Houston housing market stays strong

Allison Wollam
Houston Business Journal

The Houston housing market continued to show strength throughout the month of March, according to the Houston Association of Realtors Multiple Listing Service.

Total property sales for the month totaled 6,483, which was a 4.2 percent increase over March 2004.

More than $1.1 billion worth of properties changed hands during the month, which was a 9.5 increase compared to last year's $1 billion in March sales.

Additionally, year-to-date property sales reached 15,322, which is an increase of 4.1 percent over the first quarter of 2004.

All listing categories combined, Houston's overall housing market in March experienced increases across-the-board including sales, available inventory, pending sales and overall total dollar volume on a year-over-year basis.

"The Houston metropolitan area is showing no signs of a weakening housing market, despite some predictions that we would not match last year's remarkable levels," says Toni C. Nelson, HAR chair and division vice president for Coldwell Banker United, Realtors.

"The record number of pending sales at the end of March shows that Houstonians are continuing to take advantage of the tremendous affordability provided by the various housing options. In fact, of the 10 most populous cities in the country, only San Antonio has a median home price lower than Houston."

The number of available homes at the end of March was 43,152 properties, which was an increase of 8.8 percent versus last March and a new monthly record.

Month-end pending sales of properties reached 5,118, which was up 13.3 percent from last year, and was actually an all-time record high.

The overall median price of single-family homes reached $135,000 in March, which was an increase of 3.3 percent compared to the prior year, and the average price for single-family homes reached $178,575, which was up 4 percent versus the same period last year.

Houston's current median price of $135,000 is 29.3 percent less than the national median price, which reached $191,000 in February, according to statistics released by the National Association of Realtors.

Eliminating the perks could mean lower rates

April 16, 2005, 6:40PM

Title insurance firms used them to get business
By NANCY SARNOFF
Copyright 2005 Houston Chronicle

A new state rule banning Texas title insurance companies from offering perks to real estate firms — ranging from season tickets to Astros games to sponsoring golf tournaments for agents — is being put to the test.

Some 20 title companies are under investigation for giving gifts to firms that can send business their way, according to the Texas Department of Insurance, which regulates the title insurance industry.

Robert Carter, deputy commissioner for the insurance department's title insurance division, would not say which companies are under scrutiny.

These perks are also referred to as rebates or kickbacks, depending on who's speaking.

The probes stem from an insurance department rule implemented last year that outlawed the use of these practices. The rule is meant to enforce a state law intended to limit this type of activity.

A $10,000 fine
First-time offenders can be subject to a fine of $10,000 per violation per day, and penalties affect the giver and receiver of the rebate. If they continue, violators could have their licenses revoked, Carter said.

"I'm almost positive there will be fines," he said of the cases now under investigation.

The state rule could lead to lower Texas title insurance premiums, which are some of the highest in the nation.

The typical title insurance premium in Texas for a $100,000 property is around $870. However, only about 5 percent of what the title industry takes in is paid out in claims to property owners with losses because of disputed titles, Carter said.

On top of that, 90 percent of the expenses reported to the state go for salaries, employee training and maintaining property records, leaving a 5 percent profit margin.

Title insurance companies are paid to search title records for things that could raise questions about the title upfront, like property liens for unpaid remodeling work, seeking to avoid later payouts, Carter said.

Cutting the extras
The new rule went into effect last April. It said title companies couldn't give anything of value to firms that might entice them to refer them business.

"We found title agents and insurers were falling all over themselves trying to give things to lenders, agents and builders," Carter said.

Premiums on title insurance are set by the state. Because prices are uniform, title companies compete on customer service and business relationships.

This has led many title firms to offer perks to lenders, developers and real estate agents who are likely to steer business their way.

Title companies report those expenses, which are classified as training or other business purposes, to the insurance department. These costs are taken into account when setting rates, Carter said.

But the costs of the perks are difficult to document because they are often mixed in with other costs under advertising, travel or salaries.

While there have been rate cuts in previous years, they might have been bigger if this ban had been in effect, Carter said.

The state will consider any rate reductions — or increases — at its biennial rate hearing, which is expected to take place later this year.

"I don't know how much of an impact it will have, but I think it has to be significant," he said.

Before the state rule was enacted, the U.S. Department of Housing and Urban Development found seven title companies doing business in Texas were paying for virtual tours, an online tool used by agents to market properties. HUD law is also designed to restrict these practices.

In 2002, they all signed settlement agreements saying they would discontinue the practice and paid fines ranging from $1,260 to $43,500.

Those companies were Chicago Title Insurance Co., Stewart Title Austin, Heritage Title Co., Gracy Title Co., The First American Corp., Austin Title Co. and Fidelity National Title Insurance Co.

Texas real estate agents and builders are fighting the new state rule.

Toni Nelson, chair of the Houston Association of Realtors and a division vice president at Coldwell Banker United, Realtors, said while there was a need to crack down on more serious violators, "I think they went overboard."

Defending the practices
Jay Dyer, director of regulatory affairs with the Texas Association of Builders, said many title companies have stopped advertising in industry publications for fear they might be breaking the rule.

Carter said it's fine for title companies or agents to advertise, as long as they don't promote particular real estate agents or their properties.

While there are still violators, the rule has started to rein in some giveaways.

"The word I hear is that it has pretty much shut down the in-house publishing operations that a lot of these title companies had to print up brochures and signs," Carter said.

And some title firms are finding it easier to say no to real estate agents pressing them for freebies, he said.

Nelson said while the law was created to give consumers more freedom to select a title company, it has the title insurance industry scared.

"A title company ought to have a right to come into an office, market their wares and feed you breakfast," she said. "That's marketing and advertising."