Houston’s Luxury Home Market Remains Resilient
It seems like Houston’s once white-hot real estate market has calmed down somewhat thanks in part to low oil prices, resulting job losses, and subsequent softening demand. Say what you will, but the oil business is still a vital economic driver for Houston. Nonetheless, while home values have dipped from a strong peak just a year ago, experts agree that it’s still a seller’s market.
Following are five key market reasons for the resilience in Houston luxury home values:
- Houston has had years of low housing inventory. The inventory represents the amount of time it would take to sell all the homes available for sale right now. Six months of inventory characterizes a market in balance. Since the Spring of 2015 to today, inventory has consistently sat well below 4 percent, indicating low inventory, and thus, less supply to fulfill overall demand. While inventory has risen from a low of 2.8 months last year to 3.7 months today, inventory below six months indicates a market still favoring sellers.
- Home buyers haven’t stopped buying; they’re simply making more value-conscious decisions. While luxury sales have dipped, sales of homes in the middle of the range have seen an increase. Home buyers who may have felt comfortable purchasing homes over $500,000 a year ago are now looking at slightly lower home purchases. This is likewise for buyers in other price ranges. In fact, despite the apprehension, average prices were up 1% in April.
- The speculative craziness is slowing down for the moment. That may be a good thing for the time being. A temporarily slower luxury housing market may help reign in the kind of rampant housing speculation that landed Houston on a shortlist of cities with potential housing bubbles.
- Lower Houston luxury home prices are relative. Luxury home prices have dipped as of late. However, this is a natural market cycle that I have experienced dozens of times. Nothing is ever up or ever down forever. The market has a way of correcting itself. In spite of lower home prices, historically they remain quite high.
- Houston is a growing city. Despite collapsing oil prices, Houston added more people than any other metropolitan area in the nation last year.
A slight deceleration in Houston’s hot housing market, if only to catch our collective breaths, may be positive. It might give us some time to consider the consequences as well as the opportunities for growth.