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.

Income for Texas families trailing rising home prices

Despite recent industry forecasts that the Texas economy is growing, research economists with the Real Estate Center at Texas A&M University in College Station say statistics show paychecks aren't keeping pace.

Since the end of 2003, the average income of Texas households has dropped by 2 percent, while the median sales price of a Texas home is up by more than 3 percent to $129,900.

As a result of this, researchers at the Real Estate Center say less than half of Texas households -- about 49.5 percent -- can afford to buy an average-priced home, compared with 52.8 percent a year ago.

"The combination of lower household incomes and higher home prices means that fewer Texas households can afford to buy a home compared with the year before," says Jack Harris, a research economist with the Real Estate Center in College Station.

However, he adds that interest rates, which fell 12 basis points throughout the past year, managed to soften the blow somewhat.

The Texas Housing Affordability Index, which tracks the relationship between housing costs and incomes in most metropolitan and a few non-metropolitan areas of the state, fell to .99.

According to the center, this means that the average household income is 1 percent below that needed to buy a median-priced home. In the fourth quarter of 2003, the index was 1.04.

For first-time home buyers, housing is even less affordable. The First-Time Homebuyer's Affordability Index is .91, meaning that the average income of a renting household in Texas is 9 percent short of the amount needed to buy the median-priced starter home with a loan covering 95 percent of its value.

According to the real estate center, the FTHAI was .95 a year ago.

However, despite the statewide trend, housing became more affordable in some metropolitan statistical areas.

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.

May 2004 Houston Real Estate Report

HOUSTON (June 16, 2004) – Houston’s property sales in May reached the highest number of sales ever recorded in a single month. According to the Houston Association of Realtors’® Multiple Listing Service, 6,482 Houston-area homes listed by Realtors® sold last month.

“May’s record-breaking volume of sales pumped more than $1.1 billion into Houston’s economy last month,” said HAR chairman elect Toni C. Nelson. “And with pending sales up almost 6 percent over this time last year, we can assume that next month also will be strong.”

Pending sales serve as the traditional indicator of listings scheduled to close within the next month.

Overall, Houston’s market showed an increase across the board including sales, available inventory, pending sales and total dollar volume.

May Market Comparison (all categories)
All Classes May
2003 May
2004 Percent Change
Total Property Sales 6,074 6,482 +6.7%
Total Dollar Volume $987 million $1.14 billion +15.7%
Active Listings 36,722 41,789 +13.8%
Pending Sales 4,066 4,307 +5.9%
Months Inventory 6.7 6.4 -4.5/%

High-Rise Market Sales Up

Houston’s high-rise market experienced a sales explosion during the month of May. Houston-area Realtors sold 71 high-rise properties last month, representing an increase of more than 120 percent when compared to this time last year. Realtors sold 32 high-rise properties during May 2003.

“The popularity of high-rise living in Houston is on the rise and with the recent opening of projects such as the Montebello, the sale of Houston’s high-rise homes more than doubled during May,” said Nelson.

There are currently 847 active listings in the high-rise category when compared to 556 listings on the market at this time last year.

Single-family Homes Update

Total sales for single-family homes increased 4.6 percent to 5,305 from last year’s 5,073. The median price of single-family homes grew to $138,000 in May, compared to $133,160 last May.

Houston Real Estate Milestones

Highest number of properties sold in a single month.
Highest number of properties on the market since November 1986.
* Months inventory estimates the number of months it will take to deplete current active inventory based on the prior twelve months sales activity. This figure is representative of the single-family homes market.

The computerized Multiple Listing Service of the Houston Association of Realtors includes residential properties and new homes listed by 18,000 Realtors throughout Harris, Fort Bend and Montgomery counties, as well as parts of Brazoria, Galveston, Waller and Wharton counties. The Houston Association of Realtors is the largest trade association in Houston and the second largest local Realtor association in the nation. Residential home sales statistics as well as listing information for more than 40,000 listings 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.
The MLS does not verify the information provided and disclaims any responsibility for its accuracy. All data is preliminary and subject to change. Monthly sales figures reported since November 1998 includes a statistical estimation to account for late entries. Twelve-month totals may vary from actual end-of-year figures. (Single-family detached homes were broken out separately in monthly figures beginning February 1988.)