Residential real estate sales on the island surged 8 percent and prices climbed higher too in the first six months of 2020, a surprising phenomenon driven by low interest rates and buyers seeking drive-to vacation getaways, industry observers say.
Although the COVID-19 pandemic initially stalled and even killed some island real estate transactions, it quickly changed buyer behavior in ways benefiting housing markets in beach towns and resort destinations across the nation. Meanwhile, prices are rising as homebuyers hoping to lock in rock-bottom interest rates descend on the island, where inventory is low.
“Once our country began to shut down in March due to COVID-19, we anticipated a significant decline in the local real estate market,” said Michael J. Gaido III, a Realtor with Sand ‘N Sea. “There was an absence of buyers in March and part of April; however, in late April and May, the market exploded with a multitude of buyers with multiple and higher-than-list price offer situations.”
UP AND UP
There were 509 residential sales in the first six months this year, compared with 471 in the same period a year ago, an 8 percent increase, according to data compiled by Sand ‘N Sea Properties with information from the Houston Association of Realtors.
The median selling price in the first six months was $310,000, compared with $290,000 a year ago, a 7 percent increase.
Median refers to the price in the middle, meaning half of homes are listed above the price and half are below.
“We can only speculate that the strong market was driven by people who were afraid to get on cruise ships, planes or any other means of transportation to go on a vacation,” Gaido said.
“They wanted, and still want, a place that they can drive to. We are uncertain as to whether this recent influx of buyers is trying to quarantine from their congested urban areas or whether they came to the realization that driving to their vacation home is the new future.”
SWOON, THEN BOOM
The pandemic is altering buying patterns in other ways, said V.J. Tramonte, of Joe Tramonte Realty.
Island real estate was going strong before the pandemic but slowed during the initial reaction to it, he said.
When the city of Galveston in late March temporarily banned non-essential guests from using short-term rentals and the city closed the beaches to slow the spread of the virus, Tramonte lost four transactions involving people seeking investment rental properties. When the short-term rentals, hotels and beaches were allowed to reopen a month later, business began booming, he said.
Short-term rental properties are in high demand as investments and for buyers to use when they want a getaway, Tramonte said.
When they closed, uncertainty caused buyers to balk.
“As soon as it reopened in May, it went through the roof,” Tramonte said.
Tramonte is optimistic about sales through the year, barring a natural disaster, he said.
“I expect it to be good if we don’t have a damn storm,” Tramonte said.
Although the Houston metroplex, a zone of 6 million people 45 or so minutes away, still is a main source of buyers, people snapping up island real estate are coming from all across Texas, said Jim Rosenfeld, a Realtor with Martha Turner Sotheby’s International Realty. Most plan to avoid air travel for the foreseeable future, Rosenfeld said.
“They’re coming from Dallas, Fort Worth, Austin, San Antonio ...,” Rosenfeld said. “They don’t have to get on a plane, and they want a shorter drive.”
Cruise ships sailing from Galveston always have boosted home sales as people got a feel for the island before or after voyages, Rosenfeld said.
But suspension of cruises hasn’t terribly hurt an industry in which predictable sales patterns and seasons were shaken up by the pandemic.
Weekends were generally a popular time for people to tour homes, for example. But with so many people out of the office, weekdays are just as busy now, Rosenfeld said. Sales typically slow at the beginning of school years. Not so this year, with COVID-19 disrupting the start of the academic year.
“All the normal things aren’t taking place,” Rosenfeld said.
Because of the Fed’s response to the coronavirus pandemic, mortgage borrowers are finding some of the lowest interest rates in history, also boosting real estate sales, Rosenfeld said.
Tom Schwenk of Tom’s Galveston Real Estate is feeling the effects of rising home prices, he said.
“I’ve had more business and less transactions — the prices are higher,” Schwenk said.
Year to date, Schwenk has posted 58 transactions compared with 74 for the same period last year, he said.
Across Galveston Island, dollar volume in residential sales for the first six months was about $195 million, compared with $161.3 million for the same period a year ago, a 21 percent increase.
Schwenk is encountering buyers who are retirees, people tired of being cooped up in cities, and people forced to cancel trips abroad because of the pandemic, he said.
“They’re putting off travel and buying houses,” he said.
The pandemic also has created a new breed of homebuyer — remote workers no longer tied to cities where their offices are, Schwenk said. Some are taking advantage of that freedom and investing in beach houses, he said. That works both ways — some islanders who now work remotely are moving to Austin and other cities, he said.
What’s also surprising about the surge in home and lot sales on the island is that it came as the oil industry struggles with tumbling fuel demand caused by the global pandemic and other issues.
The island’s second-home real estate market and the oil patch long have been inextricably linked. In 2015, island real estate, which had been riding high, dipped because of an oil and gas downturn arguably less severe than this one.
But the oil and gas bust isn’t battering island real estate like it did in the past.
“I think this confirms that the Houston-area economy is more diversified than everyone believes,” Gaido said.
Early in the pandemic, there also was real estate industry worry about mass job losses caused by the pandemic.
“I don’t have a crystal ball to see the future but would anticipate the market to remain strong through the end of the year or until our society establishes a new normal,” Gaido said. “This is especially the case if interest rates remain low and property inventories remain in short supply.
“Despite the significant loss of jobs in the hospitality and other industries, there are evidently still enough people in the Houston area with expendable income to continue to purchase property in Galveston,” he said. “We certainly hope this persists.”