Houston-area homebuyers snapped up a record number of houses in May and drove the region's median sales price to unprecedented levels.
Home sales surged 11.5 percent from the same period a year earlier, the Houston Association of Realtors reported Tuesday, even though employment has yet to fully recover from the extended oil price slump.
"It's kind of counterintuitive," said Patrick Jankowski, vice president of research at the Greater Houston Partnership. "One would expect that with the weakness in the job market we would have weaker home sales."
Instead, May saw 8,156 single-family home sales, the highest monthly figure ever. The median sales price rose to $235,000, buoyed in large part by a continued strong showing at the top end. Sales for homes priced at $750,000 and above — the top category measured by the realty association — grew by nearly 28 percent.
That was the seventh consecutive month of rising sales in the luxury market, according to the association, whose data are based on property sales handled through the Multiple Listing Service throughout primarily Harris, Fort Bend and Montgomery counties.
"If we can maintain this pace, there's no doubt that 2017 will be a record year for Houston real estate," HAR chairwoman Cindy Hamann said.
The combined dollar value of properties sold across the region jumped 17.4 percent to $2.8 billion.
Strength in the housing market comes as the regional economy continues to emerge from the oil slump. Houston's business-cycle index, a broad measure of economic health, in April hit its highest level since the start of the downturn in 2014, according to a May report by the Federal Reserve Bank of Dallas, which called Houston's outlook "cautiously optimistic."
At least in the top tiers of the market, growth has been driven in part by the return of jobs to the energy sector.
"One big change we've seen in 2017 is the amount of buyers coming in, specifically in the energy industry," said Paul Kilian, vice president of operations at Martha Turner Sotheby's International Realty.
Affordability issues
Sandra Gunn, a Realtor with Sandra Gunn Properties, also cited relocations from out of state, job growth in the medical industry and the arrival of millennials as homebuyers.
Another driver, Jankowski said, was likely pent-up demand. Many people, priced out of the market during the last energy boom, postponed big purchases once the bust hit due to job fears. Now that the worst of the layoffs appears over, and with an impending interest rate hike, folks are jumping in all at once.
While a harbinger of local economic strength, soaring sales prices continue to raise concerns about Houston's ability to supply adequate housing across income levels, including service workers needed in desirable and increasingly affluent areas.
"These statistics are not surprising," said Amanda Timm, executive director at the Local Initiatives Support Corp. in Houston. "But they definitely exacerbate the affordability challenges facing working families in our city."
Record prices also could attract the attention of builders, potentially fueling another housing construction boom and holding prices in check.
"Builders will expand supply to meet demand and keep price growth moderate," said Will Holder, president of Trendmaker Homes and former president of the Greater Houston Builders Association. "The market will remain in balance."
The only tier of housing to log a decrease in sales in May was the segment priced between $100,000 and $150,000. Sales fell 5.3 percent.
"We definitely need more inventory at that price range," Hamann said.
One reason for the shortage of those homes, she said, was investors buying them up for rental properties, removing them from the sales market.
Rental rates decreased
Even while prices increased and home sales and transaction volumes grew across the board, rental rates decreased, which Hamann attributed to growing inventory. Leases of single-family homes grew 31 percent while average rent fell 4.2 percent to $1,779. Leases of townhomes and condominiums shot up 46 percent while average rent fell 6.7 percent to $1,565.
The increased activity in luxury home sales became notable last fall, said Robin Connor, senior vice president at Martha Turner Sotheby's International Realty.
She attributed the growth to a convergence of factors. For one, she said, asking prices actually came down as sellers adjusted to the realities of the post-oil boom housing market. And now, a healthy stock market and relatively stable oil prices have boosted consumer confidence, nudging prospective buyers to make the leap.
"We have a lot of Houstonians that are moving around looking for a change of location," Connor said. "We do still have a tremendous amount of people coming in from out of town, and, absolutely, international buyers are coming in. It's a really good mixture."
