Houston Housing Market Has Very Strong Sales In March

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Houston Housing Market Has Very Strong Sales In March

Houston Housing Market Has Very Strong Sales In March by Todd Sullivan, ValuePlays

Supply, supply, supply. Right now it stands at 2.8mos, well below the 4.6mos national average.  As long as it stays this low, pressure on pricing will remain upward.  The drop in oil prices, which was supposed to collapse the Houston housing market has barely even managed to slow it down.

Folks comparing the 1980’s oil price declines and their subsequent effect on housing with today carelessly (or intentionally) omitted Houston’s experience during the 2008-’10 oil price collapse which saw rising prices. Further, both of those previous event saw Houston entering them with monthly supply of homes >6mos vs the miniscule number it stands at today.

I’ve said for some time now that unless we see oil fall into the $40’s for a prolonged period (12-18mos) Howard Hughes will see little effect from oil. Oil now sits in the mid $50’s and when Howard Hughes releases Q1 results, I expect more significant YOY gains just as we saw when FY 2014 results were released.

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Here is the thesis in more detail: Harbor 2-11

Note the surge in sales in the mid to upper price ranges that Howard Hughes sells homes in

HOUSTON (April 8, 2015) After February’s decline in sales volume, Houston home sales returned to positive territory in March, with consumers buying newly listed homes before they ever had a chance to replenish the local housing supply. Sales of single-family homes rose 3.8 percent year-over-year in March, with most activity taking place among homes priced between $250,000 and $500,000. The high end of the market also had a gain after experiencing its first decline in many months in February.

March single-family home sales totaled 6,232 units compared to 6,005 a year earlier, according to the latest monthly report prepared by the Houston Association of Realtors (HAR). Buyer demand offset a 7.3 percent increase in new listings, keeping inventory levels down. Months of inventory, the estimated time it would take to deplete the current active housing inventory based on the previous 12 months of sales, increased only fractionally to a 2.8-months supply. That remains well below the current national supply of 4.6 months of inventory.

Home prices achieved record highs for a March. The average price of a single-family home rose 6.5 percent year-over-year to $276,837. The median price—the figure at which half the homes sold for more and half for less—jumped 8.9 percent to $208,000.

March sales of all property types totaled 7,564 units, up 3.6 percent compared to the same month last year. Total dollar volume increased 9.0 percent to $1.9 billion versus $1.8 billion a year earlier.

“It was great to have sales back in the black in March after February’s decline, but in order to satisfy the long-term needs of the Houston housing market, we need to see substantive growth in inventory levels, which remain at record lows,” said HAR Chair Nancy Furst with Berkshire Hathaway HomeServices Anderson Properties. “It could take the remainder of this year to begin approaching what we consider a ‘balanced market,’ which is typically a five- to six-month supply of homes.”

March Monthly Market Comparison

The Houston housing market grew in all categories in March, with single-family home sales, total property sales, total dollar volume and pricing all up compared to March 2014.

Month-end pending sales for all property types totaled 6,004, a 30.6 percent increase versus one year earlier. Active listings, or the number of available properties, at the end of March rose 1.5 percent to 28,507. New listings totaled 9,389, an increase of 7.3 percent. However, the pace of home buying prevented those new listings from replenishing inventory levels.

Houston’s housing inventory grew only slightly in March to a 2.8-months supply versus the 2.6-months supply of a year earlier. According to the National Association of Realtors, the current supply of homes nationally stands at a more robust 4.6-months supply.

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Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a RealMoney.com contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.

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