New report finds Houston home sales declining for the first time in three years, but there is a small silver lining.

In a Houston Association of Realtors home sales report, released early Wednesday, research revealed sales in the metro area, which has stood as somewhat of an oasis in the wake of the housing crisis, declined in May for the first time in three years.

Including all property types, May sales totaled 8,688 units, amounting to a 5 percent decline year-over-year, with exceptional declines to single-family home sales – down 7.3 percent from May 2013 – and, as expected, foreclosed property sales – down 57.4 percent from May 2013. However, in a bizarre twist, average sale price is actually up, according to HAR.

While sales of properties priced on the lower-end of the home price scale continue suffering from historically low inventory levels, sales of homes priced $500,000 and above are on the rise, outpacing May 2013 levels. According to HAR, as a result, total dollar volume for properties sold in the city rose to $2.3 billion, slightly edging out the $2.2 billion sold in May 2013.

What Are the Details?

While cumulative home sales in Houston declined overall, HAR’s report revealed the dwindling numbers were due largely in part to dips in single-family and foreclosed property sales. When broken down into individual property types, the news of the first sales decline in thirty-four consecutive months seems slightly less ominous:

• Single-family home rentals increased 20.4 percent compared to May 2013, raising the average rent by 4.5 percent to $1,727.
• Townhouse and condominium sales increased 4.8 percent compared to May 2013, raising the average price by 2.1 percent to $193,992.
• Existing-home sales declined 4.2 percent compared to May 2013. Still, the average sale price rose 7.4 percent to $263,560.

A Silver Lining

There were some in the Houston market shocked by the news of HAR’s new home sales report, but ask the association’s chair, Realtor Chaille Ralph of Heritage Texas Properties, and she’ll tell you this decline was all but inevitable.

“It was just a matter of time before our depleted supply of inventory caught up with us,” she said. “This is Economics 101: Supply and Demand. Until more homes are listed for sale and new housing is built, it’s a safe bet that there will be further sales declines and more demand for rental properties.”

One silver lining from HAR’s report is that the decline in home sales has actually allowed inventory levels to climb, if only slightly. In May, Houston’s inventory crawled up to a 2.8 months supply, which is the first increase the city has seen since last December when inventory hit a 2.6 months supply. Still, inventory remains considerably lower than the 3.3 months supply recorded in May 2013, and even lower still than national inventory, which is currently a 5.9 months supply.