Houston market update: Prices and Sales up, inventory drought

Statistics for the performance of the Houston real estate market during January were released a few days ago and they point to a strong Sellers market. All the required ingredients are there: Strong sales, higher prices and inventory levels unseen since Bill Clinton was President (December 1999 to be exact). So let me give you the “espresso ristretto” version of the real estate market stats for January 2013:

Property sales were up 29% over January 2012
Average home sales prices were up 3.4% over January 2012
Homes under contract were up 13.5% over January 2012
Active listings for sale were 33,500 – that’s a 20% drop
Inventory levels were down to 3.6 months – a 36% drop
Average home rents were $1548 – a 7.4% increase
Number of homes rented was flat (+0.7%)

Okay great, so what’s it all mean?

The statistic of most importance in this report is the inventory number because it will determine where the market goes from here. At 3.6 months, it’s approaching a level where it may be too low for the market to function normally and it’s likely to cause price increases across the board as Sellers find themselves in the driving seat. Also, this level of inventory is great news for home builders who are likely to benefit greatly from this supply shortage. In fact, they’ve already started to raise their base prices in reaction to these market conditions. Although Buyers may have to pay a little more for their home, this is ultimately good news for the local economy as it will likely benefit from the growth in residential construction.

December and January are typically the slowest time of the year for rentals as most prospective tenants have either completed their move during back to school time around August or they are waiting for Springtime. But the fact that rents rose despite this fact, is an indicator of continued strength of the Houston rental market. Even when compared to the previous three months (1552, 1517 and 1562) the average rent of $1548 in January shows a continuation of the upward trend.

Buyers and Sellers better buckle their seatbelts as the spring seems poised to bring with it a feverish market of high activity, sales, prices and rents.