Houston Home Sales Fall
After second-best year ever for home sales, Houston market ponders future amid oil price collapse
Houston just finished its second-best year for home sales, despite a collapse in oil prices that pressured the realty market late in the year.
A total of 73,724 single family homes were sold last year, down 2.4 percent from the 75,535 homes sold in 2014, according to the Houston Association of Realtors.
For much of the year, the Houston real market seemed to be almost bulletproof as sales outpaced the record-setting sales of 2014.
In fact, the month of July 2015 — with 7,895 sales — was the best month ever for home sales in the history of Houston real estate.
However, under the weight of a slowing economy, the area’s home sales began to taper off in the fall of 2015.
In December, only 5,879 homes were sold, almost a 10 percent decline from December of 2014, HAR reports.
This week oil dipped to its lowest level in more than a decade – under $30 a barrel - casting uncertainty over the local economy and the housing market.
“With oil dropping to levels around $30 a barrel, I think it’s fair to say that the Houston housing market is going to remain cooler for at least a little while,” says HAR Chairman Mario Arriaga of First Group. “The good news is the local economy is vastly more diversified than it was during the oil bust of the '80s and other industries are continuing to hire, so it really is going to come down to consumer confidence.”
The inventory of homes for sale remains low, with a 3.2-months supply on the market, HAR reports. That is still an exceptionally low inventory when compared to the last 20 years or so when it was normal to see a 5-months supply of homes for sale.
Houston’s housing market will be driven ahead by the tight inventory, although home prices won’t be escalating as rapidly as they have been over the last three or four years, says Cheri Fama, president of John Daugherty Realtors.
The high price of renting an apartment — and rental rates have escalated sharply in recent years — also is a motivation for buying a home, Fama says. Plus, mortgage rates remain low.
“Our outlook for 2016 is very optimistic. There are lots of opportunities,” Fama says.
In 2015, the annual median price of a single-family home was $212,000, up over 6 percent from $199,000 in 2014.
The HAR report indicates that will be slower in January. Sales traditionally slow down at the end of the year and pick back up in the spring. Questions about oil prices and the local economy should be answered later in 2016.
“The next few months will tell us where the market is going,” says Houston economics consultant Evert Crawford, former director of the Institute of Regional Forecasting at the University of Houston.
The upper-end of the housing market, homes priced over $500,000, will tend to be more susceptible to the decline in the oil industry, Crawford says.
The economy in Houston, known as the Energy Capital of the World, has been pummeled by falling oil prices, which have prompted companies to lay off workers and shut down drilling activity. Some other sectors in the local economy continue to thrive, but energy-related sectors account for about 10 percent of the city’s jobs.
Job growth is expected to be tepid in 2016 and that will poise a challenge for Houston’s real estate market.
Ralph Bivins, former president of the National Association of Real Estate Editors, is editor of Realty News Report.