Houston home sales continued to shine in May. Single-family home sales were up 11 percent compared to last year. Katy Texas home sales were flat for the month. The median price of a home sold in May hit a new all-time high of $235,000, while the average price of a Houston home was near a record at $302,362. Active listings were up 16.4 percent compared to May 2016. New home sales in Houston rose 4 percent year-over-year while new home sales dropped 14 percent in the Katy area.
More inventory on the market in Houston has been a key factor so far this year as global liquidity looks for a place to call home. This dynamic has helped to levitate Houston home sales through the first half of 2017. Lower interest rates are also helping the picture. I was receiving quotes as low as 3.625 percent this week.
The residential lease market showed a dramatic increase in volume, with closed leases of single-family homes rising 31 percent even as the average rent fell 4.2 percent from last year. Leases of condos shot up 46 percent in May even as the average rent fell 6.7 percent. Rents in the Katy area continue to be near cycle lows because that “strong demand” that local real estate pundits keep referencing is really more a strong search for affordability.
Looking at the distribution of actual sales during the month of May, that global liquidity play is easy to see. How did Houston manage an eleven percent rise in total home sales during the month? A 27.6 percent rise in luxury sales priced at $750,000 more helps explain the “strong demand”. These aren’t your garden variety Houstonians we are talking about. These are one percenters parking wealth in today’s bifurcated housing market. This has most definitely been a driver for Houston home sales so far this year. It’s also not sustainable. Just take a look at Houston’s average and median family wages if you want more clarification.
Stretching out to the burbs here in Katy, we can see a more stagnant housing market where prices are struggling to reach back up to that 2014 peak when oil prices tanked.
This week we saw WTI crude prices drop below $45 per barrel as surging supply meets weak global demand. Amusingly enough we also saw the Federal Reserve raise interest rates again even in the face of glaringly weak economic data. Even as the FOMC hiked rates by 25 basis points, real Treasury yields actually fell. Mortgage interest rates are now at 8-month lows. You couldn’t get a clearer picture that the Fed has lost all credibility if you tried.
But don’t take my word for it. Ask someone who has worked inside the Fed and seen the credibility gap first-hand. She understands how the Fed’s asset price distortions have manifested in the U.S. housing market.
“Despite what the realtors tell you, there will be ramifications that emanate from the largest age cohort in America failing to fulfill their designated role as first-time homebuyers in the current recovery. Millennials’ power-in-numbers will force the closure of the price gap between entry-level, move-up-to-after-second-child-born, and die-in homes. “ Danielle DiMartino Booth