HOUSTON – Record-setting heat coincided with a scorching real estate market in June, as low mortgage rates and tight inventory pushed home prices to new highs.
According to the Houston Association of Realtors (HAR), 13,090 properties—including single-family homes, condominiums, townhomes and vacant lots—changed hands in June, the strongest single-month sales total in Houston’s real estate history.
The sales pace accelerated dramatically. The official metric Days on Market (DOM) fell to 29 days, and agents reported homes moving quickly, often receiving multiple offers and going under contract in record time.
Many properties sold above their asking price. In nearby Austin, a smaller market, reports showed roughly 1,500 homes sold for more than $100,000 above their original listing price—an indication of how competitive the market has become regionally.
Inventory in the Houston area tightened to just a 1.5-month supply, a historically low level that seemed unimaginable before the 2021 housing surge.
One major driver of this shortage is long-term underbuilding. The National Association of Realtors estimates a nationwide deficit of about 5.5 million housing units. To address demand, the U.S. needs roughly 2 million single-family homes and 3.5 million multifamily units built as soon as possible; NAR has urged lawmakers to consider housing supply in infrastructure planning.
Large institutional buyers have also been increasing their presence. The Blackstone Group recently agreed to pay $6 billion in cash to acquire Home Partners of America, which owns roughly 17,000 single-family rental homes nationwide, signaling intensified investor competition for housing stock.
Newly built homes are being absorbed by the expanding build-to-rent sector, and smaller “mom-and-pop” investors remain active purchasers as well.
“The Houston housing market is in overdrive right now, and we know anecdotally that out-of-town investors have contributed to the frenzy,” said HAR Chairman Richard Miranda of Keller Williams Platinum. “We saw similar investment activity after Hurricane Harvey, and within a few months, the market stabilized. We expect stability to return this time around, so anyone in the market for a home who is frustrated by current market conditions needs to be patient.”
Realtors had warned that limited inventory would curb sales growth, but that expectation has not materialized—at least not yet.
June marked the market’s thirteenth consecutive month of year-over-year gains in sales. On a year-to-date basis, home transactions are 25.9 percent ahead of 2020’s record pace. With that substantial lead, Houston Realtors are on track for another record-setting year in 2021.
Dollar volume also surged: June sales totaled a record $4.8 billion, a 43 percent increase over June of the previous year, which itself was an unusually strong month despite the impacts of COVID-19.
Single-family home sales rose 13.6 percent from last June, with 10,638 closings compared to 9,362 a year earlier. The average price for single-family homes climbed 23.7 percent to $395,316, while the median price increased 20 percent to $314,500.
Eventually, accelerating prices—not inventory alone—are likely to slow the market. Even with mortgage rates near 3 percent, large price gains increasingly exclude entry-level buyers. Many millennials are entering the market for the first time without equity from a previous sale, so double-digit price appreciation creates a significant affordability barrier.
There are signs nationwide that sales momentum may be moderating, and with recent rapid price increases, a return to more normal market conditions in Houston could follow.
July 15, 2021 Realty News Report. Copyright 2021.
For more about Texas real estate, see the book Houston 2020: America’s Boom Town – An Extreme Close Up by Ralph Bivins. Available on Amazon.
Houston 2020 Ebook version: https://tinyurl.com/4xm7z8b5
Photo credit: Ralph Bivins, Realty News Report. Copyright 2021.