Houston Real Estate Trends, January 2016 Update

Houston Real Estate Trends, January 2016 Update

Five year Houston real estate trendsIt seems like every “How’s the Real Estate Market?” conversation I’ve had lately inevitably turns to the price of oil.

With the barrel price sitting at $31 today, it would be unrealistic not to consider its impact on Houston.

While I’m comfortable saying “the sky isn’t falling,” you definitely want to consider the following data and trends if you’re thinking about selling or buying this Spring.

Here are a few highlights:

For those of us who’ve been around for a little while, we’ve seen similar pattens in 2002, 2008, 2010, and 2011.

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.
  • 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.
  • 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 (December 2014 – December 2015).

December Houston Real Estate Milestones:

  • Single-family home sales fell 9.4 percent compared to December 2014, marking the third consecutive monthly decline;
  • Total property sales dropped 9.9 percent (6,988 units);
  • Total dollar volume decreased 10.9 percent to $1.8 billion;
  • At $216,000, the single-family home median price achieved a December high;
  • Single-family homes months of inventory climbed to a 3.2-months supply versus 2.5 months a year earlier;
  • Townhomes/condominium sales dropped 2.9 percent with the average price down 14.6 percent to $197,904 and the median price up 1.2 percent to $159,900;
  • Leases of single-family homes rose 2.9 percent with rents flat at $1,710;
  • Leases of townhomes/condominiums declined 3.6 percent with rents down 3.1 percent at $1,459.


Custom Report from a Top Ranked Houston RealtorHouston Real Estate Resources


Houston Real Estate Updates In December

Houston real estate faced a stiff challenge in 2015. It followed the best year on record for home sales. Add plunging oil prices and the resulting layoffs into the mix along with persistently low levels of housing inventory, and the result was the drop in sales that economists had forecast. While there were single-digit declines in sales volume at different times throughout the year, more substantial ones struck during the fourth quarter, including December. Nonetheless, the total number of 2015 single-family home sales as well as sales of all property types achieved the second-highest levels of all time, behind 2014.

December single-family home sales slid 9.7 percent versus December 2014 while total property sales dropped 9.9 percent. The latest monthly report prepared by the Houston Association of Realtors (HAR) shows a total of 5,879 single-family home sales compared to 6,507 a year earlier. The sales slowdown did allow inventory to grow from a 2.5-months supply, the lowest level of all time, to 3.2 months. Homes priced between $150,000 and $500,000 saw flat year-over-year sales, while homes below $150,000 and above $500,000 experienced declines.

“With oil dropping to levels around $30 a barrel, I think it’s fair to say that the Houston housing market is going to remain cooler for at least a little while,” said HAR Chairman Mario Arriaga with First Group. “The good news is the local economy is vastly more diversified than it was during the oil bust of the 80s and other industries are continuing to hire, so it really is going to come down to consumer confidence.”


houston neighborhood map

A year ago, Houstonians were hailing a surge in employment that drew home buyers and renters from across the U.S. and around the world. By contrast, the latest Texas Workforce Commission report states that the Houston metro area added just 4,800 jobs in November, making it the third weakest November in 25 years, according to the Greater Houston Partnership, which notes that the region typically adds 10,000 to 12,000 jobs in the month.

In December, the single-family home average price dipped a fractional 0.6 percent year-over-year to $280,201 while the median price—the figure at which half of the homes sold for more and half sold for less—rose 2.9 percent to $216,000. The median figure represents an all-time high for a December in Houston.

December sales of all property types in Houston totaled 6,988, a 9.9-percent decrease from the same month last year. Total dollar volume for properties sold in December slid 10.9 percent to $1.8 billion versus $2.0 billion a year earlier.

2015 Annual Market Comparison

While 2015 began at levels comparable to the record-setting 2014, home sales began to falter as plummeting oil prices and energy industry layoffs sparked jitters throughout the Houston market. Even so, there were 73,724 single-family home sales and 88,764 total property sales, with both numbers representing the second most transactions in the history of Houston real estate, behind 2014.

Single-family home sales fell 2.4 percent for the year and sales of all property types dropped 2.9 percent. On a year-to-date basis, the average price climbed 3.7 percent to $280,290 while the median price increased 6.5 percent to $212,000. Total dollar volume for full-year 2015 matched last year’s record high of $23.5 billion.

The greatest one-month sales volume of 2015 was recorded in July with 7,895 single-family home sold. By contrast, the lightest one-month sales volume took place in January with 4,109 sales.

Months inventory began the year at a 2.5-months supply, and while it grew to a 3.5-months supply over the summer, it ended 2015 at a 3.2-months supply. Months of inventory estimates the number of months it will take to deplete current active inventory based on the prior 12 months sales activity.

Single-family home sales 75,535 73,724 -2.4%
Total property sales 91,439 88,764 -2.9%
Total dollar volume $23,553,542,859 $23,559,111,514 1.0%
Single-family average sales price $270,182 $280,290 3.7%
Single-family median sales price $199,000 $212,000 6.5%

* 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.


December Monthly Market Comparison

December delivered largely negative results compared to home sales readings for December 2014. On a year-over-year basis, total property sales, total dollar volume and average sales price declined while the median price rose.

Month-end pending sales for all property types totaled 4,761. That is down 1.5 percent compared to last year and suggests the possibility of another sales decline when the January numbers are tallied. Active listings, or the number of available properties, at the end of December rose 18.7 percent from December 2014 to 30,661.

Houston’s housing inventory has held above a 3.1-months supply since May 2015, getting as high as a 3.5-months supply during the summer months and settling at a 3.2-months supply in December. That compares to a 2.5-months supply in December 2014. The national supply of homes reported by the National Association of Realtors (NAR) currently stands at 5.1 months.

Total property sales 7,753 6,988 -9.9%
Total dollar volume $2,091,529,181 $1,863,139,044 -10.9%
Total active listings 25,821 30,661 18.7%
Total pending sales 6,507 5,879 -9.7%
Single-family home sales $281,973 $280,201 -0.6%
Single-family average sales price $210,000 $216,000 2.9%
Single-family months inventory* 2.5 3.2 28.5%
Single-family pending sales** 4,834 4,761 -1.5%

* 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.

** 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.

Single-Family Homes Update

Single-family home sales totaled 5,879 in December, down 9.7 percent from December 2014. That marks the third consecutive monthly decline.

The average price declined a fractional 0.6 percent to $280,201. However, the median price achieved the highest level ever for a December in Houston, rising 2.9 percent year-over-year to $216,000. Days on Market (DOM), or the number of days it took the average home to sell, edged up to 57 days versus 56 in 2014.

Broken out by housing segment, December sales performed as follows:

  • $1 – $79,999: decreased 25.6 percent
  • $80,000 – $149,999: decreased 25.5 percent
  • $150,000 – $249,999: unchanged
  • $250,000 – $499,999: unchanged
  • $500,000 – $1 million and above: decreased 17.2 percent

HAR also breaks out the sales figures for existing single-family homes. Existing home sales totaled 4,858 in December, down 7.9 percent versus the same month last year. The average sales price rose 2.5 percent year-over-year to $257,399 while the median sales price climbed 3.7 percent to $196,000.


Townhouse/Condominium Update

Sales of townhouses and condominiums declined 2.9 percent in December. A total of 536 units sold compared to 552 properties in December 2014. The average price dropped 14.6 percent to $197,904 and the median price edged up 1.2 percent to $159,900. Inventory grew from a 2.3-months supply to 2.9 months.

Lease Property Update

Demand for single-family lease homes rose 2.9 percent in December while townhomes/condominiums saw demand tumble 3.6 percent. The average rent for single-family homes was unchanged at $1,710 while the average rent for townhomes/condominiums dropped 3.1 percent to $1,459.

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.

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