If you’re thinking about buying a home in the Katy, Texas area, whether it’s for your family or to use as a rental property, you might wonder whether there’s a cycle to the property prices in the area. If home prices rise and fall at steady, predictable intervals, it makes sense to wait to buy a property when prices are at their lowest—but if these cycles are hard to predict or understand, it may not be worth the effort.
Let’s take a look at some of the cycles that could apply to the Katy, TX area, and whether they’re worth considering in your next purchase.
First, let’s consider how home prices can change over the course of a year due to seasonal transitions. The changing seasons are always predictable, and always occur in the same order, bound to that 12-month cycle. And there’s at least some evidence to suggest that home prices do change with the seasons. For example, one study found that Spring home listings accounted for 32.6 percent of all home listings, ultimately selling above list price for 18.7 percent of homes. Fall, on the other hand, accounted for just 17 percent of all listings, and only 14.7 percent of those homes sold for above list price.
There are a couple of things to keep in mind here. Obviously, Spring is a more popular time to sell your home, but the margins aren’t explosive; Fall is only 8 percent behind the “average” contribution for a season, and the difference between “above list price” sales is just 4 percent between those two seasons. In other words, waiting two seasons would result in a 4 percent greater possibility of selling your home above list price in this scenario.
We also need to consider the climate in Katy compared to the rest of the country. The seasonal transitions aren’t as extreme, and the winters are far milder than in other areas of the country. Accordingly, seasonal transitions might not have as big of an impact on home prices in the area.
Broad Economic Changes
There are other cycles to keep in mind, however. Home prices are dictated by supply and demand, like in any other economic system. And, like any other economic system, it can be influenced by broad economic changes. If the stock market crashes and/or enters a bear market, consumer spending will slow, industries will suffer, people will lose their jobs, and of course, home buying will slow to a crawl. In an economic recession, a home buying recession is almost sure to follow, and in almost every available housing market.
The problem here is predictability. Even the most experienced, educated economists can’t predict when the next bear market is going to arise. This year solidified one of the longest-running bull markets in history, and economic growth in the United States remains relatively high. We might enter a bear market, or a full-blown economic recession by the end of the year, or it might be another decade before this trend of growth starts to subside.
The sad reality is that it’s impractical, and in some cases foolish, to base your real estate investing decision based on broad economic changes that might happen in the future. There’s little to no consistency in the rhythm of stock market or housing market changes at this scale.
Local Economic Changes
However, there can be local real estate cycles that develop, based on city-specific factors for growth. For example, a major metropolitan area like San Francisco might have small boom and bust cycles, based on things like job availability, salary growth, and the ebb and flow of population within city limits. Usually, these cycles unfold in a familiar pattern of recovery, expansion, hyper-supply, and recession. The length of time for these phases to unfold varies significantly based on location, but typically stretch over several years. The severity of price fluctuations also varies based on cities; some cities have dramatic price differences between the top and bottom of the cycle, while others experience only minimal changes.
Then, we have to think about local changes and influences that could disrupt or hasten this cycle. New additions or removals in a neighborhood can advance a location quickly into the next phase of the cycle, or result in short-term increases or decreases that fall outside usual cycle parameters. For example, in the wake of Hurricane Harvey, home prices in Katy briefly plummeted, and existing homeowners spent extra money to elevate and/or protect their homes from future damage. In specific neighborhoods, the presence of a new employer, an increased school system rating, or a new feature like a park could all increase home prices, outside of the predictable cycle.
Overall, while local cycles can follow a noticeable pattern, that pattern still isn’t entirely rational. A single variation can completely disrupt the cycle, and sometimes the cycle deviates from its historical patterns—without any outside stimulus. Accordingly, you can try to trace and monitor previous historical patterns, but there’s no real guarantee of success.
How to Base Your Decisions
Let’s look at the bottom line here. While there are some traceable variations in home prices in the Katy, TX area, they aren’t consistent enough or significant enough to provide the basis for your decision. Even if you think home prices have bottomed out, they could fall further, and if you think they’ve reached a peak, they could continue to climb. Seasonal variations do make a difference, but you can still find a great deal in the offseason. Ultimately, you should keep cycles in mind when making your house purchasing decision, but there are too many other factors to account for to rely on this exclusively.
If you’re in the market to buy property in the Katy area, Green Residential can help. Contact us today, and one of our agents will reach out to help determine your needs—and find the perfect property for you.