Houston breaks records in 2014, but is the city on too much of a roll to slow down in 2015?

It has been an exceptionally exciting year for Texas and particularly Houston, where home sales and prices have continued to swell despite the seasonal hiccups and lingering post-crisis problems that has stifled national development, according to a new report from the Houston Association of Realtors.

Ending the year in stride, in December, Houston single-family home sales increased 11.6 percent, compared to only 11 percent in December 2013; and sales of all property types increased 11 percent. However, persistent demand has done little to supplement falling inventory levels, which, as HAR last reported, stand at a 2.5-months supply.

Still, the city shines as a beacon of market progress. In a line-by-line comparison, HAR researchers evaluated Houston, finding that by nearly all measures 2014 was a more fruitful year than its predecessor. Single-family home sales rose 2.8 percent from 73,266 to 75,319, amounting to a 12.7 percent increase to total dollar volume and an 8.7 percent increase to the average sales price of single-family homes.

A December to Remember

A further year-over-year comparison of December’s performance revealed even more promising numbers, which lend further credence to Houston’s claim as one of the nation’s strongest markets. The findings include:

• Total dollar volume in December increased 11 percentage points year-over-year, from $1.7 billion in December 2013 to a little over $2 billion this past month.
• Sales of townhomes and condominiums rose 7.3 percent year-over-year.
• Townhomes and condo inventory is at a 2.3-months supply.

Will 2015 Be Another 2014?

It was a hallmark year for Houston, which saw sales volumes and prices reach record highs.

“The Houston housing market experienced its best year on record in 2014 and that is a reflection of the vitality of the local economy,” HAR Chair Nancy Furst with Berkshire Hathaway HomeServices Anderson Properties said.

But moving deeper into 2015, the city’s toying with the sort of overwhelming success that might quickly become toxic. If prices continue appreciating with the same rapidity that’s defined Houston all year, the market may very well find itself greatly overvalued, which could spark an eventual spiral. Though, Furst is hardly worried.

“We expect the pace of sales to normalize this year, which should finally enable inventory levels to grow, restoring balance to the market,” she said.

The first half of 2015 will be crucial for Houston, which desperately needs to establish a new market pace; one that will sustainable in the long-term.