Houston home sales break records in 2018, but slowdown appears on horizon



NEXT: See the most expensive homes sold in Houston last year. The housing market shattered 2017’s record, but going into 2019, the health of the local market appears shaky.

NEXT: See the most expensive homes sold in Houston last year. The housing market shattered 2017’s record, but going into 2019, the health of the local market appears shaky. Photo: Melissa Phillip, Staff / Houston Chronicle Photo: Melissa Phillip, Staff / Houston Chronicle Image 1 of / 132 Caption Close Houston home sales break records in 2018, but slowdown appears on horizon 1 / 132 Back to Gallery

Oil prices are down, the stock market is in flux, and mortgage rates are higher. But the Houston housing market keeps chugging along.

Home sales in 2018 again shattered sales and price records, even as once white-hot markets in other parts of the country softened. Despite the lingering effects of Hurricane Harvey, rising mortgage rates and growing concerns about a slowing national economy, home sales in Houston ended the year nearly 4 percent above the previous record, set in 2017, while the median sales price climbed to $237,500, 3 percent above the previous record, the Houston Association of Realtors reported Wednesday.

The combined value of more than 82,000 homes sold last year soared to $28 billion, up more than 20 percent from 2017.

MANY REASONS WHY: Lower-end home sales tumble amid limited inventory

The region’s housing market has proved itself remarkably resilient in recent years, powering through the last oil bust with rising sales and prices with the help of a growing population, a diversifying local economy and a strong national one. But real estate analysts and agents say the record run may come to an end in 2019.

The local market remains challenged by relatively a low inventory of homes for sale, while rising mortgage rates and new tax laws that places some limits on the mortgage interest deductions and property taxes are taking some of the luster off home ownership. Already, home sales have slowed.

In December, single-family home sales were down 4.1 percent compared with the same month in 2017 — the second straight month of declining year-over-year sales, according to the Houston Realtors Association.

“When I talk to other Realtors, I think the second half of the year was really slow,” said real estate agent Shad Bogany. “Builders were telling us it was slow. Certain neighborhoods, we’re not getting any traffic at all, especially where you had resales and new homes in the same neighborhood.”

The major culprit appears to be mortgage rates. The average rate on a 30-year mortgage jumped to nearly 5 percent in 2018, from lows near 3 percent in recent years. While rates have again retreated, falling last week to 4.5 percent, experts said buyers took note of the trends.

Anticipating higher rates, they rushed to purchase homes early in the year, frontloading 2018 sales, said Patrick Jankowski, senior vice president of research for the Greater Houston Partnership,

“We’ve been spoiled with the lower rates for so long and they’re now getting to normal,” Bogany said. “Taxes are higher on your home, homeowners insurance is higher. I think people are weighing all that.”

Shannon Cobb Evans, 2019 chair of the Houston Association of Realtors, said the federal government shutdown is also adding uncertainty to the market. Thousands of federal employees in the region are going without paychecks, and could face weeks before they see another payday.

“Federal workers are on edge about the ongoing government shutdown and how that might hurt their cash flow, which could affect housing” she said in the home sales report.

In December, the decline in sales wasn’t limited to single-family homes. Townhomes and condo sales also took a hit, falling 7.8 percent from a December 2018.

Houston’s low inventory — which has led to higher prices — is also hampering sales. The inventory of single family homes for sale was up slightly in December to 3.5 months in December from 3.2 months a year ago, the HAR data show. But it’s still below the U.S. inventory now at a 3.9-month supply.

Only two segments of the market experienced increases in sales: homes in the $250,000 to $500,000 range and those in excess of $750,000.

Mike Mahslstedt, a real estate agent who concentrates on the $1 million-plus market, remains optimistic. He said buyers in the market for homes up to $3 million are more picky than they were a couple of years ago and less likely to bid up prices.

But they are still shopping and buying.

“I’ve had more showings on my River Oaks listings between $1.5 and $3 million in December and January than I’ve ever had in a December and January,” said Mahlstedt, an agent with Compass real estate firm.

nancy.sarnoff@chron.com