Declining oil prices eroded Houston home sales last month, as residential sales dropped 5.8 percent in February, compared to February of last year, the Houston Association of Realtors reported Wednesday.

The drop in February home sales — the first decline in six months — comes as Houston grapples with falling oil prices.

After hitting a high of $108 a barrel last summer, oil prices have fallen sharply and it was trading below $48 a barrel on Wednesday. When oil falls that rapidly it sets off shock waves in Houston, known as the Energy Capital of the World.

The Houston Realtors organization placed the blame for February’s sales decline on “falling oil prices and related layoffs, limited housing inventory, and rising home prices.”

The upper-end of the home market — homes priced at $500,000 and up — faltered in February, after being one of the strongest selling brackets for months, the association noted.

“I think you have some slowdown in the marketplace just because of oil prices going down,” says Shad Bogany of Better Homes and Gardens Gary Greene. “I’ve lost at least two buyers (employed at energy companies) lately who had signed contracts and backed out of them a week later.”

However, Houston’s housing market continues to have a slim supply of homes for sale and 2015 should be a fairly good year for real estate, argues Bogany, a former chair of the Texas Association of Realtors.

“I don’t think we are in a crash mode,” Bogany says. “I have plenty of buyers and I have no houses to sell them.”

Months of inventory, the time it would take to deplete the current active housing inventory based on the previous 12 months of sales, edged up slightly to a 2.7-months supply in February. By comparison, five years ago when the market was soft in 2010, Houston had a 6.3-months supply of homes for sale.

Jobbed

Last year was a record year for home sales in Houston and the local economy surged with 105,000 new jobs created. But the market braced for a slow down this year as the local economy fell off its pedestal. Only 63,000 new jobs will be created in Houston this year, according to the Greater Houston Partnership. And the Houston Association of Realtors has predicted a 10 percent decline in home sales in 2015.

“We are witnessing the start of exactly what economists predicted would create a more ‘normalized’ Houston real estate market: Declining sales volume, increasing prices, and improvement in housing inventory levels,” says HAR Chair Nancy Furst with Berkshire Hathaway HomeServices Anderson Properties. “While some local energy jobs have gone away, the Texas Workforce Commission just declared 2014 one of the best years for job creation in Houston, with almost 105,000 jobs added and continued hiring expected this year, albeit at lower levels.”

The median price of homes sold in the Houston area in February was $199,400, up about 8 percent from last February, the association reported.

Although the overall Houston statistics showed some softness in the upper-end of the market, there is still a lot of strength in affluent neighborhoods close to the city’s center, says Cheri Fama, president of John Daugherty Realtors, which specializes in the upscale homes.

“From February of last year to this year, our company was up 12 percent for properties over $500,000,” she says. "We are still incredibly low on inventory, especially as you get closer into town. So, there’s still a lot of competition for properties.

“Houston has had such as accelerated market over the last few years. If we go down a little bit we are just getting closer to normal.”

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