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: December 2007: Home market closes out second best year; median price ends year higher

Residential Housing Market Summary

• Sales for all property classes declined 23.5% — sales for single-family homes declined 18% when compared to December 2006. Nationally, existing-home sales were down 22% from 2006.
• Year-to-date Sales for 2007 were down 4.5% from 2006, but beat 2005 by 6%. Dollar volume for 2007 was $16,645,129,318 — .2 % ahead of 2006 and over 18% higher than 2005.
• Sales were weakest for properties priced between $80,000 and $200,000, declining over 26% for the month. Except for properties priced below $80,000, all price classes were down for the month.
• Single-family prices were up again for December — the median single-family price was $152,000, up 1% from 2006’s median price of $149,610. In 2007, Houston prices appreciated 4.16% through November 2007.
• Houston’s price risk — the chance that Houston’s housing prices will decline as reported by the PMI U.S. Market Risk Index — was ranked among least-risky major housing markets. According to the same report, local housing appreciated at 4.7% during the 4th quarter of 2007.
• Pending sales — listings under contract expected to close within 30 days — declined 13.6 % indicating further sales declines expected for January 2008. The active-pending ratio stands at 13.1 — 13.1 active listings for each pending sale for all property classes and up from last month’s 12.0.
• NAR’s Pending Home Sales Index — a forward-looking sales indicator — was down over 2% in November, indicating that home sales at the national level are expected to decline in coming weeks and months.
• Inventory Supply, aided by slower growth in homes listed for sale, was at a 5.9 month’s supply in December — down 3.2% from 6.1 months in November. On a year-to-year basis, inventory was up over 17% from last December. At 5.9 month’s supply — Houston inventory remains far below a national housing supply of 9.6 month’s supply.
• Texas job growth while not robust at 2%, still beats the national average of 1% for November, the most recent month reported by the TAMU RE Center. Unemployment remains at historic lows — 4.1% for November 2007.
• Housing starts for the Houston MSA were down 22% from last November. Nationally, housing starts were also down 22% for the same period.
• New home sales were down 26% nationally. Builders are offering hefty incentives to move unsold inventory — some offering incentives worth up to $40,000 to move standing inventory. Local builders are also offering buyer and agent incentives to boost sales.

Houston Residential Housing Sales 2005 — 2007

Existing home sales started 2007 with higher volume than any previous year on record. Beginning in May, sales dropped off previous record paces set in 2006, and stayed ahead of 2005 until August. Despite the slower sales for 2007’s second half, the current year still beats 2005 to become the second best sales year for Houston’s housing market. For the month, sales were down 23.5% from December 2006 and 12.5% from December 2005.

Homes priced between $80,000 and $200,000 make up more than half of area sales. Shopping for homes priced between $80,000 and $200,000 is down dramatically — and explains most of the sales declines for the second half of 2007. Sales for mid-price homes aren’t expected to expand until the credit markets shake off the current malaise, and buyers find their footing. Increased foreclosure activity could tamp down any recovery in mid-priced sales, but media reports indicate that the worst may be over by this summer. Lower interest rates may help strapped home sellers refinance and avoid foreclosure in coming months.

Houston Month’s Inventory

Houston’s 5.9 month’s supply of inventory remains far below the national average of 9.6 month’s supply. Despite consecutive year-over-year increases in numbers of active listings, Houston’s market has been able to absorb the additional listings at current sales paces. Despite slowing sales in 2007’s second half, Houston’s inventory has not grown past a 6.3 month supply — and has trended down in recent months as the number of available listings added to the market has slowed.

The number of available homes (active listings) at the end of December stood at 49,566, down 2,651 listings from November’s total of 52,217, or a decrease of 5.1%. Home sellers may be waiting for better market conditions or may be converting their properties into lease rentals, helping to lower the total sales listings available and helping to maintain a market balanced between buyers and sellers.

Month-end pending sales – those listings expected to close within the next 30 days – declined 13.6% from last year. Pending sales are down 9.3% from last month. Decreasing sales could work to increase the month’s supply of inventory during the next couple of months — fortunately, there’s been a corresponding decrease in available listings that has helped slow or reverse the inventory growth from previous months.

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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.

December 2005 – 2007 Closed Sales by Price Class

Price Class	2005	2006	2007	Change
0 – $79K	445	526	547	3.9 %
$80K – $199K	3,625	3,711	2,738	26.22 %
$200K – $499K	1,431	1,533	1,420	7.37 %
$500K +	254	324	316	2.45 %

Houston Year-to-Year Comparison Dec 2006 – 2007

December	2006	2007	Change
Sales Closed	7,136	5,957	16.5 %
Median Price	$150,000	$153,630	2.4 %
Active Listings	43,438	49,566	14.1 %
Pending Listings	4,369	3,773	13.6 %
Month’s Inventory	5.0	5.9	17.6 %
Days On Market	80	85	6.2 %

Weekly average rates January — December 2007

The fed cut a key interest rate — the Federal-Funds Rate, a benchmark or targeted interest rate charged between banks for overnight loans — three times during the last three months. The last cut on January 24th was an emergency measure aimed to calm roiling market reaction to the U.S. mortgage crisis.

Fed rate cuts are meant to spur short term lending — but in today’s market uncertainty, banks are hesitant to extend credit. The result is that rate cuts don’t always have the intended result in the short term. When rates were cut in December, mortgage rates jumped. Long term mortgage rates respond to long-term economic forecasts — so they tend to move opposite of short-term fed cuts.

As December progressed, economic news reports indicated a potential recession is around the corner — lower consumer confidence, lower retail sales, slower job growth, and the mortgage crisis are having an effect on long-term projections and were driving mortgage rates down at the end of December.

An emergency Fed rate cut in January is expected to be followed by further rate cuts in coming months, although the final rate target is uncertain. It’s unlikely that the Fed will repeat the low interest rate environment now blamed for frothy housing boom and subsequent bust — the final targeted rate will probably come late this Spring.

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Closed Sales | NE Houston Humble & Atascocita | HARMLS Area 1

Single-family closed sales were down 12.2% in year-to-year comparisons. Local sales volumes tracked Houston’s for much of the year — starting strong and closing down. Month-to-month sales were up 3.85% from November to December.

Local sales for home priced between $80,000 and $200,000 have slowed the most. Despite slower sales, local median prices have exhibited positive growth in month-to-month and year-to-year comparisons — boosted by home sales activity for homes priced above $200,000.

Charting single-family closed sales for the previous 18 months allows year-to-year comparisons and illustrates sales activity over time. Year-to-year comparisons are made to reduce seasonal variations.

Months Inventory | NE Houston Humble & Atascocita | HARMLS Area 1

Local inventory supply for NE Houston — Humble and Atascocita — single family housing declined 4.76% in December to a 6.0 month’s supply. Although sales volumes are down, the decrease of active listings by 5.17% helped reverse recent inventory growth.

During the second half of 2007, available listings grew faster than sales could remove them from the market place, raising inventory to a recent high of 6.5 months. During November, inventory dropped to a 6.3 month’s supply.

At 6.0 months, the market remains relatively balanced. Fewer listings help offset slower sales and keeps the market in line — neither favoring buyers or sellers, although buyers and sellers for homes priced between $80,000 and $200,000 may be experiencing conditions favoring buyers as increased foreclosure activity and limited credit tamps down existing and new home sales.

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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.

Sales 2006 – 2007 | NE Houston Humble & Atascocita | HARMLS Area 1

December	2006	2007	Change
Sales Closed	246	216	12.2 %
Median Price	$153,000	$160,160	4.7 %
Active Listings	1,191	1,377	15.6 %
Pending Listings	160	170	6.2 %
Month’s Inventory	4.0	6.0	22.4 %
Days On Market	83	90	8.4 %

Closed Sales | N Houston Spring & Cypresswood | HARMLS Area 12

Single-family closed sales beat last year’s volume by 6.67% in year-to-year comparisons. Local sales volumes grew for the first half of 2007, but have remained relatively flat since October. Month-to-month sales were up less than 1% between October and December.

Local sales for home priced between $80,000 and $200,000 have slowed the most, and it’s had an effect on local prices — the median single family price is down 5.17% in year-to-year and down 4.37% in month-to-month comparisons. During the last 12 months, the median price has fluctuated between a low of $103,250 and a high of $118,500.

Charting single-family closed sales for the previous 18 months allows year-to-year comparisons and illustrates sales activity over time. Year-to-year comparisons are made to reduce seasonal variations.

Months Inventory | N Houston Spring & Cypresswood | HARMLS Area 12

Local inventory supply for N Houston — Spring & Cypresswood — single family housing declined 7.69% in December to a 7.2 month’s supply. Drops in active listing numbers helped reverse recent inventory growth — active listings were down in month-to-month comparisons by 6%.

During the second half of 2007, available listings grew faster than sales could remove them from the market place, raising inventory to a recent high of 8.0 months in August. Inventory growth was reversed in September and has declined steadily through December.

At 7.2 months, the market tends to favor buyers, but the current inventory trend was down for the last few months. Pending sales — a forward looking sales indicator — is down 14% from the previous month indicating slower sales in coming weeks. If the number of active listings continues to decline, it may offset the corresponding reduction of sales and keep inventory from increasing.

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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.

Sales 2006 – 2007 | N Houston Spring & Cypresswood | HARMLS Area 12

December	2006	2007	Change
Sales Closed	172	156	9.3 %
Median Price	$116,780	$110,740	5.7 %
Active Listings	1,034	1,155	11.7 %
Pending Listings	109	132	21.1 %
Month’s Inventory	6.6	6.9	4.5 %
Days On Market	81	94	16.0 %

Closed Sales | NE Houston Kingwood | HARMLS Area 32

Single-family closed sales were down 32.3% in year-to-year comparisons. Local sales volumes tracked Houston’s for much of the year — starting strong and closing down. Month-to-month sales were down 6.67% from November to December.

Local sales for home priced between $80,000 and $200,000 have slowed the most. Despite slower sales, local median prices have exhibited positive growth in month-to-month and year-to-year comparisons — boosted by home sales activity for homes priced above $200,000. The local median price for 2007 has fluctuated between a low of $149,000 and a high of $198,500 — the small number of sales for HARMLS area 32 produces wide swings in median values.

Charting single-family closed sales for the previous 18 months allows year-to-year comparisons and illustrates sales activity over time. Year-to-year comparisons are made to reduce seasonal variations.

Months Inventory | NE Houston Kingwood | HARMLS Area 32

Local single-family inventory decreased 6.82% to a 4.1 month’s supply during December in month-to-month comparison with November. In year-to-year comparisons, inventory is up 28.1% over last December’s 3.2 month’s supply.

During 2007, inventory peaked in September at 4.8 months and has steadily decreased in each consecutive month, corresponding to decreases in the number of active listings available for sale. After September’s peak inventory of 4.8 months, the number of available listings dropped, helping reverse inventory growth. Pending sales — the number of listings under contract — were down 9% from the prior month and down 28.6% from the prior year.

While market trends indicate further inventory increases, at 4.1 months, the market still favors home sellers. If closed and pending sales volume remains stable and fewer listings are added to the market, inventory will continue to favor sellers for the immediate future.

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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.

Sales 2006 -2007 | NE Houston Kingwood | HARMLS Area 32

December	2006	2007	Change
Sales Closed	124	84	32.3 %
Median Price	$164,250	$198,500	20.8 %
Active Listings	375	446	18.9 %
Pending Listings	70	50	28.6 %
Month’s Inventory	3.2	4.1	28.1 %
Days On Market	69	82	18.8 %