A lack of inventory has put a damper on the Houston housing market winning streak as sales declined in May — the first decline in three years.
The Houston Association of Realtors reports 7,145 single-family homes sold in May, a 7.3 percent decline from the 7,708 Houston-area homes sold last May.
Even with the decline from a year ago, sales remain exceptionally strong. Monthly sales have surpassed the 7,000-mark less than a dozen times in Houston’s history, so May was still excellent. But the inventory of homes for sale has been extremely low for more than a year, picked clean like the shelves of a grocery store.
The inventory of homes for sale has been extremely low for more than a year, picked clean like the shelves of a grocery store before a hurricane.
"It was just a matter of time before our depleted supply of inventory caught up with us," says HAR chair Chaille Ralph with Heritage Texas Properties. "This is Economics 101: Supply and Demand. Until more homes are listed for sale and new housing is built, it’s a safe bet that there will be further sales declines and more demand for rental properties."
The limited supply of homes for sale pushed home prices upward. Houston hit an all-time record in May with the median home reaching $200,000, the realty association reported. The average home price was $280,346 in May – the highest average home price in Houston’s history and a 10 percent increase over the average price of $255,855 reported last May.
Driven by a dramatic rise in domestic energy production, Houston's economy has been surging in the last two or three years, ranking among the nation's leaders for population gains and job growth. The boom created shortages in housing supply, both rental homes and apartments and homes for sale. The home building industry was caught flatfooted without sufficient supply of lots and few new subdivisions were developed in the wake of the recession. Many home builders report a lack of skill labor because workers left home construction during tight times.
In many Houston-area neighborhoods, homes sell quickly, often drawing offers from several buyers within hours of being placed on the market.
Houston has a 2.8-months supply of homes for sale, down significantly from a year ago. By comparison, the national supply of 5.9 months of inventory.
Rental housing is the alternative when there are few homes to be purchased. Single-family home rentals shot up 20.4 percent compared to May 2013, the Houston Realtors organization reports.
Ralph Bivins, a former president of the National Association of Real Estate Editors, is editor of Realty News Report.