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: September 2007: Despite national media gloom, it's not all bad at home

Houston Market Conditions Summary

• Despite headlines proclaiming September’s sales declined by the largest percentage in years — off over 15% from 2006’s record peak volumes — sales numbers are still on par with September 2004 and 2005.
• Pending sales are down 4.5%, indicating decreased buyer activity and further sales declines for October.
• Inventory supply bumped up to 6.3 months as listing growth continues to out pace sales — but local inventory remains far below a national average approaching 10.5 months.
• Median price remains stable for now despite slower sales, increased inventory, and growing days-on-market.
• Slowest sales are reported for houses priced between $80,000 and $180,000 — but sales for higher priced homes are slowing also.
• Interest rates continue to fluctuate between 6.25 and 6.50% for fixed rate loan products — buyers with money down and good credit aren’t having trouble getting financing.
• Labor markets across Texas strengthened in September 2007 — Texas employment grew 2.0 % as compared to 1.2 % growth in US employment between September 2006 and 2007.

Despite gloomy national housing outlook — it’s not all bad news for Houston’s real estate market

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Despite gloomy media headlines marking September 2007 as the single month with the largest sales decline in US history, local sales numbers don’t look bad. Houston’s sales declined over 15% in September when compared to 2006. When coming off of 2006’s record peak sales, any percentage decline would appear significant. Yet when you compare actual sales, September 2007 ranks among the top sales years for the last decade — houses are still selling at a clip nearly matching 2005 — the second best year for Houston area housing by most measures.

Looking back 10 years, the Houston Association of Realtors September press release for 1997 gives us some perspective on the record sales growth experienced in the Houston market.
As the press release reported back in 1997, “there were more homes sold in the greater Houston area this September than any other September in the city’s history, and a record number of pending sales indicate the market isn’t cooling down anytime soon.” The release further stated that “with 3,680 existing home sales closed in the month of September, the Houston real estate market posted its fourth straight month of record sales.”

Sales for September 2007 were 5,984 — a 62.6% increase over September 1997. Houston’s real estate market has experienced tremendous growth during the past 10 years. Last year’s peak volumes could not be sustained forever by the loose-lending standards prevalent across the mortgage industry. Mortgage securities investors are demanding higher quality mortgages and real estate markets are settling back into a sustainable sales pace. Despite the double-digit percentage decline in sales, September was still among the best for the past 10 years.

September Sales 2005 – 2007

If sales during 2007 maintain their current pace, it will be the 3rd highest sales year for the last decade. The sales peaks achieved in 2006 were unsustainable given the easy-credit financing terms offered by lenders. Buyers accepted risky loan terms in record numbers last year — and many are facing foreclosure on loans they can no longer afford. So while median headlines lament the decline in sales, the reality is that real estate is settling back into a sustainable sales pace where people buying homes will be able to afford them over the long term.

Houston Median Single Family Home Price

Houston’s median price for September 2007 was $150,500, an increase of less than 1% over 2006’s value of $150,000. Despite slower sales in recent months, the overall median house price for Houston-area single family homes is holding steady in year-to-year comparisons, posting its first recent decline back in July 2007.

September’s median price was boosted by stronger values in home sales above $180,000. Home sales closed below $180,000 posted modest price declines for September 2007. Median price declines for homes priced between $80,000 and $180,000 were offset by appreciation in higher priced homes.

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 Inventory

Houston’s housing inventory increased to 6.3 month’s supply during September 2007. As available listing growth continues to out pace sales, inventory has increased from 5.3 months (December 2006) to 6.3 months (September 2007). September’s Pending sales (the number of MLS listings under contract) were down 6.7%, indicating further inventory growth as sales are expected to slow again in October.

Houstons 6.3 month’s inventory remains far below the national average now approaching a 10.5 month’s supply. Although available listings have grown each month for more than a year, sales volumes have managed to keep the supply from growing as fast as the national average. Overall, the market will favor buyers as inventory climbs beyond a 6 month supply. When evaluating sales according to price classes, homes priced between $80,000 and $180,000 are experiencing more downward price pressure as inventory builds.

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Inventory describes 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.

Houston Metro Area Market Activity

Year-to-year market comparisons illustrate activity changes between September 2006 and 2007. In previous months, sales declines were recorded primarily in homes priced between $80,000 and $180,000 — this month sales declines included all price classes above $80,000. While most market metrics are indicating negative trends, the median home price remained relatively flat this month. Fewer pending sales and increased listing numbers may indicate further sales declines in coming months. 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.

September 2005 – 2007 Closed Sales by Price Class

Price Class	2005	2006	2007	Change
0 – $79K	460	483	518	7.2 %
$80K – $179K	2,809	3,332	2,549	23.5 %
$180K – $499K	1,517	1,870	1,659	11.3 %
$500K +	212	282	240	14.9 %

Houston Single Family Housing Year-to-Year Comparison

September	2006	2007	Change
Sales Closed	5,954	5,061	15.0 %
Median Price	$150,000	$150,500	.003 %
Active Listings	32,620	37,500	15.0 %
Pending Listings	3,803	3,551	6.7 %
Month’s Inventory	5.5	6.3	14.5 %
Days On Market	73	79	8.2 %

Weekly average rates January — September 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, remained between 6.25 and 6.5% for September despite the anticipated interest rate reduction by the Federal Reserve Board. Mortgage rates track long term bond prices, which have experienced pronounced volatility in recent weeks as the mortgage industry shakes off millions of bad loans.

Increased bond price volatility has translated into rate fluctuations for fixed and adjustable rate loan products. Increased stock activity and lower inflationary expectations have worked to keep mortgage rates in check. Investors are demanding better loans and higher returns before re-entering the mortgage security market — putting additional pressure on higher rates.

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Humble & Atascocita Area Median House Price

The single family home median price for the Humble & Atascocita area was $149,400 — a less than 1.0% decrease from September 2006. Sales in higher priced homes offset price declines in homes priced between $80,000 and $180,000. Despite slower sales and buyer activity, the overall median price has been holding steady in recent months.

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.

Humble & Atascocita Area Inventory

The Humble (and Atascocita) area’s housing inventory increased to 6.5 month’s supply during September 2007. As available listing growth continues to out pace sales, inventory has increased from 5.0 months (December 2006) to 6.5 months (September 2007). September’s Pending sales (the number of MLS listings under contract) were down 15.6% — a significant decrease in buyer activity.

While listing growth was increased a modest 1%, the slower sales pace and lower buyer activity will continue to add to inventory levels. At 6.5 months, the advantage is shifting towards buyers — particularly in homes priced between $80,000 and $180,000.

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Inventory describes 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.

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

September	2006	2007	Change
Sales Closed	233	188	19.3 %
Median Price	$149,710	$149,400	0.002 %
Active Listings	1,263	1,497	18.5 %
Pending Listings	167	141	15.6 %
Month’s Inventory	5.4	6.5	20.4 %
Days On Market	74	86	16.2 %

Kingwood Area Median House Price

The median price for Kingwood Area single family homes was $176,200 —- a 3.9 % increase from September 2006. Sales in higher priced homes offset price declines in homes priced between $80,000 and $180,000. Despite slower sales and buyer activity, the overall median price has been holding steady in recent months.

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.

Kingwood Area Inventory

The Kingwood area’s housing inventory increased to 4.8 month’s supply during September 2007. As available listing growth continues to out pace sales, inventory has increased from 3.2 months (December 2006) to 4.8 months (September 2007). September’s Pending sales (the number of MLS listings under contract) were down 10% — a significant decrease in buyer activity.

While listing growth increased less than 1%, the slower sales pace and lower buyer activity continues to add to inventory levels. At 4.8 months, the seller’s advantage is shifting towards a balanced market. Longer days-on-market and lower buyer activity in coming months are indicated by current inventory trends.

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Inventory describes 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.

Kingwood Area Single Family Housing Year-to-Year Comparison

September	2006	2007	Change
Sales Closed	100	87	13.0 %
Median Price	$168,750	$176,200	4.4 %
Active Listings	464	545	17.5 %
Pending Listings	60	54	10.0 %
Month’s Inventory	4.0	4.8	20.0 %
Days On Market	54	71	31.5 %