You might have had to read the title of this article a second time to make sure your eyes weren't playing tricks on you. The latest MLS statistics are out and they show a 2% drop in sales for February 2011 when compared to the same month last year. While a drop in sales is usually not greeted with open arms, let's examine why this is excellent news for the Houston market.
First, in February 2010 we were still feeling some artificial inflation of the market due to the Federal First Time Buyer Tax Credit. While this incentive fueled a sharp rise in sales, it took a lot of potential buyers out of the market that were planning on purchasing later in the year. When this credit expired last year, the market instantly felt a sharp drop in sales.
The second major factor affecting the market is the much tighter lending guidelines that have been applied the last 12 months. With everything from Fannie Mae overlays, rising interest rates, minimum credit score changes and the upcoming loan officer compensation rules that will change on April 1st, buyers have felt decreasing purchasing ability.
The third contributing factor is the total number of foreclosure sales. In February 2011, there was a 16% drop in the total number of foreclosures sales. As we all know, distressed properties normally sell at a significantly lower than market price which has a negative effect on values and appraisals.
When you look at these three contributing factors it clearly shows that the market in Houston is returning to stability and our total number of sales are now a result of normal buyer demand as opposed to being artificially inflated by the Federal Tax Credit. When you mix in the tighter lending guidelines, this also implies that while it limits the purchasing power overall, the Houston market is still resilient and is headed in a positive direction.
Along with these market metrics, there are more reasons to be extremely optimistic for 2011. Our year to date sales have increased 2% and our average price has also increased 4% to $205,495. In addition, Builder Online ranked Houston #7 in Healthiest Housing Markets for 2011. They estimate that in Houston building permits will rise 30% this year along with employment growth of 2.66%.
While it is sometimes hard to interpret statistics, forecasts and reports, it is often a good idea to talk to those on the front line of the real estate market and get their opinion. When speaking with several builders and Realtors, it is apparent that the market is getting better as sales office traffic, phone calls, sales and other positive market factors have improved the last 30 days.
When you look at all these factors it paints a very accurate and optimistic outlook for 2011.
If you are looking to buy or sell real estate in Houston and need a qualified Realtor to help in your search, please contact Paul Silverman, Broker Associate at Heritage Texas Properties. You can visit his website at www.ourfirstnest.com .
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