place quite overgrown – in August 2021. We couldn’t find any information on TKRE, and we haven’t heard from Freeport officials about any news about what might be happening there. It’s a high profile place, so hopefully it has a new business lined up.

Yes, it’s time for another out-of-town excursion, which means The Scoop will be taking some time off next week. We hope to feature a story about a Damon business that reversed its decision days after announcing its closure due to customer outcry. Thanks to Susan Avera Holt for picking up this story.

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