Houston - Is the market going soft?

[Michael Delpier]

Houston, Do we have a problem?

I'm wondering if the market is softening in Houston Texas.

Fair warning: I'm new to analyzing. And my information is from realtors web sites. (not raw data) But the data is reported to come from the Houston Association of Realtors (HAR)

SFH supply is 2.8 months, (2014 = 2.9 months)

DOM increased 7-days YOY

Median listing price is up 7%, but median sales price is not. (med sales - 2014 = $214K, 2015 = $208K)

Typically, Houston listings/sales ramp up in spring for the summer selling season. I don't see this happening yet. (active listings at 28K down almost 2K from 2014) My thought is people wont sell if they can't buy.

This does not seem like much, but given the market was heading up like a NASA rocket, this seems like a stumble. People are still buying, but not at the same enthusiasm as last year.

Another possible cause of the slight difference is the big investment companies have slowed their buying in Houston. This is completely hear say from a mid level employee of one of the investment companies.

Building new is currently cheaper than buying old. This is very significant in Houston as new is seen as very good. There are thousands of homes being built in west Houston.

So what does this all mean? I'm wondering if the Houston market has met it's tolerance, or is this a temporary issue due to the low price of oil.

Comments?

[Lyall Storandt]

Here's the link to latest HAR market update (April 2015).

@Michael Delpier A lot of the stats mentioned in your original post have since bounced back on a year-over-year basis. Supply is still at 2.9 months. Average days-on-market was 51 vs. 56 in April '14.

Average sales price was up 4.3% to $281,724; median sales price was up 7% to $209,790.

Active listings are up 4.9% vs. last April.

I don't think the market is going "soft." From my perspective it's as tight as it's ever been in the three and a half years that I've been actively involved in the Houston real estate market. Definitely a hard time to be a buyer, both for occupants and investors.

I was hopeful that one of the unintended side effects of the oil slump would be percentages coming back down to earth. What I mean by this is the percentage of ARV that investors are able to purchase at. Whereas 70-75% used to be the gold standard back in 2011, now most investors are happy to see anything below 80%.

@Ann Howell Hey Ann, where are your out-of-state rentals located? Also, if you have the homestead exemption your personal property taxes shouldn't be increasing more than 10% annually.

@Juan Maldonado I don't have a better number to quote you, but I'd guess more than 5-7% of the Houston economy is tied to the Energy industry. Whatever that number actually is, it's significantly lower now than it was last time there was an oil crash in the 80's.

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My gut feeling is that we won't see any decreases in real estate prices or activity this year and I'd guess that the price of oil will stabilize somewhere around $65 / barrel towards mid-Summer. I'd also guess that most of the effects of the oil dip are already priced into the real estate market. If anything, I think the market may level off some this year, but I don't think we'll see a dip. I could be wrong. These are just my predictions.

As with anything, humans tends to over-react to any changes in market conditions or information. It's important to consider the recent jobs cuts in the Energy sector in Houston in totality with the hiring that took place during the oil boom that preceded the slump. Same thing if and when prices cool off in Houston; that info needs to be taken into account with the recent run-up of prices.

We all know that you make your money in real estate (or any investment) when you buy. As long as you're buying right for the current market conditions with an eye on what's coming or what's possible in the future, we'll all be fine.