If you are currently a Buyer, especially in Memorial or Inside Loop 610, you have practical knowledge of what Houston’s historically low inventory of homes really means. Most of us have been involved where Buyers descend upon a new listing like a swarm of locusts. When the sky clears, there are multiple offers (I had one case of 15 offers) and a sales price well over list price. To illustrate the effect upon prices, the number of single family homes sold in February increased 8.4% over February 2013. At the same time the dollar volume increased 21.9%!
I thought you would like an explanation of just how low is the inventory. While I can explain the numbers, I have no prescription for how we move to a more stable, sustainable market.
The graphic above demonstrates better than words how far the inventory of single family homes has fallen. In May 2011 the inventory of single family homes was 33,111 at the end of February the inventory was 15,870, a 52% decline. With a decline in inventory occurring while sales increased, the decline measured in months, the industry measure, was even more dramatic. During this same period, the annual rate of sales increased from 50,065 in May 2011 to 73,685 in February 2014, a 47% increase. The result is that in May 2011 there was 7.94 months inventory and at the end of February, single family inventory stood at 2.58 months.
Currently West University/Southside Place has an inventory of 1.2 months, an exceptionally low level. What this means is over the past 12 months 272 single family homes have been sold in that area and currently there are only 28 homes on the market. Tighter still is the inventory of homes priced between $1.0 and $1.25 million. In the past 12 months 48 such homes have been sold and currently 4 are on the market.
River Oaks/Avalon has seen some increase in inventory. Currently the inventory stands at 5.0 months. For homes priced under $2.0 million, the inventory is 2.3 months. This is a significant improvement since May, 2013. At that time River Oaks/Avalon inventory under $2.0 million stood at 0.5 months.
For Buyers in certain price ranges, the answer may be to look at new construction. While total inventory in Houston is 2.58 months, inventory of New Construction homes sold through MLS is 4.0 months. Since builders only place a limited number of their homes on MLS, real new construction inventory is probably closer to 6 months. New construction prices have increased and builders are holding to their asking price. However, seldom are we seeing multiple offers and bidding wars for new construction. I will post more about the New Construction market in a future post.
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