Houston Chronicle

Drop in home sales a ‘yellow flag’

Experts say downturn could be sign that oil slump is finally catching up

- By Nancy Sarnoff

Houston-area home sales fell 8.8 percent in July, the most severe decline since last winter and a sign that the oil slump finally may be catching up with the housing market.

The July drop follows months of relative stability in the property market, which defied the impact of low crude prices that have bankrupt scores of energy companies and resulted in layoffs across the region.

There are likely to be multiple reasons for the slowdown: a trickle-down effect of low oil prices, prospectiv­e buyers holding off amid the economic uncertaint­y and a lack of affordably priced homes for sale.

For now, economist Ralph McLaughlin calls the July downturn a “cautionary yellow flag.”

“If the year-over-year drop continues over the next two months where it’s becoming a trend, that’s where the yellow flag should turn into a red flag,” said McLaughlin, chief economist for San Francisco-based Trulia, a real estate listing and data firm.

Buyers closed on 7,204 single-family homes in July at a median price of $230,000, the Houston Associatio­n of Realtors reported Wednesday. That was down from a record of 7,898 sales during the same month last year.

The market had been holding up for much of this year because pent-up de-

mand from Houstonian­s edged out of the market during the boom continued to fuel sales.

“That pent-up demand is just about gone,” said Patrick Jankowski, chief economist for the Greater Houston Partnershi­p.

Sales last month were off in all price ranges, with the worst declines in the lowest and highest ends of the market, according to the local realty data, which are based on sales handled through the multiple listing service throughout primarily Harris, Fort Bend and Montgomery counties.

The high-end market in The Woodlands, an area that saw a big run-up in prices during the boom, is now hurting.

The average sales price among the top 5 percent of the market was off 24 percent, according to a report released Wednesday from Redfin, a national real estate firm.

‘Missed the sweet spot’

Sales are down in the Greater Heights neighborho­ods, and properties aren’t selling as fast as they were a year ago.

In 2014, Elizabeth Winston Jones and her family decided to list their Heights home when they saw how hot the market was. But as they were preparing to sell, they realized they needed to make repairs. By the time they were ready, the market had started to soften.

They were told not to worry, that their house might take longer to sell but that they would still get the top range of what they were hoping for.

By the time the for-sale sign hit the yard, “it really felt like a buyers’ market,” Jones said.

“Clearly we missed the sweet spot,” she said. “We were still able to sell our home, but it certainly wasn’t the high end.”

Overall, home prices are still increasing, Gaines said, but at about half the rate they had been increasing over the past couple years.

If Houston’s job market continues to sputter, prices could as well.

“There is a lag, and as oil prices change up or down home prices do follow eventually,” Gaines said.

Inventory low but rising

Housing inventory, while still low by historical standards, reached four months in July, the highest it’s been since the fall of 2012.

Convention­al wisdom holds that anything higher than six months of inventory is a buyers’ market. If it’s below six months, sellers typically have the upper hand.

That won’t be true this time around, Jankowski said.

“As people recognize the direction the housing market is going, sellers are going to be more in a hurry to make a deal before things get worse,” he said. “Buyers will have more options.”

While the overall inventory figure remains low, breaking out supply based on price tells a different story.

Inventory of homes priced between $750,000 and $1 million is more than 10 months. It’s even higher in the $1 millionand-up market.

Stagnant job growth will inevitably affect Houston housing, but economists won’t say yet if this is the beginning of a prolonged downturn.

“If there’s no job growth next year, housing is going to struggle,” Jankowski said.

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 ?? Nancy Sarnoff / Houston Chronicle ?? Houston’s housing market fell 8.8 percent in July, the biggest drop since last winter, as demand softens and inventory grows.
Nancy Sarnoff / Houston Chronicle Houston’s housing market fell 8.8 percent in July, the biggest drop since last winter, as demand softens and inventory grows.

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