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Houston home sales experienced their fourth consecutive monthly decline in July. New listings slipped as well, but because sales slipped even more, inventory rose to its highest level in nearly two years. The decline has had a minimal impact on prices, though. In July of this year, the average closing price for a single-family home was nearly $40,000 more than July ’21.
Local home sales first dipped in April. The decline is accelerating as the year progresses. April ’22 sales were down 0.2 percent compared to April ’21. May sales were down 0.9 percent, June down 8.6 percent and July down 13.4 percent compared to the previous year, according to data recently released by the Houston Association of Realtors.
The trend shows no signs of abating. Pending sales fell to their second lowest level since March of ’21. Historically, sales peak in the early summer and begin to taper off in August. This suggests sales will likely continue to trend down through the remainder of the year.
New listings in July were comparable to July of last year (14,283 vs 14,400). The drop in July sales, though, lifted inventory. The 33,711 homes (single-family, duplexes, condos, and townhomes) in HAR’s database at the end of July reflects a 63.5 percent increase in listings since February, the high point this housing cycle.
With closings trending down, Houston is unlikely to set a sales record this year as it has for the past six years. Total sales for the 12 months ending in July slipped to 130,767, down from the peak of 134,189 in April.
Houston now has a 2.5-month supply of single-family homes, up from 2.0 months in June and a low of 1.3 months in March. This metric reflects how long it will take to deplete current inventory based on the prior 12 months of sales activity. That is the highest level since August of ’20 when it was 2.6 months.
Houston is moving toward a more balanced market in which neither the buyer nor the seller has the upper hand. The Partnership believes that a balanced market today is somewhere between 3.5 and 4.5 months of inventory. If the current pace of sales and new listings hold, Houston may reach that state later this year or early next year. The future path of mortgage interest rates and whether the U.S. slips into recession will also influence when the market stabilizes.
Slowing sales and rising inventories have had a minimal impact on home prices, however. The median price for a single-family home slipped $6,200 from June to July but was still $38,745 higher (12.5 percent) than July a year ago.
After surpassing the 100-percent mark for three straight months, the ‘Close to Original List Price Ratio’ for single-family homes fell to 98.9 percent in July. A reading above 100 percent signals that a majority of buyers paid above list price for homes on the market.
Prepared by Greater Houston Partnership Research
Patrick Jankowski, CERP
Senior Vice President, Research
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