October was a record-breaking month for Houston real estate as property sales rose 35 percent over October 2011, according to the Houston Association of Realtors.

Prices rose significantly and the inventory of homes for sale dropped to its lowest level in 11 years. The realty market is demonstrating an exceptional surge that is surprising veteran real estate pros.

“I never imagined we’d go over 30 percent. It’s fantastic,” said housing analyst Evert Crawford of the University of Houston’s Institute for Regional Forecasting. “It’s an acceleration of what we saw at the first of the year. People are in the mood to buy houses.”

A combination of low mortgage rates and strong local job growth has elevated the Houston realty market to a high perch.

Mortgage rates have dipped below 4 percent. The national Freddie Mac survey of 30-year mortgages last week dropped to 3.34 percent – the lowest ever in the Freddie Mac survey, which began in 1971.

Houston has whittled down its inventory of homes for sale to 37,909 homes, a 19 percent decline from last October, the Houston Association of Realtors reported. That is considered a 4.4 month supply of homes, a low inventory level that has not been seen since December 2001.

“Inventories are tight. Multiple offers are common, all over town,” said Cheri Fama, president of John Daugherty Realtors. “When (a new listing) comes in, it’s like a feeding frenzy.”

Mansion sales brisk

In the rarified mansion market, sales are brisk. A number of homes in the $5 million and up price range are under serious negotiation or under contract right now, Fama said.

The average and median price hit the highest points ever for an October, jumping over 8 percent from October 2011, the Houston association reported. The average price for a home sold in Houston in October was $223,366, while the median price (representing the midpoint with half sold for more and half for less) was $163,000.

The declining inventory combined with strong demand will mean more price increases are on the way, Crawford said.

Tight inventories have been boosting sales of new houses for home builders also.

“The inventory squeeze has definitely created fertile ground for homebuilders,” said Wayne Stroman, HAR chairman and CEO of Stroman Realty. “Our active real estate market reflects the general health of the Houston economy, most notably the addition of close to 96,000 new jobs over the past year, according to the latest Texas Workforce Commission employment report.”

Counting single-family homes, condos and other residential realty, the Houston area registered 6,457 property sales in October, up from 4,781 sales in October 2011, the Realtors association said. Single-family sales totaled 5,379, up 32.7 percent from last October.

“It’s incredibly, incredibly busy. The market seems to be totally on fire,” said Amy Bernstein of Bernstein Realty.

Relocation sales

A lot of homes are being sold to professionals relocated to Houston by their employers, which include energy firms, but also for people working in technology, medical, accounting and law, Bernstein said.

Bernstein said next year is expected to be very strong also. Even an uptick in mortgage rates would not be detrimental because it could motivate “fence-sitters” to buy a home before mortgage rates get high again.

Sales will continue to be strong across the country next year and prices will go up about 5 percent, said Lawrence Yun, chief economist of the National Association of Realtors. In a news conference, staffed by CultureMap earlier this month, Yun named Texas as the standout real estate market in the nation.

Looking ahead, rising apartment rents will be motivating people to buy houses, which will be pushed ahead by low interest rates, Yun said.

One threat to the real estate market is the discussion in Congress about cutting the mortgage interest rate deduction, which has lightened income tax burdens for years, Yun said. Wiping out the mortgage interest rate deduction entirely would cause home values to drop 15 to 20 percent, he said.