A strong economy and low mortgage rates elevated Houston realty to record levels in 2014 as more homes were sold than ever before – and prices rose to record highs, as well.

The Houston Association of Realtors reported 75,319 single-family homes were sold last year, the highest annual sales total in Houston’s real estate history.

“The Houston housing market experienced its best year on record in 2014 and that is a reflection of the vitality of the local economy,” says HAR chair Nancy Furst with Berkshire Hathaway Home Services Anderson Properties. “We expect the pace of sales to normalize this year, which should finally enable inventory levels to grow, restoring balance to the market.”

The average price of a single-family home sold in Houston last year was $270,182, up 8.7 percent from last year, the Realtors association reported.

Houston’s inventory of homes for sale remained tight and the market closed the year with only a 2.5 months supply of homes, the lowest inventory on record.

The small supply of available homes meant that many buyers were frustrated in their home search because they could not find homes in the price-range and location they wanted. Bidding wars erupted in some places as houses attracted multiple offers, driving up the prices even further.

More homes will be put on the market this spring, easing the inventory crunch somewhat, says Cheri Fami, president of John Daugherty Realtors.

Home builders are stepping up their construction programs, but builders struggle to build enough homes to move the Houston market significantly closer to a balance of supply and demand.

“The master planned communities are trying to build faster with their production builders,” Fama says. “You can put them up fast, but not that fast.”

Oil prices on everyone's mind

Houston’s robust job growth, with about 125,000 new jobs created over the last year, pushed the housing market to record highs in 2014. But the recent decline in oil prices means job growth will not be as strong in 2015 in Houston.

The price of West Texas Intermediate crude has fallen from a high of $107 a barrel last summer to almost $45 a barrel today. Due to the oil price drop, a number of energy companies, including industry giant Halliburton, have announced layoffs and cutbacks.

What will low oil prices do to the housing market in Houston, which is known as the Energy Capital of the World?

“The oil prices are on everyone’s mind,” says Houston real broker Amy Bernstein of Bernstein Realty. “But at this point in time, we’re not seeing any sign of a slowdown.”

Bernstein says some would-be buyers may be pulling back on their quest for a home, waiting to see what will happen to the housing market in light of the oil price crash.

But there is a steady stream of buyers coming to Houston because of job relocations and many of them are not employed by energy-related companies, Bernstein says.

Overall, Houston-area home sales in 2014 were up 2.8 percent over the sales total of 2013, which was also a record year.

The year ended on a strong note. The 6,451 single-family homes sold in Houston in December, represented the most homes ever sold in a December in this city. Last month’s sales were up almost 12 percent over December of 2013.

Mortgage rates have been falling, another promising sign for housing. The Freddie Mac national survey placed the average 30-year, fixed-rate mortgage at 3.73 percent last week, down from 4.51 percent a year ago. Today’s mortgage rates are the lowest since May 2013.

Although the energy business is down, Houston’s housing market is not moving toward a rapid collapse. As previously reported, the Houston Realtors association has predicted a decline of about 10 percent in sales in 2015, following the record high in 2014.

“We are still very glad to be in Houston, Texas,” Fama says. “We think it’s going to be a very good year.”

Ralph Bivins, a past president of the National Association of Real Estate Editors, is founding editor of Realty News Report.