Local housing market hits record
Monthly home sales surpassed 10,000 for the first time in July as buyers rushed to the housing market chasing historically low mortgage rates and new surroundings after months of being stuck at home. The record pace, however, may be short-lived.
Houston-area buyers closed on 10,975 homes last month, a 23 percent increase over the same month last year, the Houston Association of Realtors said Wednesday in a monthly housing market report. July marked the second month of record closings after buyers stayed home in April and May to reduce the spread of the new coronavirus.
Recent activity drove down the supply of listings, which could suppress future sales as inventory fell to a three-month supply in July, meaning it would take that long to sell all of the properties on the market based on the last 12 months of sales. Anything below a six-month supply is generally considered a seller’s market.
While housing availability can vary widely among neighborhoods and price ranges, supply was limited throughout the Houston suburbs. From League City and Missouri City to parts of Conroe and Katy, dozens of areas had fewer than three months of inventory.
Some high-end neighborhoods closer to downtown, however, saw their inventories rise. River Oaks, Bellaire, the Galleria area and Westchase all had more than 10 months of supply.
Matthew McKinney is one buyer looking to take advantage of low mortgage rates. He’s been looking at houses in the East End since March, but there hasn’t been much to choose from in his under-$250,000 budget. The one house he was going to bid on got snapped up in the few days he took to think about it.
“Things have picked back up,” said McKinney, who works in human resources. “Now I feel like houses are going under contract a lot sooner than before.”
The median price of a single-family home in Houston hit $271,830 last month, up 8.7 percent from a year earlier and a new high, driv
en by a surge in sales of properties priced from $500,000.
“We are grateful for two consecutive months of strong activity across greater Houston; however, we do not consider the current pace of home sales sustainable given the shrinking supply of homes and expect business to taper a bit this fall,” HAR Chairman John Nugent, said in the report. “Historically low interest rates make this an outstanding time to buy a home, but without the inventory, there unfortunately isn’t much out there for consumers.”
There were 36,055 listings in July, down 19.4 percent from the previous year, according to the data, which is based on sales handled through the association’s Multiple Listing Service throughout primarily Harris, Montgomery and Fort Bend counties.
The disconnect in supply and demand is due in part to the struggling economy. Homeowners who may have been considering selling before COVID-19 are staying put if they’ve lost a job or are worried about their future employment.
At the same time, historically low interest rates are luring buyers.
The average rate for a 30year fixed-rate mortgage fell to 2.88 percent, down from 3.6 percent a year earlier, according to Freddie Mac’s latest survey. It was the lowest since the government-sponsored mortgagefinance company began tracking rates in 1971. The average rate for a 15-year fixed-rate mortgage fell to 2.44 percent.
As mortgage rates fall, banks are pumping the brakes by requiring buyers to have better credit scores and higher down payments than they did before the pandemic. They’re also tightening lending standards on self-employed buyers.
Last week, George Ratiu, senior economist at the home listing website realtor.com, said the market should expect a substantial slowdown in sales during the second half of the year.
Yet for now, sales are surging across Texas.
The state’s homeownership rate hit 67.5 percent in June, the highest since record-keeping began in 1996, according to a report from the Real Estate Center at Texas A&M University. Texas now lags the national rate by only half a percent said Jim Gaines, the center’s chief economist.
While existing homes in Houston are selling are up 2.7 percent year-to-date compared with the same period last year, new homes — a smaller segment of overall sales — are seeing even bigger gains.
Through June, there were 8,923 new home closings, up 18 percent over the first half of 2019, according to Metrostudy.
Depending on the health of the economy, jobs and interest rates, Metrostudy expects builders to start between 27,000 and 31,500 homes this year, compared with 30,570 in 2019.