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HAR: Houston Sales Fall Double Digits

by James McClister

http://houstonagentmagazine.com/home-prices-strong-or-overvalued/

Last fall, the price of oil plummeted by 50 percent and Houston industry insiders claimed all was well. When energy companies started laying off thousands, many claimed Houston’s economy was strong and described the forthcoming effects on real estate as “minimal.” In October, sales of all property types plummeted 11.9 percent year-over-year, while total dollar volume fell 8.3 percent, according to the Houston Association of Realtors. In HAR’s report, the opening line cites the “downturn in the oil industry” as one of the primary drivers behind the recent declines.

In April, HAR Chair Nancy Furst reaffirmed that business in the city was “strong.”

“The Houston real estate market is doing quite well despite low inventory and concerns about the effects of declining oil prices,” she said. “Realtors I speak to regularly tell me that business remains strong, and April’s uptick in inventory means consumers had the benefit of more homes hitting the market.”

In that same month, Carolin Allison, a Realtor with Keller Williams Metropolitan, told Culture Map Houston that “the slowdown is more psychological than real.”

“The Houston economy is booming,” Allison said. “If you look at the Houston real estate market, it is up on every measure as compared to last year.”

Five times this year home sales in Houston have dropped, including the 10.2 percent year-over-year drop in single-family home sales this October. In months past when sales had dropped, the declines were generally relegated to the very bottom or very top of the market. But October’s declines were recorded among every housing tier – though losses were still more prominent on the lower and higher ends:

$1 – $79,999: decreased 27.2 percent
$80,000 – $149,999: decreased 24.9 percent
$150,000 – $249,999: decreased 5.6 percent
$250,000 – $499,999: decreased 3.4 percent
$500,000 and above: decreased 10.4 percent

Existing-home sales were down 9.1 percent compared to the same time last year, as well.

Inventory and Prices Up

The effects of falling sales have shown one significant upside, and that is increases in inventory.

In October, single-family inventory rose from a 2.8-months supply last October to a 3.5-months supply, which is where it’s remained for the last four months.

It was a similar case with townhomes and condominiums. Sales for the property type dropped 17.3 percent from Oct. 2014 to Oct. 2015, which helped inventory swell from a 2.5-months supply to 3.2 months.

However, despite increased options and repeated warnings from CoreLogic, Fitch Ratings, Forbes, Trulia and others about the overvaluation of Houston’s market, single-family home prices continue surging. In October, median price jumped 6.6 percent to $205,000, while condo prices slipped 1 percent.

A Step Towards Normal?

But while the declines are daunting, Houston’s sales and pricing increases remain largely in line with the record-setting pace established in 2014. And HAR’s chair believes the recent dip is simply the city’s market settling into a more sustainable track.

“At the beginning of the year, we discussed how Houston home sales would normalize by the end of 2015, and after an impressive run that rivaled last year’s record levels, it looks like the forecast is coming true in the fourth quarter,” she said.

Furst didn’t address growing concern over rampant home price appreciation, but forecasts have suggested an eventual price slow down as a result of oil price depreciation. If prices go the way of sales and inventory continues to gain, the city could find itself with a more “normal” market in 2016.

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