Houston Real Estate Trends, May 2016 Update

Houston Real Estate Trends, May 2016 Update

Five year Houston real estate trendsHouston Association of Realtors (HAR) has just released the April Houston real estate stats.

The Houston real estate market continues to display healthy equilibrium despite instability in the energy industry.

Here are a few highlights:

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 (January 2014 – January 2015).

April Houston Real Estate Milestones:

  • Single-family home sales declined a fractional 0.6 percent compared to last April;
  • On a year-to-date basis, single-family home sales are up 1.6 percent;
  • Total property sales declined 2.0 percent to 7,583 units;
  • Total dollar volume fell 1.6 percent to $2.01 billion;
  • At $278,544, the single-family home average price was down 1.0 percent compared to last April;
  • The single-family home median price rose 3.3 percent year-over-year to an all-time April high of $217,000;
  • Single-family homes months of inventory climbed to a 3.6-months supply versus 2.9 months a year earlier;
  • Townhome/condominium sales fell 12.6 percent with the average price up 4.1 percent to $206,832 and the median price up 7.3 percent to $153,450;
  • Leases of single-family homes leapt 18.1 percent with rents up 2.6 percent to $1,811;
  • Leases of townhomes/condominiums soared 26.0 percent with rents down 1.7 percent to $1,574.

Custom Report from a Top Ranked Houston RealtorHouston Real Estate Resources

 

Houston Real Estate Updates In April

The Houston real estate market continues to display healthy equilibrium despite instability in the energy industry. Overall single-family home sales volume was virtually flat in April, however mid-range homes scored another month of positive sales and the supply of homes available for sale grew some more. The average price was down slightly while the median price rose to an all-time April high.

Single-family home sales declined a fractional 0.6 percent versus April 2015, with a total of 6,310 sales compared to 6,349 a year earlier, according to the latest monthly report prepared by the Houston Association of Realtors (HAR). On a year-to-date basis, home sales are 1.6 percent ahead of last year’s pace. New listings helped inventory grow from a 2.9-months supply to 3.6 months.

“There is little to complain about in the April HAR sales report, especially when you take into account the fact that we are comparing current home sales to the Houston housing market’s record 2015 performance,” said HAR Chairman Mario Arriaga with First Group. “Indicators continue to point to more sustainable market conditions, as mid-range homes sell well and consumers find that they have more homes from which to choose than they did at this time last year.”

 

houston neighborhood map

 

Home prices delivered mixed readings in April. The single-family home average price declined 1.0 percent to $278,544. The median price-the figure at which half of the homes sold for more and half sold for less—rose 3.3 percent to $217,000, the highest price ever for an April.

April sales of all property types in Houston totaled 7,583, down 2.0 percent from the same month last year. Total dollar volume for properties sold in March declined 1.6 percent to $2.01 billion.

April Monthly Market Comparison

Houston’s housing market figures were mixed in April compared to those from a year earlier, but continue to support what are considered more sustainable market conditions. On a year-over-year basis, single-family homes sales, average price and total dollar volume were down slightly while inventory levels grew and the median sales price rose to an April record high.

Month-end pending sales for single-family homes totaled 8,213, an increase of 2.3 percent compared to last year. Total active listings, or the total number of available properties, at the end of April climbed 16.7 percent from April 2015 to 34,402.

April’s increase in new listings gave single-family homes inventory a boost, with levels climbing from a 2.9-months supply to 3.6 months. For perspective, housing inventory across the U.S. currently stands at a 4.5-months supply, according to the latest report from the National Association of Realtors (NAR).

CATEGORIESAPRIL 2015APRIL 2016CHANGE
Total property sales7,7417,583-2.0%
Total dollar volume$2,049,590,794$2,016,963,688-1.6%
Total active listings29,48634,40216.7%
Single-family home sales6,3496,310-0.6%
Single-family average sales price$281,352$278,544-1.0%
Single-family median sales price$210,000$217,0003.3%
Single-family months inventory*2.93.622.6%
Single-family pending sales**8,0278,2132.3%

* 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 6,310 in April, down just 0.6 percent from April 2015.

The average price declined 1.0 percent to $278,544, while the median price rose 3.3 percent $217,000, a record high for an April in Houston. Days on Market (DOM), or the number of days it took the average home to sell, edged up to 55 days versus 51 in 2015.

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

  • $1 – $79,999: decreased 12.8 percent
  • $80,000 – $149,999: decreased 19.3 percent
  • $150,000 – $249,999: increased 7.8 percent
  • $250,000 – $499,999: increased 2.1 percent
  • $500,000 and above: decreased 15.7 percent

HAR also breaks out the sales figures for existing single-family homes. Existing home sales totaled 5,428 in April, up 1.0 percent versus the same month last year. The average sales price fell 0.9 percent year-over-year to $260,019 while the median sales price rose 4.1 percent to $201,000.

Townhouse/Condominium Update

Sales of townhouses and condominiums tumbled 12.6 percent in April coming off of last month’s year-over-year increase of 4.7 percent. A total of 562 units sold compared to 643 properties in April 2015. The average price rose 4.1 percent to $206,832 while the median price climbed 7.3 percent to $153,450. Inventory grew from a 2.6-months supply to 3.4 months.

Lease Property Update

Demand for lease properties was very strong in April. Rentals of single-family homes jumped 18.1 percent, while townhomes/condominiums saw demand soar 26.0 percent. The average rent for single-family homes rose 2.6 percent to $1,811 while the average rent for townhomes/condominiums declined 1.4 percent to $1,574.

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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