Houston's average home price breaks $200,000-mark for first time

Houston Business Journal - 2:00 PM CDT Thursday
by Allison Wollam
Houston Business Journal

Houston home prices broke records in May, with the average single-family home price surpassing the $200,000 mark for the first time.

The average single-family home price for May was $204,005, up 8.2 percent over last year, according to statistics from the Houston Association of Realtors.

The median price -- which is the typical market price where half of the homes sold for more and half of the home sold for less than that figure -- also reached an all-time record of $152,000, up 5.6 percent from last year.

Houston's current median price of $152,000, while a record for the Houston market, is 31.7 percent less than the national median price, which reached $222,700 in April, according to statistics from the National Association of Realtors.

"While the rest of the country is talking about bubbles deflating, we continue to reach new heights in the Greater Houston real estate market," says Lorraine Abercrombie, HAR Chair and marketing director for Greenwood King Properties. "We know that for most people a home is their largest investment, so while we help them achieve their housing dreams, it is also good to know their investment will prove to gain value in the future. These numbers are definitely good news for our area."

Total property sales for the May 2006 totaled 8,629, an 11.6 percent increase over May 2005.

Properties sold during the month reached a total of nearly $1.7 billion, a 20.9 percent increase compared to last year's nearly $1.4 billion in sales.

Houston's overall housing market in May saw increases in most categories, including total property sales and overall total dollar volume on a year-over-year basis.

Month-end pending sales reached 5,892, which reversed last month's decline and was up 14.6 percent from last year.

Additionally, total sales for single-family homes in Houston continued a streak of year-over-year increases, marking 28 consecutive months that sales have been higher than the same month of the previous year.

For May 2006, single-family home sales increased by 11.7 percent to 7,199, up from last year's 6,443.

Meanwhile, the number of available homes at the end of May was 43,362 properties, which was a decrease of 3.6 percent versus last May and the sixth consecutive month with a year-over-year decline.

Houston's Wealthy Compete for Mansions as Oil Buoys Real Estate

May 31 (Bloomberg) -- Emily Burguieres and her fiance started house-hunting in Houston's most expensive neighborhood during December, expecting an easy search. What they found was a market where buyers must move fast.

``We made an offer on one that we were really excited about, but it was priced at a point where it had four other offers in one day,'' Burguieres, 32, said of a $1.5 million house in the city's River Oaks area. ``Our realtor told us it went over the asking price.''

As housing prices slow in much of the U.S., homes in River Oaks are selling faster, in larger numbers and at higher prices than a year ago. Growing demand at the top end reflects strength throughout the Houston market, which is getting a lift from soaring oil prices. The fourth-largest U.S. city is known as the world's energy capital.

``The energy business is making a lot of people wealthy,'' said Mike Inselmann, president of Houston-based researcher Metrostudy. ``Business is good for those folks, and they're spending money.''

First-quarter home sales in River Oaks rose 28 percent from a year earlier, and the value of homes sold jumped 55 percent to $32.3 million, according to local real estate firm Greenwood King Properties. The median selling price was $1.2 million, up from $940,000.

Burguieres, a financial analyst, and her husband-to-be, an energy trader, finally closed on a $1 million River Oaks home last week.

Energy Spending

Crude-oil, natural-gas and gasoline prices surged to all- time highs last year, spurring record profits for Houston-based ConocoPhillips, Halliburton Co. and other energy companies.

Producers and service providers, wary because of past boom- bust cycles, initially were reluctant to use their burgeoning cash flows to increase spending. That's changing, as shown by the 51 percent jump in exploration spending planned this year by Houston's Marathon Oil Corp.

``The oil industry has slowly come to believe that price incentives can be trusted this time and has finally begun to act on them,'' the Federal Reserve Bank of Dallas said in a March report.

That means good times in the Houston market, including River Oaks, an area east of downtown with tree-lined streets that attract oil barons, surgeons and lawyers. Some mansions sit on three-acre lots, boasting more than 10,000 square feet of space and price tags topping $10 million. That's in a city with a median home price of $147,000.

Faster Sales

The largest River Oaks property for sale is a 22,364-square- foot home built in the 1980s by a Saudi prince. Now owned by a real estate developer, the nine-bedroom residence sits on a 3.2- acre lot overlooking the Buffalo Bayou. The asking price: $8 million.

River Oaks' $2 million-and-over properties are selling within nine months, compared with 12 months a year ago and 21 months in 2003, according to Judy Thompson, a buyer's agent and publisher of WestURealEstate.com.

``Normally, you list a $2 million-plus property, you tell the seller it could take two years to sell,'' said John Daugherty, president of John Daugherty Realtors, which specializes in River Oaks. ``Today, we're seeing that they can sell them in six months.''

The oil boom is boosting home sales in other price levels as well. With half of Houston's jobs tied directly or indirectly to oil and gas production or refining, wage gains ``quickly filter through the rest of the economy,'' the Federal Reserve said.

Job Gains

The number of non-farm jobs in the Houston area climbed 2.7 percent in the past year, to an April total of 2.74 million, according to the Texas Workforce Commission. In the past five years, jobs in oil and gas extraction have jumped 13 percent.

Sales of previously owned homes in the area rose 4.6 percent in April from a year earlier, according to the Houston Association of Realtors. Nationwide, sales fell 10 percent.

One reason for the relative strength of Houston's housing market, realtors and economists said, is the city's slow pace of price gains in past years.

Houston's median home price rose an average of 4.3 percent annually from 2001 to 2005. That compares with price jumps of 18 percent in hot markets like San Diego and Las Vegas, according to National Association of Realtors data. Orlando, Florida's median price surged 44 percent last year and 17 percent in 2004.

Immune to a Crash?

``Since we haven't had this 20 to 30 percent inflation rate like California and the East Coast, we're not going to have the big fall, either,'' said Tom Anderson, a partner at Houston real estate firm Martha Turner Properties.

University of Houston Economist Barton Smith said the local housing market isn't immune to national trends. Inflation stemming from the high energy prices now benefiting Houston may lead the Federal Reserve to keep pushing interest rates -- and mortgage costs -- higher, Smith said in a May report. If housing prices crash nationally, he said, Texans will feel shock waves.

``It will all depend on the health of the national economy, and that, in turn, will largely depend on the fate of the housing market,'' Smith said.