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: October 2007: Despite 8.6% sales decline, year-to-date sales on pace for 3rd best year

Houston Real Estate Market Conditions

• October sales declined 8.6% — while off 2006’s record peaks, year-to-date sales are on pace to match 2004 and 2005. Nationally, existing home sales were down 1.2% during the same period.
• Pending sales — listings under contract expected to close within 30 days — declined 6.6% indicating further sales declines for November.
• Aided by slower growth in homes listed for sale, inventory dropped to 6.2 months from last month’s level of 6.3 months — Houston inventory remains far below a national average approaching 10.8 months.
• Median price nudged down .5% to $145,390 — national median price was down 5.1% for October.
• Largest sales declines are reported for houses priced between $80,000 and $200,000 — sales for homes priced above $500,000 rose more than 22%.
• Recession fears are raising bond prices and cutting yields, lowering mortgage rates — buyers with money down, verifiable income, and good credit aren’t having trouble getting financing. Further Fed rate cuts could rally stocks, sending mortgage rates higher.
• Despite recession expectations and the current credit crisis, Transwestern’s annual economic forecast predicts that Houston’s economy will grow for the foreseeable future — jobs are forecast to grow by 60,000 each year through 2009 as energy sector development and economic diversification continues.
• Consistently ranked amongst the most affordable cities, Houston’s housing market is also among the least risky real estate investments nationwide according to PMI Mortgage Insurance Company. PMI’s risk scores evaluate the probability for price declines across national real estate markets.

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While Houston’s median home price has remained relatively flat in recent year-to-year comparisons, the supply of listings has grown for much of the last year. Last October, the number of properties for sale stood at 46,673 — this October, that number increased 14.4% to 53,407, an extra 6,734 listed properties just as sales are falling from 2006’s record peak. Divided by the average sales per month for the previous 12 month period, that listing inventory equates to a 6.2 month supply — not bad when compared to a national inventory approaching 10.8 months, but still high by recent Houston standards.

While current inventory levels are not considered excessive, mortgage and credit industry problems are reducing financing options for buyers, reducing sales and helping deepen the local housing supply. Mortgage defaults and financing problems could continue for most of 2008, according to recent news accounts. Increased foreclosures will add bank-owned properties to the inventory, increasing the probability for price declines in affected neighborhoods.

If inventory levels grow beyond the market’s ability to absorb the excess, home prices would eventually come down. Despite declines in homes priced between $80,000 and $200,000, the median price has been stabilized by stronger sales for homes priced $500,000 and above, indicating that future price declines may be limited to certain neighborhoods. For now the median price is holding steady, but there’s a great deal of uncertainty about the real estate market’s direction. Buyers reading media reports about declining prices are hesitant to purchase. Sellers worry about reducing asking prices before the market has turned, giving away their equity unnecessarily.

So what’s the best course for now? Buyers and sellers should proceed cautiously and take advantage of information sources they can use to make smart purchase and sale decisions. That’s why it’s important to rely on a local source for market information — no national website or media outlet is going to help you analyze what’s happening down the street. Despite the media’s attention on housing market problems, Houston’s market remains among the most affordable and least risky real estate investments you can make.

October Sales 2005 – 2007

Sales for October 2007 were 6,244 — a 66.2% growth rate from October 1997. Houston’s real estate market has experienced tremendous growth during the past 10 years. The record peak sales volumes of 2006 could not be sustained forever — loose-lending standards would eventually be curtailed as foreclosure rates increased, decreasing the number of buyers that could secure financing and lowering sales. Despite October’s 8.6% sales decline, October 2007 is still among the best sales months for the past 10 years.

Houston Median Single Family Home Price

Houston’s median price for October 2007 was $145,390, a decrease of less than 1% from October 2006. 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.

October’s median price benefited from stronger values in home sales above $500,000. As sales for homes priced between $80,000 and $200,000 have posted the largest sales declines, the higher mix of sales for homes priced above $500,000 has helped maintain Houston’s median house price.

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 dropped to 6.2 month’s supply as listing growth slowed during October 2007. In previous months, listing growth outpaced sales, adding inventory during each month since December 2006. October’s pending sales (the number of MLS listings under contract) were down 6.6%, indicating slower November sales and the potential for added inventory next month.

Houston’s 6.2 month’s inventory remains far below the national average now approaching a 10.8 month’s supply. Although 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 $200,000 are experiencing more downward price pressure as inventory builds in those neighborhoods.

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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 October 2006 and 2007. Home priced above $500,000 helped offset slower sales for homes priced between $80,000 and $200,000 in October. While most market metrics are indicating negative trends, the median home price remained relatively flat this month. Fewer pending sales indicate further sales declines in coming months. Listing growth slowed in October, helping reverse recent inventory supply increases. The average days-on-market rose to 81 days as sellers are waiting longer for workable offers.

October 2005 – 2007 Closed Sales by Price Class

Price Class	2005	2006	2007	Change
0 – $79K	467	488	603	23.56 %
$80K – $179K	3,049	3,221	2,695	16.33 %
$180K – $499K	1,484	1,697	1,568	7.60 %
$500K +	220	207	268	22.76 %

Houston Single Family Housing Year-to-Year Comparison

October	2006	2007	Change
Sales Closed	5,600	5,171	8.6 %
Median Price	$146,000	$145,390	.05 %
Active Listings	32,568	36,833	13.0 %
Pending Listings	4,034	3,866	4.0 %
Month’s Inventory	5.5	6.2	14.1 %
Days On Market	75	81	8.0 %

Weekly average rates January — October 2007

Interest rates remained volatile as recession fears and a Fed rate cut affected bond prices. As the housing and mortgage crisis puts a drag on economic growth, the fed has responded with a rate cut in September, with mortgage rates rising immediately following the change. Before news of another anticipated rate cut in December rallied stocks, recession fears drove markets down, lowering mortgage rates. Mortgage rate volatility is likely to continue as news bounces back and forth between rate cuts and recessionary fears.

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 near 6.4 % for the month of October. Mortgage pricing for the 1 Year ARM has been volatile again in October as the rate’s low for the month was 5.53 % and its high was 5.81%. The long term forecast is uncertain as recessionary fears continue to affect stock and bond markets.

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Humble & Atascocita Area Median House Price

The single family home median price for the Humble & Atascocita area was $146,000 — a 1.9 % decrease from October 2006 in year-to-year comparisons. Overall, closed and pending sales were up for October in yearly and monthly comparisons, helping maintain the median price and slow the growth of inventory.

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 remained at a 6.5 month’s supply during October 2007. As available listing growth outpaced sales, inventory grew from 5.0 months (December 2006) to 6.5 months (September 2007). During October, inventory remained at a 6.5 month’s supply as sales climbed and fewer new listings were added to inventory. Pending sales (the number of MLS listings under contract) were up 19 % — a significant increase in buyer activity for the month and indicating that area sales for November could be stronger.

At 6.5 months, the market advantage favors buyers — particularly in homes priced between $80,000 and $200,000. Higher closed and pending sales could reduce inventory next month if listing inventory levels off or declines.

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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

October	2006	2007	Change
Sales Closed	211	215	1.9 %
Median Price	$148,780	$146,000	1.9 %
Active Listings	1,296	1,502	15.9 %
Pending Listings	169	201	18.9 %
Month’s Inventory	5.5	6.5	18.2 %
Days On Market	88	81	7.9 %

Kingwood Area Median House Price

The median price for Kingwood Area single family homes was $156,280 —- a 0.8 % increase from October 2006. Sales in higher priced homes offset price declines in homes priced between $80,000 and $200,000. Despite lower closed and pending sales, the overall median price has been holding steady in recent months.

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.

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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.

Kingwood Area Inventory

The Kingwood area’s housing inventory dropped to 4.5 month’s supply during October 2007. The number of active listings dropped from 545 in September to 499 in the current month, helping lower the inventory supply. Pending sales (the number of MLS listings under contract) were up 33% — a significant increase in buyer activity indicating that inventory may decline again next month.

At 4.5 months, the market favors sellers. If closed and pending sales continue to exhibit growth, and fewer listings are added to the market, we can expect to see lower inventory supplies and stronger market performance.

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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

October	2006	2007	Change
Sales Closed	99	88	11.1 %
Median Price	$155,000	$156,280	0.1 %
Active Listings	431	499	15.8 %
Pending Listings	74	72	2.7 %
Month’s Inventory	3.8	4.5	18.4 %
Days On Market	59	72	22.0 %