Home prices continue rising

Despite the ongoing trend of slow home sales in the Houston real estate market in the month of December, the Houston Association of Realtors says the continued strength of home prices is an optimistic sign.

According to the report, there were just over 5,100 home sales in the city last month, down 3 percent compared to December of last year. However, that difference is the smallest seen since the expiration of the first-time homebuyer tax credit over the summer.

The region's average and median home prices continued to grow, reaching their highest-ever levels for the month of December. According to the report, the median sales price during the month was $157,500, while the average was more than $221,000. Those improved pricing numbers left analysts optimistic about the upcoming year.

"We need to carefully watch how the Houston real estate market performs over the next couple of months before being able to truly determine how 2011 might pan out, but the December report contains encouraging signs," said Carlos P. Bujosa, HAR chairman.

Houston foreclosures continued to make up a significant part of the real estate market, as they made up 20.1 percent of December home sales, roughly the same percentage as the past few months.

The city's housing inventory also continued to be relatively healthy, dropping from 7.6 months in November to just 7.2 months in December, which compares favorably to the oversupplied national market, which has 9.5 months of properties.

The market is also waiting to see if many families currently renting Houston homes may soon move back toward buying, tempted by the affordable climate. According to the HAR, demand for single-family, condominium and townhouse rentals is up more than 25 percent compared to last year.

"A slowdown in declining sales and improvement in pending sales bode well for real estate, however rising oil prices and concerns about the employment landscape are also factors to consider as we look ahead," said Bujosa. "Mortgage interest rates are edging up, and that might spur prospective homebuyers into making purchases earlier in the year."

However, interest rates have remained low to start the year after bouncing up from the record lows of late 2010, although most analysts predict they will end the year higher. According to Freddie Mac, the average interest rate for a 30-year fixed-rate loan was 4.71 percent, a four-week low.