Houston Housing Market

The overall Houston housing inventory as of May 8th, 2009, came in at 6.2 months. This shows no change from the 6.2 months of inventory posted in April. Inventory for the lower price ranges declined, while inventory levels for the luxury market continued to expand. In fact, we saw another major jump in the inventory level seen for the $700,000 and above price range. It is my opinion that continued expansion and declines in pricing for the luxury market will eventually begin to cause downward pressures on pricing for the price point directly below. With this being the case, I have decided to expand the price points that will be covered in the Houston housing inventory reports. Back in November, I had considered the possibly of separating the $300,000 to $700,000 price point, but did not see a substantial difference in inventory when observing sections of that price range. I decided to take another look at it, and today’s Houston real estate market shows meaningful softening in the $500,000 to $700,000 price range. This was not unexpected with the continual expansion of inventory and more recent price declines seen in the $700,000 and above price range. Further review now shows weakening in all price ranges exceeding the $300,000 price point. This is not all that surprising since lending standards for all loan types other than FHA have continued to tighten. Lending standards for FHA loans have not tightened much since last October. The maximum FHA loan amount for the Houston metro area is $271,500, which is not much less than $300,000, and so explains why we are seeing a balanced market place within that price range.

Total Breakdown of Activity For The Houston Housing Market

As of May 8th, 2009, the $80,000 and below price point had just 3.3 months of inventory, down from the 3.5 months of inventory posted in April. This leaves the price point as an ever stronger seller’s market, where home sellers have an advantage in the negotiation process. Active listings declined during the period, however, total listings sold held nearly constant. The past few months we had been seeing total home sales for this price point increase, but it looks like the expansion of home sales may be over for now. If this is the case there is a good chance the downward trend in housing inventory for this price point could end.
The $80,000 to $150,000 price range saw a small drop in housing inventory, posting 5.0 months of inventory as of May 8th, 2009, which is a return to the inventory levels seen in March of this year. Markets showing 5.0 months or less in inventory tend to give an advantage to home sellers during negotiations. The number of home sales in this price range is not showing much of a change from those posted last year and almost no change in the average home sale price. I believe that we should see things level off in the 5.0 to 5.1 months of inventory range.
Inventory for the $150,000 to $300,000 price range has stopped increasing, as it came in at 6.2 months on May 8th, 2009. With home sales for this range staying level and the average home sale price for the period showing little change, I would say we have a balanced market that is likely to hold at least through the summer months. A balanced market is defined as a market place that has more than 5.0 months of inventory but less than 6.5 months of inventory. Markets that have inventory fitting this range tend to not give an advantage in negotiations to either the seller or the buyer in a transaction.
As I mentioned above, I have decided to split the $300,000 to $700,000 price range into two categories in response to changes seen in the luxury market over the last few months. This price range will be broken into a $300,000 to $500,000 price point and a $500,000 to $700,000 price range.
The $300,000 to $500,000 price range showed 8.6 months of inventory, which is a substantial jump from inventory levels witnessed in the under $300,000 price point. An inventory of 6.5 months or more is considered a buyers’ market by most economists. When inventory levels reach this point, buyers tend to have an advantage during negotiations. In most cases, markets that have shown inventory levels in excess of 9 months tend to see price declines. With an inventory level of 8.6 months, I would say that there is a risk we could see price declines in this section of the market place. Thanks in a large part to the continued weakness occurring in the luxury market.
The $500,000 to $700,000 price range has now posted inventory levels in excess of 9 months of inventory with 12.8 months as of May 8th, 2009. With this level of inventory, it is fairly safe to say we will have price declines in the near term. For the most part, the high levels of inventory are due to two things. First of all, the tightening credit market for Jumbo loans, and secondly, the rapidly weakening market for luxury homes, as people are becoming more conservative with their purchases.
The $700,000 and above price range had another large increase in inventory and saw total sales decrease over the last month. The inventory for this price range came in at 19.4 months, from the 18.8 months posted in April. The continued increase in housing inventory for this price point suggests we will continue to see price declines on homes sold in this sector of the market place. There is however, one piece of positive information. We did not see an increase in the total number of active listings when comparing April to May. This may suggest that there is a chance inventory will start to level out, but a single month of data is not enough to come to this conclusion. We will have to see what plays out over the upcoming months.

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 300,000-500,000 Price Range

Houston Homes Market Breakdown For 500,000-700,000 Price Range

Houston Homes Market Breakdown For 700,000 And Above

In conclusion, we are truly seeing a tail of two markets. The below $300,000 price point is very stable and even showing strength in the lowest price range, where as the $300,000 and above point is seeing inventory pile up. This can easily be explained as a cause of the mortgage market. Home loans under $300,000 are not much more difficult to obtain than they were this time last year. However, home loans are much more difficult to obtain above the $300,000 price point, as credit requirements have gotten higher and so has the required down payment amounts. It then becomes even more difficult to obtain loans in excess of $417,000. Loans in excess of this amount have much higher interest rates along with higher credit qualifications and larger down payments thereby reducing the percentage of the population that can get approved for these loans. Add this to the increased building of speculative homes by home builders in the higher price ranges in response to the demand witnessed early last year while oil and gas prices were shooting up, and it is not difficult to see why we have a segmented market place.
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 Saturday, May 9th, 2009 at 10:09 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.