Houston Real Estate Market Ends Record-Setting Year on High Note

Author: Beth Bresnahan
Publishing date: 01/14/05

RISMEDIA, Jan. 14 – The Houston real estate market ended 2004 with the best year in the history of the city, according to statistics released by the Houston Association of Realtors Multiple Listing Service. New annual records were set for total dollar volume of transactions, number of properties sold and average sales price.

More than 72,000 properties, or an average of 6,000 per month, changed hands through the MLS during 2004, which was an increase of 10.1 percent versus last year.

The Houston housing market outpaced the overall 2004 national average increase in existing home sales of 8.9 percent, according to estimates from the NAR.

Additionally, more than $12 billion worth of property, or an average of $1 billion per month, was transacted in the Houston area in 2004, which was an increase of 7.6 percent from 2003 levels.

“This has been the best year in Houston that residential real estate has ever seen and current economic indicators project 2005 to be just as strong,” said Toni Nelson, HAR Chair and a Division Vice President for Coldwell Banker United, Realtors. "We are fortunate to live in a city that has experienced stable growth over a number of years with no economic indicators that point to either a boom or a bust, as in some areas of the country. We can have confidence in the retention of our homes’ values.”

All listing categories combined, Houston’s overall housing market in December experienced marked percentage increases across the board including sales, available inventory, pending sales – those listings expected to close within the next 30 days – and overall total dollar volume on a year-over-year basis.

Total property sales for the month of December reached 6,284, which was up 5.9 percent compared to the same period last year. Additionally, the number of available homes (active listings) at year-end was 39,758 properties, which was an increase of 12.3 percent versus last December and a new record. Year-end pending sales of properties reached 3,803, which was up 16.9 percent from last year, and was another new record and portends for an active beginning in 2005. Months inventory of single-family homes for December remained unchanged from last year at 5.6 months, which is relatively low and shows that demand is keeping up with the available supply of homes.

For the full-year 2004 Houston housing market, it was another record-breaking year that continued its show of strength that has been sustained since 1992. The average sales price for a single-family home in 2004 was $178,196, or a 1.8 percent increase on a year-over-year basis, with the median single-family home price of $135,000 remaining unchanged from 2003.

Home prices still headed high in 2005

Those who fear that we're in a fragile real estate bubble can relax -- for now. All the economic cards but one point to another strapping year for housing prices.

By Kiplinger's Personal Finance Magazine

One good thing you can say about the pundits who keep predicting that the end is near for rising home prices: They're consistent. They've been dead wrong year after year.

Despite their near-certainty that the market would cool in 2004, median U.S. home prices rose 9%, and a vast majority of cities saw a bigger increase than in 2003. In fact, the National Association of Realtors proclaimed 2004 the hottest U.S. home-sales market in history. Says Thomas Kunz, CEO of Century 21 Real Estate: "There's been no rhyme or reason to prices because of multiple offers and bidding wars."

And those who fear that we're in a fragile real-estate bubble can relax -- at least for now. David Seiders, chief economist for the National Association of Home Builders, speaks for most chastened housing-market analysts when he says that the chance that median home prices will drop is "zero nationally, zero in major regions and close to zero in any state," although some individual cities may see declines.

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Demand for new homes continues to be strong, driven by both first-time home buyers and people like Melani and Coates Lear, who are trading up from their Denver bungalow to a built-to-order house in a suburban development. In addition, a stronger economy, a stronger job market and higher incomes are the positives, says Seiders. He predicts the only moderating force will be modestly higher interest rates. (By "modestly higher," he means a rise from the current 5.8% to 7% for a 30-year fixed-rate mortgage.)

Most housing-market analysts now say they expect the median price increase to cool to the 5%-to-6% range nationally in 2005. Then again, that's the range they predicted for 2004. A cooling-off would also mean that houses stay on the market longer before they're sold, giving buyers more negotiating leverage.

Despite what you might think about soaring prices in your neighborhood -- or the neighborhood you'd like to live in -- investment strategist Ed Yardeni of Oak Associates says home prices aren't outrageous given the low interest rates. "You'd find out if this is a bubble if mortgage rates rose two, three or four percentage points." He predicts that would result in a loud pop, followed by falling prices. But Yardeni doesn't foresee such a hike in rates, and expects single-digit percentage increases in prices for the next three or four years.

Population boom
The demand that's driving the U.S. housing market comes from many sources. The country's population is increasing by about three million people -- or a million households -- annually, according to John McIlwain, of the Urban Land Institute. And it's no surprise that most of the growth is on the coasts, in so-called gateway cities that see high rates of immigration, global trade and direct foreign investment (Chicago is also considered a gateway). Not coincidentally, gateway cities have also seen some of the biggest increases in home prices.

Other demographic trends are fueling this demand. Minorities, especially Hispanics, are buying in record numbers. The echo-boomer generation -- born between 1977 and 1994 and 72 million strong -- is beginning to enter the home-buying market. And don't dismiss their baby-boomer parents. Coldwell Banker Real Estate CEO Jim Gillespie points out that the youngest baby-boomers, in their early 40s, are buying up, and the oldest, nearing 60, are in their prime earning years and also buying up or buying second homes.

Meanwhile, on the supply side, developers and builders in the nation's hottest markets are hemmed in on one side by an ocean and on the other by the high cost of land and by land-use constraints. David Lereah, chief economist for the National Association of Realtors, says that builders still haven't loosened up since being burned by the real-estate recession of 1990-91.

About one-fourth of the nation's 316 largest metropolitan areas enjoyed double-digit price appreciation in 2004, with most in California, Nevada, the Northeast Corridor (traditionally from Washington, D.C., to Boston, but now stretching to Portland, Maine) and Florida. Except for Honolulu, nine of the ten cities with the highest median home prices are in northern or southern California. San Francisco, arguably the hottest housing market over the past decade, has the highest median price ($629,005).

(Visit Kiplinger’s online database of more than 300 cities to see how home prices in your city have fared over the past one, three and five years.)

Trade-offs
As many buyers, especially first-timers, continue to be forced to the far suburbs, at least they're no longer sentenced to cookie-cutter gulags. Case in point: The Lears of Denver loved their urban lifestyle and their first home, a 1907 bungalow in central Denver. But when son Dawson arrived in August, the couple figured that their perfect little house would soon feel, well, little. Moving to a larger home in their current neighborhood, where a house big enough for a family of four runs $600,000 to $700,000, wasn't an option.

Resigned to looking in the 'burbs, the Lears cast their eyes east to Stapleton, five miles from downtown Denver, where the former Denver International Airport is being turned into the country's biggest planned community. Such developments are among the major trends shaping home building today. The couple has committed to a 2,000-square-foot home, with a base price of $360,000, that will be finished by the end of this summer.

Anticipation has replaced resignation. "Stapleton offers a lot of things that we liked about living in the city," says Coates, 35. A neighborhood park and pool within several blocks of their house are planned. A town center will feature restaurants and service providers, such as drugstores and dry cleaners. Best of all, the community has lots of other young families, with "strollers everywhere," says Melani, 31.

The best developers and builders now provide homes with a sense of place and community because that's what sells. Prairie Crossing, 40 miles northwest of Chicago, is another good example. Built on a former farm, with homes tightly clustered to preserve open space, the community is served by two commuter-rail lines into Chicago.

Gary Mitchiner, 48, and his wife, Ellen Winick, 43, moved to Prairie Crossing in 1996, having previously lived in downtown Chicago. They say the community is an ideal place to raise their two children. "We have more house and more community for the money in Prairie Crossing. It's a joy to wake up every morning and look out at 100 acres of open land," says Gary.

Still, heaven to some is boondocks hell to others. So a second major trend in home building is driving builders to scour the inner suburbs and downtown for land and properties that can be developed or redeveloped for residential use. Homes in these areas are typically pricey because land and development costs exceed those of green-field development farther out.

In Seattle, the Cottage Company builds "pocket neighborhoods," which consist of bungalow-style houses of less than 1,000 square feet built around a common garden. Partner Linda Pruitt says that their homes, which are typically priced in the high $300s, mainly attract single people and couples who sacrifice a large lot (and tons of yard work) for smaller, newer, high-quality homes.

Downtowns in Atlanta, San Diego, Kansas City and Milwaukee are returning to life as young professionals and empty-nesters move back for the urban scene. Nationwide, the condos and co-op apartments going up are roomy, loftlike spaces that are pricey and loaded with amenities. Condos set a new sales record in 2004 -- 1 million sold, versus 898,000 in 2003 -- and the median condo price hit $197,000. That's an 18% increase over the year before.

Sun Je Gray, 29, and her husband Dennis, 34, moved to Kansas City's River Market neighborhood two years ago with the idea of "being close by to things," such as the bustling farmers market, to which they can walk. Their loft-style apartment, which cost $270,000, has just under 1,500 square feet and a 300-square-foot balcony that has views of the Missouri River and the city. "If we have a child, we would probably want a house with a back yard," says Sun Je. "But that's in the future."

Home prices on coasts up the most
Cities on the West and East coasts continued to rack up the biggest price gains in 2004. And the high prices along the coasts are pushing development inward, expanding California's Inland Empire and pushing up prices there, according to data prepared for Kiplinger's by consulting firm Global Insight.

In Sacramento, for example, median home prices rose 17%, and both the Riverside-San Bernardino area and Fresno saw 23% increases. A similar, though less extreme, trend is happening on the East Coast, as prices rise in places such as Glens Falls, N.Y. (10%), Albany-Schenectady, N.Y. (11%), and Allentown, Pa. (10%).

Las Vegas -- a.k.a. "the state of Las Vegas" -- posted gains in home values of 23%, up from 9% in 2003. Described as "the bulldozer convention of the world," the city is expected to lead the nation in new-home construction starting in 2005. Phoenix led the Southwest (excluding Vegas), with a 17% rise.

Growth in Georgia continues at a blistering pace, with 20 of the 100 fastest-growing counties, based on housing starts, according to the U.S. Census Bureau. For the past 13 years, Atlanta has led homebuilding in the U.S., according to the National Association of Home Builders, and the city remains affordable, with a median home price of $166,222 and price appreciation of just 4.4% in 2004.

Although experts expected prices in many Florida cities to cool in 2004, Fort Lauderdale and West Palm Beach ignored the prognosticators and rose 18% and 19%, respectively.

HOUSTON 2004 HOME SALES SURPASS 2003

More than 65,000 properties have changed hands in this record-breaking year

HOUSTON – (December 15, 2004) – Houston existing home sales once again set a new monthly record, as well as set a new annual sales record, even with one month remaining in the year, according to statistics released today by the Houston Association of REALTORS® Multiple Listing Service. Total property sales for November reached 5,222.

Additionally, year-to-date existing-home sales broke last year’s record-setting level, with 65,637 listings sold so far this year, a gain of more than 10 percent from the first 11 months of 2003. Year-to-date existing property sales through November 2003 totaled 59,491.

“Houston’s highly-affordable housing coupled with interest rates less than 6 percent and the creation of 27,700 net-new additional jobs in the past 12 months have energized housing demand and led to record sales,” said HAR Chairman and Stewart Title Chief Economist Ted C. Jones, Ph.D. “While 2005 may not top this all time record, Houston is in for an extended duration of significant housing demand. The Texas State Data Center forecasts that the Houston Metropolitan Statistical Area will grow from 5.3 million people in 2005 to 6 million by 2010—an average increase of 140,000 individuals per year. The combined demographic and economic demand portends rising home values and sales activity.”

All listing categories combined, Houston’s overall housing market experienced double digit percentage increases across the board including sales, available inventory, pending sales – those listings expected to close within the next 30 days – and overall total dollar volume on a year-over-year basis. Months inventory of single-family homes fell slightly from 6.1 months last year to 6.0 months in November 2004.

Single-family Homes Update
The median price of single-family homes reached $132,200 in November, only a negligible increase from the same month last year, but this month still marks the second highest median price ever recorded in the month of November in Houston. The median is a typical market price where half of the homes sold for more and half sold for less that that figure.

Houston’s current median price of $132,200 is 29.3 percent less than the national median price, which reached $187,000 in October, according to statistics released by the National Association of REALTORS®. These data continue to show the tremendous value and lower cost of living afforded to Houstonians.

Additionally, total sales for single-family homes in Houston increased by 22.0 percent to 4,323 in November from last year’s 3,544.

Houston Real Estate Milestones in September
# Reached the highest number of homes ever sold in the month of November.
# Surpassed total 2003 existing home sales, with one month remaining in 2004.
# Sold more than $11 billion worth of properties year-to-date.

The computerized Multiple Listing Service of the Houston Association of REALTORS includes residential properties and new homes listed by 19,000 REALTORS throughout Harris, Fort Bend and Montgomery counties, as well as parts of Brazoria, Galveston, Waller and Wharton counties. Residential home sales statistics as well as listing information for more than 40,000 properties can be found on the Internet at http://www.har.com.

The information published and disseminated to the HAR Multiple Listing Services is communicated verbatim, without change by Multiple Listing Services, as filed by MLS participants.