Just over a month ago, 2008 came to an end as one of the choppiest years for the real estate market in at least two decades. Across the country, markets were hit with slow sales and falling prices with some areas in the West dropping as much as 30%. News media outlets latched on to the national data and milked it for all it was worth, arguably making it much worse by further frightening buyers that were already feeling uncertain. There was no effort whatsoever, to parse the data and point out markets that were actually doing well - relatively speaking. Instead, we had two equally stubborn extremes: Skewed catastrophic reports from newsmedia and stubborn boneheaded cliches from Associations of Realtors.

Now the numbers for the Houston Real Estate market are out and I’d like to give you the straight story without any coating - sugar or otherwise.

The Bad News

During 2008, Realtors sold a total of 69,220 single family homes which represents a drop of 17.3% drop over 2007. That is, 14,516 fewer homes were sold in 2008 when compared with the year before. The reasons that justify this drop are several and well known: Tightening credit markets and lending guidelines, loss of employment and overall uncertainty about the economy kept buyers from pursuing and purchasing homes. Further, Hurricane Ike put the brakes on the  entire real estate establishment in the Greater Houston Area for at least four weeks. It also caused a large number of sales to fall through due to hurricane damage. When it comes to total number of transactions, virtually every market in the country suffered a drop over 2007.

The Good News

The average sales price during 2008 actually rose by about 1% (to $208,266) over 2007 while the median sales price remained unchanged at $152,000. You won’t find this story in the Chronicle because this is very positive news and they’re not in THAT business. In a nutshell, this means that while it would be normal for prices to come under pressure during periods of slower sales, not only did home prices in the Houston area NOT drop - they actually rose. This makes a lot of sense, if you think about it. We did not experience the rampant post Y2K appreciation that states like California, Arizona and Florida went through. In other words, if prices didn’t rise aggressively, they will not fall aggresively either.

Inventory

At the end of December 2008, the months of inventory was at 5.7 months - in other words, it would take 5.7 months to deplete the current inventory based on past 12 months sales (by comparison, certain markets in Florida are looking at 20+ months of inventory). This number is also down from December 2007 - a positive sign that shows the Houston Real Estate market is trending toward being more balanced after spending most of 2008 in  Buyer’s Market territory.

Looking forward

In my opinion, the Houston Real Estate market (and other similar markets) will begin to rebound during the last quarter of 2009. Stronger sales will be fueled by home buyer incentives in the stimulus bill, looser Fannie Mae credit restrictions for investors and more fluid credit markets overall. With a stronger push in the sales territory, prices should remain stable if not experience  mild appreciation.

As a consumer, you have the right to truthful information, not agenda driven spin. I hope to have provided some insight into the realistic conditions within the Houston Real Estate market.

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