Houston’s market is heading towards a fork, where one direction means stability and the other a bubble.

After a relatively disappointing February in which sales volume declined, Houston home sales are again in the green, with single-family purchases rising 3.8 percent year-over-year in March, according to a new report from the Houston Association of Realtors.

Single-family home sales totaled 6,232 units last month compared to 6,005 a year earlier, with buyer demand offsetting a 7.3 percent increase in new listings, which did nothing to help the city’s ongoing inventory shortage.

According to HAR, Houston’s current inventory is estimated at 2.8 months supply – a negligible gain from the same time last year and considerably less than the nation’s 4.6 months of inventory.

With demand remaining strong and inventory low, home prices are continuing their rapid ascent, achieving record highs in March. The median price for single-family homes jumped 8.9 percent year-over-year to $208,000, while the average price rose 6.5 percent to just over $276,000.

Inventory Remains Lone Blemish

Across the spectrum, it was a solid month for Houston, despite inventory remaining stagnant.

• March sales of all property types totaled 7,564 units, up 3.6 percent compared to the same month last year. Total dollar volume increased 9.0 percent to $1.9 billion, versus $1.8 billion a year earlier.
• In March, existing-home sales totaled 5,296; that is up 6.4 percent from the same month last year.
• After starting off 2015 with a 22.7 percent decline in sales, followed by an 8.6 percent increase in February, townhouse and condominium sales shot up 13.8 percent in March.

Another Year Without Inventory?

The positive numbers, particularly in regards to sales, are encouraging, but Houston still needs inventory growth, says HAR Chair Nancy Furst.

“It was great to have sales back in the black in March after February’s decline, but in order to satisfy the long-term needs of the Houston housing market, we need to see substantive growth in inventory levels, which remain at record lows,” she said. “It could take the remainder of this year to begin approaching what we consider a ‘balanced market,’ which is typically a five- to six-month supply of homes.”

“To begin approaching” is key to Furst’s statement, as it suggests the process of achieving sustainable normalcy is likely further into 2016. In that time, with prices skyrocketing, Houston’s market could shift dramatically. In the meantime, builders have an opportunity to tame price increases by bringing new homes to the market.