| Days of spiking home prices might have reached ceiling: Sales of cheaper dwellings could be contributing
By Nancy Sarnoff
Houston Chronicle, November 19, 2004
New jobs and still low interest rates are pushing sales of Houston homes toward another record year.
But while the number of sales are up, the median price of a used home has slipped. And to some experts, that means the days of appreciation are over for now.
In the third quarter of this year, the median price for an existing home in Houston was $137,500, a 1.2 percent drop from the same quarter in 2003, according to the National Association of Realtors.
At first blush, the decline seems small. Especially when it could simply reflect the fact that more lower priced homes were sold here in the third quarter than during the same period last year.
But Frank Lucco, president of real estate appraisal and consulting firm Frank J. Lucco & Associates, said the median price decline is a sign of things to come.
While Houston saw high appreciation gains earlier in the decade, new construction over the past couple of years has kept home prices flat.
"There's an overabundance of properties for sale," said Lucco.
In far-out neighborhoods like Kingwood, Cinco Ranch and The Woodlands, Lucco said, some owners are having trouble selling for a premium over what they paid for homes they've owned for a few years.
"It's hard to sell a house for a profit," he said. "The outlying suburbs are being beat up by new homes."
But that's not stopping buyers in Houston, where housing costs are significantly less than in other big cities.
The national median price is $188,500, 37 percent higher than in Houston.
The median price is the point at which half the homes sold for more and half sold for less.
"We're still the most affordable major metropolitan city across the country," said Lucco. "That's one of the things that has helped us continue to grow."
The median price for single-family homes in October alone was $133,800, 3 percent higher than the same month last year. The quarterly number is noted because the three-month time period helps smooth out seasonal fluctuations.
Property sales at record
The number of total property sales last month reached 5,741, representing the highest number of sales ever recorded in Houston for the month of October, according to the Houston Association of Realtors.
So far this year, 60,334 homes listed on the association's Multiple Listing Service have sold, a gain of more than 9 percent from the same period in 2003.
But Lucco said it's important to watch the widening gap between home sales and active listings, which has been creeping up.
"As those two start to spread further apart, it has a direct negative impact on appreciation," Lucco said.
According to the association, there were 43,243 used homes on the market in October-up almost 12 percent from the same time last year.
Jobs coming into town
Ted Jones, chairman of the Houston Association of Realtors and Stewart Title's chief economist, said the prospect of more new jobs will help reduce that backlog.
An October report from the Texas Workforce Commission said the Houston area added 27,700 jobs during the past 12 months.
University of Houston economist Barton Smith predicted that 55,000 more jobs will be created next year.
"A lot of people a year ago that couldn't buy a home can potentially buy a home today," Jones said.
Low interest rates are what's driving much of the increased sales.
This week, the 30-year fixed-rate mortgage fell to 5.74 percent, according to Freddie Mac. This time last year, the rate averaged 6.03 percent.
"That portends continued strength in the housing sector," said Jones.
More Hispanics buying
Home sales have been up in part to an emerging Hispanic market, said Jim See, division president of Richmond American Homes.
"We've learned how to qualify them better," said See, whose company started building here last year.
But easier qualifications can be a double-edged sword.
Some of those buyers are now facing foreclosure.
In Harris County last month, 1,700 homes were posted for foreclosure, double from what it was a couple years ago, said Lucco.
"A lot of people bought houses without a lot of money down, taxes have escalated, and they haven't gotten that kind of raise," he said. "We're seeing foreclosures of houses only two, three or four years old."
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