March seems like an eternity ago, but the Houston real estate numbers coming in now are finally starting to give us a glimpse into the impact of Covid-19 on both home sales and home prices in the early part of the year. However, buyers have been resilient in recent weeks. The market appears to be relatively stable and pending sales bounced back dramatically over the last 2 months.
As we’ve stated before, in a volatile market, pending sales are one of the best indicators we have to track the short term trajectory of the market. Based on Houston MLS data, pending sales in Harris County have dramatically rebounded since the beginning of April. Based on current numbers, the year to date pending sales are only off about 3% from 2019. This bounce-back in sales seems to be driven in large part by mortgage rates near historic lows and increased demand from home shoppers looking for a little more space to social distance.
According to the Houston Association of Realtors, single-family home sales across greater Houston totaled 6,671 single-family homes sold in May compared to 8,359 a year ago. This represents the second straight month of decline in single-family home sales.
After showing signs of resilience in April 2020, the average home price dipped in May. According to HAR, lower sales activity in the luxury home market drove much of this decline. Median home prices were statistically flat, thanks in large part to demand for mid-market properties. The single-family home average price dropped 7.4 percent to $298,199. Median home prices dropped by only 0.4 percent to $249,000. The last time home prices saw declines was January 2018.
According to HAR, total active listings, or the total number of available properties, were down 8.3 percent from May of last year. Sales of all property types totaled 7,917, down 20.7 percent from May 2019. As a result, the absorption rate for May 2020 was down to 20% from the 23% rate we saw in May of 2019 for all property types. We have to go all the way back to 2012 to find a lower absorption rate for May.
Days on Market (DOM), or the number of days it took the average home to sell, was flat from last month at 58 days. Due to a slowdown in new listings, single-family homes inventory continued to fall, with 3.5-months supply in May versus 4.1-months a year earlier. For perspective, housing inventory across the U.S. stands at a 4.1-months supply, according to the most recent report from the National Association of Realtors (NAR).
Although the real estate market in Houston has seen a slowdown due to the impact of Covid-19, the recent activity shows some great signs for optimism. Low inventory levels appear to be helping to stabilize prices.
As many prospective home buyers continue to wait on the sidelines for a more buyer-friendly market, it may never come to some sub-markets. With interest rates nearing all-time lows, it might actually make sense for some home buyers to evaluate their options in the shorter term. Check out our article titled, Is a Buyer’s Market coming to Houston?, to take a deeper dive into this topic.
For home sellers, recent pending sales activity certainly confirms that if you’re looking to sell this year, you should probably evaluate your options now.
As always, these decisions are very individual and local so make sure you discuss your options with a professional in your area.