Houston Texas homes were flying off the shelf in March as buyers showed no slights of slowing down even with slightly higher mortgage rates compared to last year. Houston saw an eleven percent increase in home sales activity, and some areas like Katy Texas eclipsed that with a 15 percent rise in sales volume. Houston luxury homes sales ($750,000 and above) posted a 5th consecutive month of sales gains as the post-election trade continued to boost sales of expensive homes which jumped 19 percent compared to last year.
The median price of a single-family home sold in Houston climbed to a March high of $227,530. The average price of a home sold in March jumped to $284,279.
The Houston Texas lease market experienced a large jump in activity in March. Single-family lease activity spiked 36 percent while leases of townhomes jumped 38 percent. While the volume of leases during March was impressive, the rents received continued to show deteriorating fundamentals. As you can see from the charts below, the Houston Texas lease market is still saturated. This is manifesting in lower real rents received by landlords, even as the property taxes on those properties continues to rise.
While the local real estate board seems to be enthusiastic about the continued strength of luxury homes, it is important to remember that the median and average salaries of most Houston residents are not even remotely sufficient to support these levels of prices. The recent bump in luxury home sales in Houston looks more and more like stock market gains making their way into Houston area trophy properties.
To get an idea of who benefits from this luxury home price levitation and speculation, it helps to know that some local Realtors are now concerned about the future of the EB-5 foreign “investor” program, the fraud-laden program that has benefited Realtors and developers across the U.S. As I have previously written Houston developers have openly stated that they are marketing their newest uber-expensive projects to these foreign “investors”, with some even receiving government subsidies in the process.
March home sales in Houston were surprisingly good, and hopefully that trend will continue into the busy summer selling season. The larger macro trend, however, remains intact as we look toward the end of the latest economic cycle. The Federal Reserve may believe their own forecasts, but that doesn’t mean you have to be fooled by the illusion of liquidity. The post-election exuberance of markets in general continues to fade into the reality of extremely weak economic growth in the face of massive debt overhangs.
Houston Texas home prices are still experiencing a top-down compression, particularly when you look beyond those foreign “investors” and consider the people who actually live and work in Houston. Outside of some “hot” sub-markets, luxury home price reductions are still plentiful. That’s because wage growth of most Houston residents has not been sufficient to support elevated home prices.
I remain skeptical that the Fed will be able to manage this latest echo-bubble in real estate. I also happen to agree with Lacy Hunt when he says that the secular low in bond yields is yet to come. The Fed has been able to levitate asset prices far longer than many expected, myself included. That being said, their juggling act is getting ever more precarious as the laws of gravity grow heavier on the bubbles they have blown.