Reprinted from Culture Map Jan 21st article by Ralph Bivins
Houston’s home sales hit an all-time high in 2013 as strong job growth and low mortgage interest rates lifted the home market to a near-frenzy that won’t be matched again in 2014.
A total of 73,232 single-family homes were sold last year, topping the previous annual record of 72,376 sold in 2007, according to the Houston Association of Realtors.
Last year, many homes sold at a rapid pace with some properties drawing multiple offers the day they placed on the market. Some homes sold for more than list price and bidding wars erupted between buyers. Would-be home buyers were frequently frustrated because the house they wanted was quickly snatched up by competing buyers.
“I think there is a chance things will slow down. There’s been a buying frenzy and that may abate somewhat.”
Houston’s inventory of homes for sale was low all year long, and it continue to be very tight. In December it dipped to a 2.6 months supply, an all-time low. A balanced real estate market — where buyers and sellers are on equal footing — is considered to be a six-month supply. So at the current conditions sellers have a strong advantage. A year ago, Houston had a 3.7 months supply, which was considered exceptionally low — then the inventory got even smaller.
The national inventory rate right now is a 5.1 month supply of homes for sale, according to the National Association of Realtors.
For the year, Houston’s 2013 single-family home sales were up 17 percent over 2012, the Realtors association reported. Some experts believe this pace of growth cannot be maintained.
“I think there is a chance things will slow down. There’s been a buying frenzy and that may abate somewhat,” says housing analyst Evert Crawford of Crawford Realty Advisors. “You can’t think things can go on abnormally strong forever.”
Ted Jones, chief economist of Stewart Title, predicts that the 2014 will continue to be excellent, but this year’s sales will only be up about five percent over 2013, instead of the phenomenal pace of gains registered of last year. Jones predicts local home prices will rise about 6 percent in 2014.
Cheri Fama, president of John Daugherty Realtors, said 2014 will be an improvement over 2013, but the surge probably won’t match last year’s record numbers.
“I can’t say it will shoot up rapidly,” Fama said. “But we can continue at this pace for the next several years.”
A total of $20.9 billion of residential real estate was sold in Houston in 2013, a 30 percent increase over 2012. This year sales could be even higher, but no one is expecting another 30 percent increase on top of last year’s big gains.
A moderation of job growth will contribute to the slight cool down in the frenzied boom. After Houston’s gain of 86,000 jobs in 2013, economists are now projecting 70,000 new jobs, or fewer, will be created in 2014.
The median price for a Houston home sold in 2013 was $180,000. By comparison, the median price of a home sold 10 years ago, in 2003 was $143,000.
Mortgage rates will also continue to rise, taking a little more steam out of the market. Lawrence Yun, chief economist of the National Association of Realtors, predicts 30-year fixed-rate mortgages will be at 5.4 percent by the end of 2014, up from the current rate of 4.5 percent.
Looking at the results for 2013, it’s important to realize selling more than 73,000 homes in a single year is huge, almost abnormal. A decade ago, in 2003, there were 65,000 home sales. Going even further back, the city had 34,000 sales in 1993 and 13,000 in 1983. Of course, Houston was a much smaller place back then.
For the homes sold last year, the Realtors association reported an annual average home price of $248,591, a 10 percent increase over 2012.
The median price for a Houston home sold in 2013 was $180,000. By comparison, the median price of a home sold 10 years ago, in 2003 was $143,000. The median price indicates half the homes sold for more and half for less.
The exceptionally low inventory in the market continues to put upward pressure on pricing. More people will put their homes on the market in the spring and that should make the inventory a little larger.