New data by the Houston Association of Realtors shows that the city’s housing market, once bullish in the months prior, is losing a bit of steam, primarily due to precipitous declines in oil prices.
A report from the organization indicated that home sales in the Houston metropolitan area was up by 6.1 percent year-over-year in January 2015. This followed up a strong close to 2014, as sales were up 11.6 percent year-over-year in December 2014. The deceleration may also be a harbinger of further deceleration to come, as the number of homes for sale in Houston was down 5.9 percent from the previous January to only 26,556 last month.
Pending sales were also down, slipping 9.3 percent to 3,382. In a separate report, Comerica Bank (Dallas) chief economist Robert Dye forecasted that home construction starts in Houston may drop by as much as 11 percent in 2015.
Oil prices, despite regaining some momentum and recently breaching the $60-per-barrel mark for the first time in calendar 2015, are still far below their earlier levels, and for metropolitan areas in oil-rich Texas, this could be one key variable predicating a more bearish market in these metros, Houston included. “January was a strong month overall for the Houston housing market, but we still expect to see sales cool as a result of lower oil prices and the limited supply of homes,” said Houston Association of Realtors chairwoman Nancy Furst. “We’ve already started to see declining townhome and condominium sales.”
Furst is one of several prognosticators who see the expected slowdown in the Houston real estate space as “normalization.” This is because Houston’s housing market recovery has generally trumped other sectors in the broader economic recovery, thanks in part to the city’s booming oil and gasoline industry.
Home price increases in Houston had also been particularly notable, typically outpacing the U.S. market’s ten-year average annual gain, which is at only 3.9 percent. Further, Houston (63,678) had trounced New York City (47,405) as the leading metro in terms of residential building permits in 2014, continuing the city’s long run as a leader in this statistical metric.
However, things changed significantly as oil prices began their downward slide, from about $90 per barrel in July to about $50 per barrel for most of the past few weeks. There have been less developers buying land in Houston, while sales of premium houses costing $500,000 or more had notably declined in January. Listings have also stayed on the market for longer than what one would normally expect.
While all is not lost for a market seemingly heading to Goldilocks status after the bull run of previous months, some consumers have been forced to cancel their plans of buying a new homes due to the transitional situation in Houston at the moment.