SterlingResidential.com | Buying & Selling Residential Properties in Texas | Houses for Rent Houston Area | Humble Atascocita Kingwood & Spring Texas Realtors | Sterling Residential®, Realtors® | Real Estate Broker: August 2007: Cooling demand for some mid-priced housing hasn't dampened median price

Houston Market Conditions Summary

Sales down 1.2% from 2006 but still ahead of 2005; pending sales down 4.5%, indicating slower sales for September; inventory supply remains at 6.2 months, below a national average approaching 10 months; median price continues growth despite slower sales — helped along by sales growth in homes priced above $500K.

Houston — (September 25, 2007) Area home sales fell 1.2% in August, with the largest sales declines in single-family homes priced between $80,000 and $179,000. Excepting 2006’s record peak volumes, sales still surpass 2005’s level as illustrated on the chart above. On a year-to-date basis, 2007’s sales nearly matched sales from last year — 49,271 YTD sales in 2006 compared to 49,106 YTD sales, as of August 2007.

As noted in the table below, the largest sales volume declines were in homes priced between $80,000 and $179,999 — homes priced in this range make up nearly half of all HARMLS sales. Sales volumes for lower and higher priced homes showed respectable growth — sales for homes priced above $500,000 increased 26%, helping offset sales volume declines in mid-priced housing. Despite the slower sales pace, homes are not languishing on the market — August’s days-on-market average was 73, only slightly above 2006.

Closed Sales by Price Class for 2005 – 2007

Price Class	2005	2006	2007	Change
0 – $79K	591	498	629	26.3%
$80K – $179K	3,877	3,988	3,549	11.0 %
$180K – $499K	1,924	2,242	2,433	8.5%
$500K +	280	330	407	23.4 %

Despite gloomy housing news from across the nation, Houston’s sales haven’t succumbed to the boom-then-bust cycle experienced in places like Arizona, California, Nevada, and Florida. With a modest price appreciation, Houston never attracted the speculative investors that competed for housing and drove up prices beyond what’s affordable for the average home buyer. Without the boom, we’re going to miss out on the bust — good news for local home owners.

While Houston hasn’t felt the pain experienced in other housing markets, the subprime mortgage mess is having a local impact. Lenders experienced a dramatic liquidity squeeze during August, attributed to investor angst over problems with subprime loans — the loans that provided financing to marginally-qualified buyers with little money down, unverified income, and wobbly credit. As a result, lenders have reined in loan offerings in recent months, dramatically impacting Houston-area homes priced between $80,000 and $170,000.

Mortgage companies have cut back on loan offers — the subprime market is nearly shut down and lenders are again promoting Federal Housing Administration (FHA) insured loans. Market watchers are concluding that the August mortgage shake up will be short lived, adding that buyers with good credit and money for down payments will continue to find financing alternatives.

While good news for many buyers, many existing home owners need to refinance from expensive ARMs or risk losing their homes — the number of Houston home owners that will loose their homes to foreclosure isn’t known. Current foreclosure activity is at an all-time high, and that could lead to an oversupply and dampened sales prices as bank-owned real estate competes with home owners for sales.

Houston has lots of economic activity to boast about: Houston continues to produce new jobs, unemployment remains at historic lows, and oil prices remain high. However, signs of a national recession are curbing expectations locally — economists just can’t predict the impact a national recession would have in Houston. Additionally, the local impact of subprime defaults and foreclosures remains unknown.

While these factors cast some shadows across the housing picture, home buyers with good jobs, stable income, and good credit shouldn’t have any trouble financing under the current market conditions. Home sellers should look carefully at neighborhood sales and local competition when listing their homes for sale — accurate pricing in a fluctuating market is crucial.

Houston Inventory

Houston’s housing inventory remained at 6.2 month’s supply again in August. As available listings have outpaced sales — homes for sale grew 15.7% in August to 53,468 properties — inventory numbers have climbed from 5.3 months (December 2006) to 6.2 months (June 2007). Since June, inventory has remained at 6.2 months. August’s Pending sales (the number of MLS listings under contract) were down 4.5%, indicating that September’s sales volume may be lower than last year’s and could add to the inventory.

While national month’s home supply is near 10 month’s, Houstons 6.2 month supply remains far below the national average. Although available listings have grown each month for more than a year, current sales volumes have managed to keep the supply from growing as fast as the national average. With the market balanced between buyer’s or seller’s advantage, prices have continued to appreciate.

What does inventory describe? Inventory determines the time it would take to sell available listings at the monthly average sales pace for the previous 12 months. Inventory below 5 months indicates a seller’s market, as buyers compete for limited housing. Inventory levels between 5 and 6 months reflect a balanced market. Inventory levels beyond 6 months are considered excessive, shifting the market advantage to the buyers, and potentially lowering sales prices and lengthening the timed needed to sell.

Interest Rate Changes for 2007

According to the Freddie Mac weekly mortgage survey, illustrated on the adjacent chart, the average 30-year fixed rate for the Southwestern US, including Houston, has increased to its highest 2007 levels in June and July, reaching 6.73% for 30 year fixed-rate loans. Other loan products have tracked the rise and fall of the fixed rate products, with the 1 year ARM showing the most volatility.

August’s interest rates moderated slightly and were trending down prior to this week’s action by the Federal Reserve Board (FRB). As the FRB cut short term rates this week from 5.25 to 4.75%, stocks rallied higher, pushing bond prices down and increasing long-term yields — raising mortgage rates higher following several weeks of declines. Lower short term rates could raise inflation fears, raising mortgage rates further in coming months. However, news of a slowing economy may relieve those fears, and work to lower long-term interest rates.

Houston Median House Price

Houston’s median price for August 2007 was $159,000, a 5% year-to-year increase over 2006’s value of $152,000, and a 2.5% increase over July’s value of $155,100. Despite slower sales numbers, the median house price for single family homes has grown consistently in year-to-year comparisons during 17 of the last 18 months, posting its first recent decline in July 2007. August’s median house price was helped in large measure by the 26% growth in sales for homes priced above $500,000.

Charting median single family prices for the previous 18 months reveals the seasonal variations and year-to-year growth. Year-to-year comparisons are made to reduce seasonal variations, reflecting actual value changes.

Houston Metro Area Market Activity

Year-to-year market comparisons illustrate a modest decrease in August sales. Available listing inventory grew in year-over-year comparisons, but didn’t move past June and July’s 6.2 month level. Available listing growth continues to out pace sales and pending contract growth (listings under contract) — a trend with implications for further inventory growth in coming months.

Houston Single Family Housing Year-to-Year Comparison

August	2006	2007	Change
Sales Closed	7,052	7,014	0.01 %
Median Price	$152,000	$159,000	5.0 %
Active Listings	32,526	37,548	15.4 %
Pending Listings	4,507	4,301	4.5 %
Month’s Inventory	5.6	6.2	11.9 %
Days On Market	70	73	3.0 %

Humble & Atascocita Area: Median House Price & Inventory

Atascocita | Crosby | Humble | Huffman | Kingwood Glen | Kings River | West Lake Houston | Beltway 8

The single family home median price for the Humble & Atascocita area was $147,410 — a 2.4% increase over August 2006. The Humble & Atascocita market’s hotness ranking was 11th for the Houston area — 13.9% of available listings were under contract, keeping Humble and Atascocita among the top performing areas in metro Houston.

Charting median single family prices over the previous 18 months illustrates year-to-year price appreciation. Year-to-year comparisons are made to reduce seasonal variations.

Sales declined 6.8% while available listings increased 14.8%, helping raise inventory to 6.3 months — inventory has increased from 5.0 months to 6.3 months since December 2006.

What does inventory describe? Inventory determines the time it would take to sell available listings at the monthly average sales pace for the previous 12 months. Inventory below 5 months indicates a seller’s market, as buyers compete for limited housing. Inventory levels between 5 and 6 months reflect a balanced market. Inventory levels beyond 6 months are considered excessive, shifting the market advantage to the buyers, and potentially lowering sales prices and lengthening the timed needed to sell.

Humble & Atascocita Area Single Family Housing Year-to-Year Comparison

August	2006	2007	Change
Sales Closed	293	273	6.4 %
Median Price	$143,900	$147,410	2.4 %
Active Listings	1,292	1,484	14.9 %
Pending Listings	200	206	3.0 %
Month’s Inventory	5.6	6.3	12.50 %
Days On Market	78	74	5.1 %

Kingwood Area: Median House Price & Inventory

Kingwood | Huffman | New Caney | Porter

The median price for Kingwood Area single family homes was $186,000 —- a 16.25 % increase from August 2006’s value of $160,000. The Kingwood area market’s hotness ranking was 12th for the Houston metro area with 13.4% of available listings under contract keeping it among the top performing sellers. Sales increased 17.2 %. Pending sales increased 5.9 %. Inventory was up again to 4.5 months, a 12.5 % increase.

Note: Area 32 is a small sales area with wide variation in sales prices — this can create wide median price swings as illustrated in the chart above, reducing the effectiveness of the chart in illustrating price trends.

Year-to-year comparisons are made to reduce seasonal variations. Charting median single family prices for the previous 18 months reveals the seasonal variations present over the sales year and reflects price declines as we leave the selling season.

Sales declined 6.4% while available listings increased 18.7%, helping raise inventory to 4.7 months — an increase of 17.5% over last year. As listing growth has outpaced sales, inventory has increased from 3.2 months to 4.7 months since December 2006.

What does inventory describe? Inventory determines the time it would take to sell available listings at the monthly average sales pace for the previous 12 months. Inventory below 5 months indicates a seller’s market, as buyers compete for limited housing. Inventory levels between 5 and 6 months reflect a balanced market. Inventory levels beyond 6 months are considered excessive, shifting the market advantage to the buyers, and potentially lowering sales prices and lengthening the timed needed to sell.

Kingwood Area Single Family Housing Year-to-Year Comparison

August	2006	2007	Change
Sales Closed	141	132	6.4 %
Median Price	$160,000	$186,000	16.2%
Active Listings	458	544	18.7 %
Pending Listings	68	73	7.3 %
Month’s Inventory	4.0	4.7	17.5 %
Days On Market	51	53	3.9 %