Houston Real Estate Trends, August 2016 Update: Home Sales Slow Down
Single-family home sales decline for the first time since January while inventory remains over 2015 levels.
Here are a few highlights:
- August 2015 to July 2016 had the second lowest number of total properties sold of any 12-month period over the prior 5 years. It’s the first time in four years total property sales went under 9,000 homes.
- For July 2016, the average single-family sales price remained almost the same as July 2015. The difference is only $2,000.
- While still well below the national average, Houston’s single-family “months of available of home inventory” has reached 4 months for the first time since 2012.
- Here’s the best 2016 forecast that I’ve seen recently.
- Learn the value of your home and see what’s going on in your neighborhood.
We recently completed an analysis of over 400,000 home sales in Houston since 2000 (email me if you’d like a copy) and found several key themes:
- Pundits are notoriously bad at calling either the top or bottom of a market.
- On average, if you bought a quality home in a quality neighborhood and held for at least 5-7 years, you’ve broken even on your investment – regardless of when you purchased.
- Quality matters. Quality was ranked in multiple categories including: location, construction type, floor plan and avoiding being along either a railroad, highway or major thoroughfare.
- Home buyers who did the worst financially purchased properties that violated two or more of these conditions. Interestingly, over two thirds of buyer who purchased these “disadvantaged properties” bought directly from a builder, didn’t use a Realtor or used the seller’s real estate agent to do “both sides of the deal.”
Key Seller Tips:
- For sellers, in a declining market (regardless of how long a declining market lasts) pricing just below the recent comparable sales (“comps”) is your best option for selling fast for the most money.
- As the market “normalizes”, it makes sense to price your home based on how the market “trended” the last time it started to slow down. Comparable sales (“comps”) help sellers stay ahead of the curve.
- Comps are a “rear view” mirror approach of what the market has been, not what the market will be.
- In declining markets, each month that passes will mean that the value declines as well.
- To maximize value in a declining market, you want to price where the market is going, not where it’s been, so that someone sees you as a deal, moves quickly and negotiates less on price.
- In addition, if someone sells faster than you for a lower price, then they “re-set” the comps to a lower amount, and then you’ll have to sell under that.
- So, in many cases, it’s better for you to be the first one out so you can set the trend, rather than lagging behind.
Key Buyer Tips:
- The key lesson from our study of 400,00 home purchases since 2000, is not to try and “time the bottom” but instead to buy the highest quality home while not overpaying for where the market is at that point in time.
- Local trends matter. The spike in home inventory is most prominent in the mid-range housing category. Single-family homes priced between $150,000 and $250,000 saw year-over-year sales increase by nearly 9% while total property sales remain unchanged
- As you’ll see in the below graph, historically, Houston’s “best properties” don’t come on the market in large volumes during major downturns (Houston real estate trends).
- What has happened historically during downtowns is that prices stagnate and transaction volume falls materially.
- In the graph below, compare the similarities between the trends between 2014 – 2015 and 2007 – 2008.
- No one knows what future oil prices will bring. It may or may not be worse than the “Great Recession.”
- If it is similar, we can use 2007 as the proxy. In 2008, we saw price stagnation and in 2009, we saw price appreciation.
- I believe the key here is to not “chase the market” and buy wisely – both in terms of property quality and appropriate pricing.
- Contact me for more about what this could mean for you.
The following is the most recent Houston MLS Report, published by the Houston Association of Realtors. The data covers Houston homes for sale and real estate trends from the last twelve months (May 2015 – May 2016).
July Houston Real Estate Milestones:
- Single-family home sales fell 8.8 percent with a total of 7,204 units sold;
- On a year-to-date basis, single-family home sales are up about one percent;
- Total property sales fell 8.6 percent to 8,571 units;
- Total dollar volume declined 9.0 percent to $2.4 billion;
- At $230,000, the single-family home median price rose 4.1 percent to a July high and second all-time high;
- The single-family home average price declined 0.5 percent to $292,316;
- Single-family homes months of inventory climbed to a 4.0-months supply, its highest level since November 2012;
- Townhome/condominium sales fell 7.4 percent with the average price down 2.5 percent to $197,104 and the median price up 4.5 percent to $159,900;
- Leases of single-family homes were up 2.3 percent with rents up slightly to $1,879;
- Leases of townhomes/condominiums soared 10.6 percent with rents flat at $1,630.
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- Why Use Us To Sell Your Houston House?
Houston Real Estate Updates In July
The greater Houston real estate market experienced its first sales decline in six months in July, with the sharpest drop in volume reported among homes on the highest and lowest ends of the pricing spectrum.
According to the latest monthly report prepared by the Houston Association of Realtors (HAR), a total of 7,204 homes sold in July compared to 7,898 a year earlier. That represents a drop of 8.8 percent, the first decline since January. However, on a year-to-date basis, home sales are still up about one percent compared to this point in 2015.
Inventory levels continue to outpace last year, rising from a 3.5-months supply to 4.0 months. That is the largest supply of homes since November 2012 when it stood at 4.1 months.
“We never like to see a decline in home sales, but it’s helpful to remember that our comparisons each month are to a record year in 2015,” said HAR Chairman Mario Arriaga with First Group. “July was the first time in several months when even mid-range housing saw declines. It’s hard to identify a single cause for the drop in sales, whether it’s a possible trickle-down effect of falling oil prices or prospective buyers holding out, but Houston’s housing market is still healthy overall, and HAR will continue to monitor conditions as we transition into the fall months.”
The single-family home median price—the figure at which half of the homes sold for more and half sold for less—rose 4.1 percent to $230,000. That is the highest median price ever for a July and the second highest of all time. The highest median ever was $233,000, reached in June of this year. The average price declined a fractional 0.5 percent in July to $292,316.
June sales of all property types in Houston totaled 8,571, down 8.6 percent from the same month last year. Total dollar volume for properties sold in July fell 9.0 percent to $2.4 billion.
July Monthly Market Comparison
Houston’s monthly housing indicators were mixed in July compared to a year earlier. On a year-over-year basis, single-family homes sales and total property sales were down along with total dollar volume, the median price reached a record high for a July while the average price dropped slightly and inventory grew to the largest level in four years.
Month-end pending sales for single-family homes totaled 7,979, an increase of 11.4 percent compared to last year. Total active listings, or the total number of available properties, at the end of July climbed 12.7 percent from July 2015 to 37,952.
Single-family homes inventory jumped from a 3.5-months supply to 4.0 months, the highest level since November 2012 when it stood at 4.1 months. For perspective, housing inventory across the U.S. currently stands at a 4.6-months supply, according to the latest report from the National Association of Realtors (NAR).
|CATEGORIES||JULY 2015||JULY 2016||CHANGE|
|Total property sales||9,374||8,571||-8.6%|
|Total dollar volume||$2,605,598,049||$2,370,776,221||-9.0%|
|Total active listings||33,670||37,952||12.7%|
|Single-family home sales||7,898||7,204||-8.8%|
|Single-family average sales price||$293,772||$292,316||-0.5%|
|Single-family median sales price||$221,000||$230,000||4.1%|
|Single-family months inventory*||3.5||4.0||17.2%|
|Single-family pending sales**||7,165||7,979||11.4%|
** Effective May 2015, in an effort to be consistent with industry standards, the Houston MLS is now including all categories of pending sales in its reporting. Previously, the Houston MLS did not include “option pending” and “pending continue to show” listings in its reporting of pending sales. The new methodology is now all-inclusive for listings that went under contract during the month.
* Months inventory estimates the number of months it will take to deplete current active inventory based on the prior 12 months sales activity. This figure is representative of the single-family homes market.* Months inventory estimates the number of months it will take to deplete current active inventory based on the prior 12 months sales activity. This figure is representative of the single-family homes market.
Single-Family Homes Update
Single-family home sales totaled 7,204 in July, down 8.8 percent from July 2015 and the first decline since January 2016.
The median price rose 4.1 percent to a July high and second all-time high of $230,000. The average price declined 0.5 percent to $292,316. Days on Market (DOM), or the number of days it took the average home to sell, edged up to 50 days versus 45 last year.
Broken out by housing segment, July sales performed as follows:
- $1 – $79,999: decreased 43.3 percent
- $80,000 – $149,999: decreased 32.8 percent
- $150,000 – $249,999: decreased 3.1 percent
- $250,000 – $499,999: decreased 1.4 percent
- $500,000 and above: decreased 21.7 percent
HAR also breaks out the sales figures for existing single-family homes. Existing home sales totaled 6,143 in July, down 10.3 percent versus the same month last year. The average sales price was flat at $274,861 while the median sales price rose 6.1 percent to $217,500.
Townhome and condominium sales fell 7.4 percent with 649 units selling in July versus 701 a year earlier. The average price declined 2.5 percent to $197,104 while the median price climbed 4.5 percent to $159,900. Inventory grew from a 3.0-months supply to 3.5 months.
Lease Property Update
The lease market was strong again in July. Single-family home leases rose 2.3 percent, while townhome/condominium leases jumped 10.6 percent. The average rent for single-family homes ticked up to $1,879 and the average rent for townhomes/condominiums held steady at $1,630.
The computerized Multiple Listing Service of the Houston Association of REALTORS® includes residential properties and new homes listed by 25,000 REALTORS® throughout Harris, Fort Bend and Montgomery counties, as well as parts of Brazoria, Galveston, Waller and Wharton counties. Residential home sales statistics as well as listing information for more than 50,000 properties may be found on the Internet at http://www.har.com.
The information published and disseminated to the HAR Multiple Listing Services is communicated verbatim, without change by Multiple Listing Services, as filed by MLS participants.
The MLS does not verify the information provided and disclaims any responsibility for its accuracy. All data is preliminary and subject to change. Monthly sales figures reported since November 1998 includes a statistical estimation to account for late entries. Twelve-month totals may vary from actual end-of-year figures. (Single-family detached homes were broken out separately in monthly figures beginning February 1988.)
Founded in 1918, the Houston Association of REALTORS® (HAR) is a 26,000-member organization of real estate professionals engaged in every aspect of the industry, including residential and commercial sales and leasing, appraisal, property management and counseling. It is the largest individual dues-paying membership trade association in Houston as well as the second largest local association/board of REALTORS® in the United States.