It’s that time of the year again! Today we will be taking an objective look at the performance of Houston’s real estate market in the year 2011 and provide you with a clear picture of how the market is doing currently. It is always good to stay informed on local market conditions but this analysis is especially helpful if you are considering a move in the next 12 months or so. Instead of an always positive spin on the data, our aim is to give you the facts and our expert interpretation of them and make your decision easier.
First, the data in a vacuum
Let’s take a look at the data HAR released a few days ago for the year 2011:
- Total Property Sales: 63,610
- Total Dollar Value: $13B
- Average Sales Price: $213,723
- Median Sales Price: $155,000
Quite a handsome set of numbers, isn’t it? Without some context however, it just makes your head hurt and tells you nothing.
Add in some historical context
The strongest indicator of market and recovery strength is the total number of sales in a particular year. This may come as a surprise to many but even during the lowest point of the recession, average prices in Houston never really dropped. They were either flat or growing slightly. What revealed the weakness in the market was the lower number of sales. In fact, we had declining sales for 22 consecutive months until the government tax credit lifted sales in late 2008 mid 2009.
So how did the Houston real estate market do in 2011 when it comes to sales? Short answer: Better. The total of 63,610 properties sold was a 4% improvement over 2010 and a 1.5% improvement over 2009. Remember that sales were on steroids during 2o08 and 2009 so direct comparisons aren’t fair. Total sales in 2011 and 2010 reflect the true state of the market, whereas in 2009 and 2008, they reflected an inflated market. So the 2008 spike you see in the graph should be taken with a big pinch of salt.
Conclusion: Sales in 2011 show a real estate market in a moderate recovery. Definitely not the time to throw a party yet, but this is encouraging.
The number of sales tells only half the story. After all, Florida had soaring sales in 2009 and 2010 but most those sales were foreclosures, short sales and distressed properties which sold at low prices. That’s not good either. So, after we found out we sold more homes we need to look at the prices those homes fetched.
The average sales price for the Houston real estate market in 2011 was $155,000 which is the highest number on record. That said, this average sales price is a 1% improvement over 2010 and it follows a trend of minimal appreciation seen since 2008. So, prices are holding up well while sales are increasing. We’ll take that.
So what should you do if you’re considering to buy or sell in 2012? The first answer is easier than the second.
If you’re looking to buy, there are three huge reasons to make that move in 2012. First, interest rates are scary good. To illustrate that point, think about this. If you had purchased a home in 2010, the average 30 year fixed mortgage rate during that year was 5%. Now it’s 3.82%. So if you take a $150k mortgage, you’d be saving 13% on your payments or $1200 for every year you have the mortgage. Like I said, scary good. Second reason is that there are plenty of deals out there. Banks have been slow dripping their inventory onto the market and kept foreclosure sales at roughly 20% of the total. That approach extended the time it took to clear out the foreclosure inventory so in 2012 there will be plenty of bank owned homes on the market. Another factor that will contribute to this will be the supply of short sales available. Banks have somewhat streamlined the short sale approval process and that has lead to more short sales being approved in a shorter timeframe. Third, financing options are plentiful. Don’t listen to boneheaded news reports that now you need 20% down or excellent credit to purchase a home. While guidelines have tightened, you can still get a conventional mortgage with 5% down and a FHA loan with 3.5% down and the required credit score is above 640. If you want to take a look at what’s on the market, you can start your search.
If you’re considering a sale of your home, your decision will largely depend on your reasons behind the move and the local conditions in the specific neighborhood. If you’re being transferred, you may have no choice but to sell or lease and a market analysis of your home can point out which one of those makes the most sense for you. If instead you have the option to sell but no obligation, the market conditions in your neighborhood and the time (and price) when you purchased your home will determine if you should put the home on the market or hold off. Either way, a disadvantageous sale can be offset by an equally advantageous purchase in this market.