While we were preparing to tackle a promising Spring/Summer season in the College Station real estate market, there was no way to know what was coming down the line. As much as the COVID-19 pandemic has disrupted our daily lives, health, and travel plans, it’s also had an unpredictable impact on the real estate market in College Station.
Initially, the outlook was great for 2020.
In December 2019, the Real Estate Center at Texas A&M released a report predicting the following:
- Texas would lead the nation in new home construction
- Sales prices would see a modest increas of 0.5%
- The rental market would continue to explode with high demand
- Home values would continue to rise
Everything looked peachy until late January/early February when the prospect of a global pandemic began to sour markets and consumers began to hunker down to see what happened – and buy a TON of toilet paper in the process.
Real estate agents in College Station – much like the rest of the country – started preparing themselves for a lean year. When the pandemic made its way full force to the U.S., early indications were bleak.
CNBC reported that mortgage applications dropped 18% in the first week of March.
In the state of Texas, we were looking down a double-barrelled shotgun as Houston’s deputy city controller, Alexander Obergon, alluded to an article in ReformAustin.org: “For Texas, we may get a double blow as a recession is usually accompanied by lower global demand for oil, and we are already seeing low oil prices. The theme here is that a ton of uncertainty remains, and we do not really know when things will normalize.”
As spring rolled around and the first wave of the pandemic began to rear its ugly head, the initial impact of the pandemic was felt in the real estate industry. According to a report filed by the St. Louis Federal Reserve, “In April and May, nationwide home sales dropped to their lowest levels since the housing and financial crisis that began in 2007…” This was due primarily to the first round of lockdown orders and restrictions to prevent the spread of COVID-19.
Here in College Station, our largest employers are the Bryan ISD, College Station ISD, and Texas A&M. The initial round of restrictions hit education institutions hard and in unpredictable ways. The initial reaction for most campuses was to pivot to online learning, keeping students and educators at home.
In March/April/May, the Bryan/College Station real estate market saw an uncharacteristic downturn.
Below, you can see that 2020 sales dipped when we typically see an improvement in home sales:
Additionally, new listings on the market, a typically signal of a healthy market dropped around the same time in 2020:
The Real Estate Market Turnaround
There are two major things that drove the real estate marketin turnaround in College Station as well as the national market: mortgage rates and remote work.
2020 Mortgage Rates Were Historically Low
Coming in to 2020, mortgage rates were already low, hovering between the high 3’s and low 4’s since the 2008 housing crisis. The federal reserve’s goal with low rates was to bolster a staggering economy and keep the housing market healthy during a nationwide economic slowdown.
Low mortgage rates make it easier for new homebuyers and existing homebuyers to access low interest mortgages, lessening their financial burden when buying or refinancing a house. It’s a financial instrument that is designed to provide incentive to homebuyers who normally wouldn’t invest in real estate to take advantage.
Workers Across the Country Transitioned to Working Remote
The other major factor in driving a healthy home market in 2020 was the transition to remote work.
Traditionally, people like to live close to their jobs and factor their commute time into their home buying decision. Because there is a tech sector boom, many of the jobs available are in urban, densely populated areas and have a high salary. As a result, a lot of cities have experienced rising home prices for homes and getting less square footage.
People were okay with paying more money for less space to be closer to their jobs with a shorter commute.
But once companies transitioned to remote work, that all changed. Homebuyers began returning to suburban and exurban areas, opting for more space further away from their place of work. This spurred on a boom in the real estate industry. Ultimately, people wanted more space.
In Bryan/College Station, that translated into a healthy seller’s market as people were looking to take advantage of low interest rates and more flexibility in their work lives.
According to a report issued by Texas REALTORS® in October 2020, “Home sales increased 18.4%, with 119,642 homes sold in the third quarter of 2020. Statewide, the median price increased 8.6% to $266,000. Of all the homes sold within the third quarter, 34.1% were priced from $200,000 to $299,999, the highest share of sales among all price-class distributions.”
In Bryan/College Station, that translated to closed sales up 30 percent compared to the same quarter in 2019, while active listings dropped 17 percent.
By the end of 2020, the real estate market had done a complete 180 from where things were in march. Overall, houses in the Bryan College Station market began to sell lightning fast and inventory was low, meaning BCS became a bonafide seller’s market.
In the 4th quarter of 2020:
- Median selling price was up 8.4% compared to 2019
- Closed sales are up 49%
- Active listings are down 22%
Looking ahead, the Bryan/College Station housing market doesn’t show any signs of slowing down. According to the Texas Real Estate Research Center, they are projecting an 8.4% increase in single family home sales in 2021.