Houston Housing Market

Thanks in large part to seller’s frustrations leading them to removing their properties from the housing market, the home inventory is down significantly in all price range categories. In addition to the large drop in total Houston homes inventory, it is noteworthy that the $80,000 and below price range saw an increase in total homes sales from last month, moving that price category further into the realm of a seller’s market. Total active single family homes listings plunged down almost 3,000 units, taking total single family homes inventory from 6.2 months to 5.8 months of total housing inventory. Despite the good news of the entire Houston housing markets move in the direction of stability, I expect that we will see a drop in the median and average home sale price for December, just as we saw for November. However, my statistical analysis suggests that it is not representative of a decline in home values but rather a shift in the percentages of home sales in each price category. The median and even more so the average home sale price are sensitive to changes in consumer buying habits. Having an increase in the number of homes that sell in the lowest price range and further decreases in the number of high end home sales can lead to a drop in the average home sale price without actually indicating a decrease in home values. This is the scenario that I believe we are encountering.

Total Breakdown of Activity For The Houston Housing Market

The 80,000 and below price point home inventory dropped from 4.7 months of home inventory at the end of November 2008 to 4.3 months of home inventory at the end of December 2008. The drop in housing inventory is accompanied by an increase in total home sales for the 80,000 price range. The combination of these two suggests that we are seeing the early stage of a seller’s market for the 80,000 and below single family category. This time last year, the $80,000 to $150,000 price category was the weakest for the Houston market. In December of 2008, that is no longer the case, as this price point had the largest drop in housing inventory. We saw a decline from 5.6 months of inventory to only 5.1 months of inventory. If this trend continues next month we could be discussing the $80,000 to $150,000 price category as a seller’s market. Inventory for the $150,000 to $300,000 price point was down from 6 months in November to 5.6 months at the end of December. This level of inventory is considered a neutral market where neither sellers nor buyers have the upper hand. A major surprise to me is the size of the drop in housing inventory in the $300,000 to $700,000 price range. I had predicted that this price point would be the worst in the Houston housing market but have been pleasantly humbled by the drop from 8.1 months of inventory in November to 7.6 months in December. With that said, the inventory level of this price point still shows weakness and the possibility for price declines, as buyers have the upper hand in negotiations. The $700,000 and above price category did see improvement in the inventory numbers but is still in a slump and should be noted as unstable with a high likelihood of price declines, since it is in a state of being a deep buyer’s market at 14 months of inventory at the end of December. Inventory levels in excess of 7 months are considered a buyer’s market, and historically speaking, housing prices have declined when in excess of 12 months for this price category.

Houston Homes Market Breakdown For 80,000 And Below

Houston Homes Market Breakdown For 80,000-150,000 Price Range

Houston Homes Market Breakdown For 150,000-300,000 Price Range

Houston Homes Market Breakdown For 300,000-700,000 Price Range

Houston Homes Market Breakdown For 700,000 And Above

The large drop in inventory over the last month coupled with the lowest interest rates in 30 years and the $7500 federal government tax credit could mean a return to home value appreciation rates in excess of 3% for 2009. Even though the ground work is laid out for Houston to have a good year, I am not sold on the worst being over. My reasoning for being reserved on the expectation of strong home price appreciation for 2009 is the wild swings and rapid dip in the price of oil and natural gas. If these two commodities continue to move down in pricing, I believe we will see layoffs in the Oil and Gas industry. If that were to occur, I feel strongly that Houston will join the rest of the nation in a recession. I do not necessarily expect further declines in the world market price of oil and gas, but felt it should be discussed because I think that the possibility will keep the Houston consumer in enough doubt that we will likely not see much appreciation, despite the previously stated groundwork. With this said, I am going to predict that we see little appreciation or a drop in home values of as much as 2%. In conclusion to this report, I would like to emphasize the uncertainty of Houston home sales market by leaving you with the predictions of two different authoritative sources. Moody’s Economy is predicting that Houston home values will appreciate 4.6% by the end of the fourth quarter of 2009, and Housing Market Predictor is predicting as much as an 8.5% decrease in home values for 2009.

Information contained in this post was acquired from the Houston Association of Realtors via the multiple listing service database and archive. Data should be considered reliable, but is not guaranteed to be accurate.

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This entry was posted on Friday, January 2nd, 2009 at 11:46 am and is filed under Houston Housing Market. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.