Home sales remain strong, but signs of easing emerge

Houston-area home prices were flat last month and the supply of houses for sale reached a five-year high, signs the city's real estate market is rebalancing after recent record-setting months.

While experts say Houston housing is still in good shape, some neighborhoods where housing activity was once red hot are cooling.

A local housing report released Wednesday noted a slowdown in outlying areas like The Woodlands and Cypress.

In The Woodlands, it's a "buyer's market" for properties priced at more than $500,000, a report from Ken Brand, sales manager of Better Homes and Gardens Real Estate Better Homes Gary Greene, concluded.

Inventory in the master-planned suburb is up 9.4 percent over last year and half of the listings have had at least one price reduction.

"There's still a lot of activity happening up there ... but you had that push from Exxon moving up there many years ago and now it's more stabilized," said Chaille Ralph, president of Heritage Texas Properties and former chair of the Houston Association of Realtors.

Ralph said the Houston market remains healthy, but it's shifting away from the strong seller's market that's characterized it for many years.

Buyers closed on 7,440 single-family homes in July, a 5 percent increase over last year, but down from two years ago, the realty association said in a monthly report released Wednesday. Year-to-date, sales are 6.8 percent ahead of last year's volume.

Sales were up across most price points in July, with the most expensive homes seeing the biggest gains. Sales of homes priced $750,000 and above were up nearly 20 percent in July, the ninth straight increase in sales of single-family properties in that category.

But those highest-end sales account for just 4 percent of the regional total. The market's median price was $230,000 in July, flat from the previous year.

A positive sign for shoppers is a steadily growing supply of homes for sale.

Inventory for single-family homes reached 4.5 months, the highest level in five years, as the number of properties for sale jumped 16.7 percent from a year ago.

Cost is 'too much'

That still doesn't help William Elser, who is renting a single-family house inside Loop 610 for his family of four because he doesn't want a long commute and can't afford to buy near his job downtown.

"The cost of housing is too much," said Elser, who works in development for the Hines real estate firm but has an accounting background.

He said his rental house is worth about $800,000 but he's paying a lot less than what he estimates it would take to pay the mortgage on it, along with taxes, insurance, maintenance and other costs.

When his family and friends tell him he's throwing money away on rent, he politely disagrees. He's investing some of the money he's not putting into home ownership.

"The investment I'm getting with that money is roughly equal to or better than my house would have otherwise appreciated," Elser said.

He says he's not against owning a house, but he just can't afford the neighborhood he wants to be in.

"I'm a renter by necessity because I refuse to live out in Sugar Land, The Woodlands or Katy and drive in," he said. "I don't think my heart could take that for more than a few weeks. I'm not the most patient person in the car."

This area was recently named one of four large housing markets in the country considered overvalued.

Data from Irvine, Calif.-based CoreLogic showed Houston's home prices are at least 10 percent higher than their long-term, sustainable level, which is determined by incomes and other fundamentals.

"Home prices are marching ever higher, up almost 50 percent since the trough in March 2011. With no end to the escalation in sight, affordability is rapidly deteriorating nationally and especially in some key markets such as Denver, Houston, Miami and Washington," CoreLogic CEO Frank Martell said in the August report.

"While low mortgage rates are keeping the market affordable from a monthly payment perspective, affordability will likely become a much bigger challenge in the years ahead until the industry resolves the housing supply challenge."

Rents are falling

Demand in Houston for single-family rentals was up 15.6 percent in July, with the average rent falling 3.2 percent to $1,815, according to the realty association.

Wayne Meyer, general manager of Firethorne, a master-planned community in Katy, said he's hearing sluggish reports from builders concerned about the local job market.

"All the builders I've talked to are all saying same thing," Meyer said. "Sales are slow, they see slow job growth and a lot of that is affecting home sales obviously."

In previous oil-related slumps, he said, energy companies would bring back many of the employees they had sent to other places. Those energy workers generated a lot of home sales.

"That's not happening this time," Meyer said.

Yet Meyer is cautious about painting too negative of a picture. While activity is slower, he said, the market has simply moderated from being overheated.

"The market in Houston has been so high for so long people forgot what a normal market is like," he said. "We're getting back to being normal."