The Houston housing market broke records in May when buyers paid the highest dollar to win bids on a limited number of properties for sale.
According to the Houston Association of Realtors’ monthly housing report, the median home price in the market broke the $ 300,000 line as inventory at historic lows and high-end deals fueled May sales. More than a third of home sales last month were for more than list price.
The average price of single-family homes rose 21.7 percent over the year to $ 304,000 in May, the association said. The average sales price also rose to a new high, rising 29.7 percent to $ 387,105 over the course of the year. The market is being driven by increased construction costs, strong demand due to low interest rates, and an influx of overseas buyers looking for a lower cost of living.
“We are experiencing the most dynamic Houston real estate market in history,” said Richard Miranda, chairman of the local real estate association, in the report. “Sellers have the upper hand and buyers don’t just meet their demands. They beat them as we hear endless reports of incoming offers thousands of dollars above list price. It is difficult to predict how and when this incredible housing construction will end. “
Sales increased by 48.2 percent compared to the previous year, when 9,702 single-family homes changed hands in May. Sales rose from 6,546 in May 2020 as the market rebounded from lockdown orders related to coronavirus. May marked the 12th month in a row with increases and the largest increase in sales compared to the previous year.
More than 1,700 sales, or about 18 percent of the May deals tracked by the brokers’ association, were new homes. The demand is so strong that home builders are putting restrictions on the number of homes they sell in communities across the Houston area.
“If they’re selling at the pace that buyers are coming, they can’t keep up,” said Kunal Seth, a broker at eXp Realty.
Buyers could also be on a waiting list of hundreds of other buyers, as in the case of Grand Trails, a community of Meritage Homes near Grand Parkway and Westpark Tollroad with homes starting at $ 200,000.
“They make homes with buyers in line,” Seth said.
At the same time, the majority of builders in the Houston area are reporting having to cut back on housing construction because of rising material costs, utility problems, and limited building lots, according to Zonda, a housing information company. The situation isn’t unique to Houston, but it’s surprising to see it here.
“Houston can typically produce new homes, subdivisions, and more, much more efficiently and easily than other parts of the county,” said Lawrence Dean, Houston Regional Director for Zonda.
Some builders with waiting lists are moving to a bidding process, similar to selling existing homes, where buyers bid for their best price, he said.
It’s not just new apartments that are difficult to find. According to HAR, the number of active entries fell by 48 percent to 12,275 over the course of the year.
“As soon as a new offering comes out, we have at least 10 demonstrations within 24 hours,” said Seth. “We have several offers within 48 to 72 hours.”
The fierce competition resulted in 3,607 buyers – accounting for 37 percent of sales – paying more than list price for their home in May, according to the Houston Association of Realtors. In comparison, 9 percent of sales were above the offer price in May 2020.
Sales of luxury homes priced at more than $ 750,000 rose 291 percent from May 2020, according to the association. Sales volume for homes priced at $ 250,000 to $ 499,000 – the category that made up just over half of sales – rose 83 percent. Sales of homes priced at $ 500,000 to $ 749,999 rose 166 percent.
Even as prices rose, deals were closed quickly. Households spent an average of just 34 days on the market in May, up from 58 days in May 2020.
The home inventory was 1.4 months for the third straight month, up from 3.3 months in May 2020. The narrowest home inventory was from $ 150,000 to $ 249,999 at 0.7 months. A six-month offer is considered a balanced market.
Not every price category saw sales increases, but that was simply because there wasn’t much on sale. According to the brokerage group, sales volumes fell for homes priced below $ 250,000.
Seth said homes can be had for less than $ 250,000, but buyers need to go further and get less for their money than they did a year ago.
“The good thing about Houston is that a buyer can tell their price and there’s a home for them,” Seth said. “But what you get for the money won’t be that big or have that many rooms.”