Mark Twain once famously wrote the “…report of my death was an exaggeration.” Much the same could be said about the real estate market in recent years. The Mark Twain statement was occasioned by the serious illness and subsequent recovery of a cousin who was mistaken by many to have been Mark Twain himself. To be sure the parallel with the real estate market in the U.S. is equally true. It has been most definitely been ill, although it would not seem to have been a fatal illness. Here is some information you may find interesting.
Nationally existing home sales declined over 4.8% last year compared to 2009. This is a gain of 4.9% in homes sold nationally in 2009 versus 2008. Houston experienced a similar situation in 2010 with a 5.7% decline in the number of single family homes sold in 2010 versus 2009. To be sure, the numbers show that the number of existing home sales is still declining across the U.S. However when you look at the prices homeowners received for the sale of their homes in 2010, there is good news. Nationally the average home sales price rose 1.9% to $220,000 while in the Houston area the average price rose 4.0% over 2009 to $211,765, nearly twice the national average. This disparity was particularly apparent in December 2010 when the average Houston home sales prices increased over December 2009 by 2.2%.
At the same time the month’s inventory number increased by 25.9% in December 2010 to 7.5 months as compared to December 2009’s number of 5.2 months. Month’s inventory is the number of months it would take to deplete the housing inventory based on the previous 12 month’s sales activity. Normally a high month’s inventory number will put downward pressure on prices as it represents increased supply. Nationally the month’s inventory number is 9.4.
So what does all of this mean, particularly to those of us here in Houston? While it’s far from conclusive, it appears that the national market is converging on the Houston market. Over the last few years the national market has taken a major beating. At the same time the Houston market has fared much better than the national market. As the national market improves it is beginning to resemble the historically better Houston market. In other words, the two markets seem to be converging on each other. This would be good news for the national market since Houston as a whole didn’t experience the depths of the decline in real estate many areas of the country did. At the same time, since Houston, and Texas in general, were among the last areas of the country to slide into the recession they should be among the first to climb out. In fact this is happening as we speak. A major sign that an economy is growing is job creation. Houston’s job creation engine is running far ahead of the national engine, thanks in large part to the oil and gas industry. So when you are tempted to really complain about the high cost of gasoline, remember the oil and gas industry may be the reason you have a job.
The South Katy area (south of IH-10) continued to be a bright spot in the Houston area, primarily due to demand in Cinco Ranch and surrounding subdivisions. Sales prices in this area increased 3.5% despite a decline of 3.2% in the number of homes sold. One significant reason for this is a relatively low inventory of available homes. By the end of 2008 there was only 4.1 months of inventory available. This is only slightly above 2009 levels, although inventory numbers are beginning to creep up. This also represents levels typically associated with a Seller’s market. Unfortunately the market is not behaving like a Seller’s market. We believe that this is because buyers believe it is a Buyer’s market and in this case perception is reality.
As we look forward to 2010, what can we expect? At the beginning of 2009 many economists predicted a rebound in the second half of the year. Obviously this did not occur. Of course this is no surprise as economists are usually wrong to one degree or another. As the economy rebounds the national real estate market should continue to increase. I for one am not willing to forecast the turnaround of the national economy. Still mortgage rates are at record lows, which has positively affected the affordability for home buyers. Coupled with relatively low inventory levels it would not take a huge uptick in demand to see the market strengthen considerably.
Posted by: David Rozier
Broker Associate-Keller Williams Realty
22762 Westheimer Pkwy, Ste 430
Katy TX 77450
281-395-0680
http://www.rozierteam.com/
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