Off to a good year, sales and prices in Houston are up, but a shrinking inventory could pose problems.

Coming into 2015, Houston is on pace to break records, with strong sales and prices persisting, according to a new report from the Houston Association of Realtors. However, despite impressive numbers, the area’s dwindling inventory poses significant problems for the months ahead.

The lion’s share of January home sales took place within the $250,000 to $500,000 price range, following a more national trend towards higher priced homes. Increases to single-family sales were particularly pronounced, jumping 6.1 percent from the same time last year, HAR researchers found.

Compared to Jan. 2014, median prices are up in all market categories, and while that bodes well for agents and sellers, the continued increases to home prices isn’t necessarily something to celebrate. With current inventory standing at a 2.6-months supply, down from 2.7 months last January and significantly below the national average of 4.4 months, home prices are poised for further increases. Considering the market is already approaching overvalued, this could prove problematic in the near future.

Sales and Prices are Up

HAR’s report revealed a number of positive trends in the local industry, with a particular emphasis on sales and price. Researchers found:

• Home prices achieved record highs for a January. The average price of a single-family home jumped 7.0 percent year-over-year to $259,969. The median price—the figure at which half the homes sold for more and half for less—rose 6.7 percent to $190,000.
• January sales of all property types totaled 4,874 units, a 2.6-percent increase compared to the same month last year. Total dollar volume for properties sold rose 9.0 percent to $1.2 billion versus $1.1 billion a year earlier.
• Sales of townhouses and condominiums declined 20.0 percent in January versus one year earlier. A total of 337 units sold last month compared to 421 properties in January 2014. The average price rose 6.2 percent to $183,906 and the median price rose grew 5.4 percent to $141,000. Inventory held at a 2.5-months supply.

A Strong Start

In relative terms, Houston’s market has opened up the year strong, but a crashing energy market is likely to prove an obstacle to continued success, according to HAR Chair Nancy Furst, a business development specialist with Berkshire Hathaway HomeServices Anderson Properties.

“January was a strong month overall for the Houston housing market, but we still expect to see sales cool as a result of lower oil prices and the limited supply of homes,” she said.

Already, Furst pointed out, Houston townhome and condominium sales have started to fall off, but with inventory low, this tapering could provide a pathway to stability.

“Coming off a record year, this normalization should give homebuilders an opportunity to create new inventory, with existing homes entering the market in the spring and summer months, which is traditionally the most popular time for owners to sell.”