Houston Real Estate Trends, June 2016 Update
The Houston real estate market continues to display healthy equilibrium despite instability in the energy industry.
Here are a few highlights:
- June 2015 to May 2016 had the second highest number of total property sales of any 12-month period over the prior 5 years. The difference from last year is less than $1,000.
- May 2016’s total dollar volume and property sales were nearly identical to (record) May 2015 numbers.
- For May 2016, the average single-family sales price remained almost the same as May 2015.
- While still well below the national average, Houston’s single-family “months of available of home inventory” is almost identical to 2013-territory.
- 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).
May Houston Real Estate Milestones:
- Single-family home sales rose 10 percent compared to last May;
- On a year-to-date basis, single-family home sales are up 3.4 percent;
- Total property sales jumped 7.1 percent to 8,703 units;
- Total dollar volume rose 7.3 percent to $2.4 billion;
- At $290,931, the single-family home average price was statistically unchanged from last year;
- The single-family home median price was also flat at $225,000;
- Single-family homes months of inventory climbed to a 3.6-months supply versus 3.0 months a year earlier;
- Townhome/condominium sales were unchanged with the average price down 2.6 percent to $198,411 and the median price up 7.6 percent to $163,000;
- Leases of single-family homes were up 4.1 percent with rents unchanged at $1,866;
- Leases of townhomes/condominiums soared 10.7 percent with rents unchanged at $1,666.
- Free Houston Relocation Kit
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- Why Use Us To Sell Your Houston House?
Houston Real Estate Updates In May
Steady growth in the supply of homes provided the fuel needed to help boost to the Houston real estate market in May, with single-family home sales up 10 percent year-over-year. As the market has seen for several months, the greatest concentration of home buying continued to take place among mid-range housing—homes priced between $150,000 and $500,000. The average and median price remained virtually the same as May of 2015.
According to the latest monthly report prepared by the Houston Association of Realtors (HAR), a total of 7,343 homes sold in May compared to 6,678 a year earlier. On a year-to-date basis, home sales rose 3.6 percent versus May of 2015. New listings buoyed inventory levels from a 3.0-months supply to 3.6 months.
“We are seeing more normal market conditions for this time of year and that is the direct result of more plentiful housing inventory for buyers,” said HAR Chairman Mario Arriaga with First Group. “A year ago, the supply of homes was historically low, which increased buyer-side demand and pushed up pricing. These are the fundamental forces of supply and demand, and with more available housing and an easing of prices, we look forward to a healthy pace of sales throughout the summer.”
The single-family home average price declined a fractional 0.5 percent in May to $290,931. The median price—the figure at which half of the homes sold for more and half sold for less—held steady at $225,000.
May sales of all property types in Houston totaled 8,703, up 7.1 percent from the same month last year. Total dollar volume for properties sold in May rose 7.3 percent to $2.4 billion.
May Monthly Market Comparison
The Houston real estate market gauges held to positive territory in May compared to those from a year earlier and continue to reflect what are widely considered sustainable market conditions. On a year-over-year basis, single-family homes sales and total dollar volume were up, inventory grew and prices were statistically flat.
Month-end pending sales for single-family homes totaled 8,286, an increase of 15.6 percent compared to last year which portends the likelihood of more positive sales when the June numbers are tallied. Total active listings, or the total number of available properties, at the end of May climbed 17.4 percent from May 2015 to 35,416.
An increase in new listings in May boosted single-family homes inventory, with levels climbing from a 3.0-months supply to 3.6 months. For perspective, housing inventory across the U.S. currently stands at a 4.7-months supply, according to the latest report from the National Association of Realtors (NAR).
|CATEGORIES||MAY 2015||MAY 2016||CHANGE|
|Total property sales||8,123||8,703||7.1%|
|Total dollar volume||$2,229,902,866||$2,392,124,785||7.3%|
|Total active listings||30,162||35,416||17.4%|
|Single-family home sales||6,678||7,343||10.0%|
|Single-family average sales price||$292,258||$290,931||-0.5%|
|Single-family median sales price||$224,900||$225,000||0.0%|
|Single-family months inventory*||3.0||3.6||20.9%|
|Single-family pending sales**||7,167||8,213||15.6%|
* 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 7,343 in May, up 10.0 percent from May 2015.
The average price was statistically unchanged at $290,931 and the median price was also unchanged at $225,000. Days on Market (DOM), or the number of days it took the average home to sell, edged up to 52 days versus 49 last year.
Broken out by housing segment, May sales performed as follows:
- $1 – $79,999: decreased 29.6 percent
- $80,000 – $149,999: decreased 10.3 percent
- $150,000 – $249,999: increased 20.0 percent
- $250,000 – $499,999: increased 15.4 percent
- $500,000 and above: decreased 6.5 percent
HAR also breaks out the sales figures for existing single-family homes. Existing home sales totaled 6,190 in May, up 9.1 percent versus the same month last year. The average sales price edged up 1.6 percent year-over-year to $277,957 while the median sales price rose 2.4 percent to $211,000.
STownhome and condominium sales were unchanged with 621 units selling in both May of 2016 and 2015. The average price declined 2.6 percent to $198,411 while the median price climbed 7.6 percent to $163,000. Inventory grew from a 2.6-months supply to 3.4 months.
Lease Property Update
Renters were out in force in May. Single-family home leases rose 4.1 percent, while townhome/condominium leases jumped 10.7 percent. The average rent for single-family homes held steady at $1,866 and the average rent for townhomes/condominiums also remained unchanged at $1,666.
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.