Real Estate Outlook: End-of-Year 2015

Setting: Single-family home sales decrease by over 10% for two consecutive months starting in October. There is a generalized sense of slowdown in activity, particularly in new construction. While conditions in the high-end, close-in segments are favorable for buyers at this time, buyers have not been quick to seize these conditions and submit offers. Meanwhile, Boulevard Realty has grown to obtain a considerable share of the inner loop SFH market, firmly remaining in the top 10 listing firms in Areas 9,16,17 throughout this year.

The headlines of Houston real estate have finally taken a stark tone, a departure from the defiant optimism of earlier this year. While there has been general consensus since last year that the market was headed toward normalization and that gradual downturns were to be expected, the negative side effects of this correction have hit some harder than others: namely, the $500s+ price segments in the inner loop. While the balancing of the market is finally appreciable across all of Houston, in these particular segments there is arguably an overcorrection favoring the buyer’s side. In other words, the huge gains in inventory have not yielded commensurate increases in sales.

The perhaps overly cautious response to this scenario has been the buyer’s unnatural pause in seizing these market conditions, which is prolonging the discomfort of the adjustment. This is strongly indicated by a decrease in showing activity (discussed below). While historically the number of pending sales has been a way to project the duration of a slump, unfortunately the shift in pending sales continues to be indecipherable due to changes in HAR’s reporting methodology for pending sales, and these figures will remain unreliable on a monthly basis until next spring. Though average and median prices rose briefly in October to record highs for that month, average prices in November then saw a 3% drop, so there is ultimately not much to conclude from these figures.

The general take on the Houston market currently after back-to-back decreases in single-family home sales is that:

  • “The onset of the holiday shopping season and continued strains within the energy industry weighed on Houston’s housing market in November. Homes sales fell for the second consecutive month and dragged average price down with them....” (HAR Press Release, December 2015)

  • “Real estate agents say would-be buyers appear to be spooked by the flailing energy industry and the job losses that have followed.” (Home sales plunge in October as pool of buyers shrinks, Houston Chronicle, November 12, 2015)

  • “Houston home sales fell more than 10 percent in November as the impact of falling oil prices and the softness in the local economy pinched the realty market.” It finally happened: Houston home sales plummet, ending long winning streak, CultureMap, December 9, 2015)

  • “Evidence mounted Wednesday that crude oil's stubborn slump is chilling the economy, with local Realtors reporting the most severe back-to-back declines in home sales in four years...” Housing, sales tax receipts point to continued slowdown, Houston Chronicle, December 9, 2015)

This generally sober take on the slowdown in sales is usually accompanied by a tinge of optimism that inventory levels, which hover at 3.4 months of inventory city-wide (compared to the national supply of 4.8 MOI), will more or less sustain the status quo even as the buyer pool retracts for now. While this is not necessarily a cavalier attitude, a closer examination of Houston’s inner loop market and its predominating price segments reveals a somewhat different outlook.

The Inner Loop Reality of Oversupply

If the consecutive 10%+ declines in SFH sales is considered significant enough to signal a market shift and the 3.4 MOI is meant to indicate that greater Houston is not too far out of the seller’s market, consider these numbers specifically looking at SFHs in Areas 9,16,17 in October:

  • Area 9: Sales were down 28%, DOM were up 32%, MOI are up 62% over last year to 5.5, and average price dropped by 8.6% to $369,450. YTD sales are down 8%, DOM are up 13% to 53, MOI are up 71% to 4.8, and prices are up by 8% at $428,071.

  • Area 16: Sales were down 21%, DOM were also down 17%, MOI are up 82% to 6.9, and average price is down by 4% to $785,336. YTD sales are down 18%, DOMs are up 9% to 62, MOI are up 63% to 5.7, and prices are up 6.5% to $796,628.

  • Area 17: Sales were up 7% following a 22% drop in October, DOM were down 7%, MOI are up 52% to 4.2, and average price is down by less than 1%. YTD sales are up 2.6%, DOM is up 9.5% to 46, MOI is up 70% to 3.9, while average price is up 6% to $921,521.

While these are all interesting figures, what stands out most is the continued and drastic growth of inventory in each area. This is not only a geographic proclivity in areas 9,16, and 17, but market-wide characterize the high-end pricing segments that predominate the SFH market in the inner loop:


MOI 10/14

MOI 10/15

% change

































Inventory gains should come as no surprise. We expected the record-setting construction permitting of 2014 to lead to huge increases in housing supply throughout this year. What we may not have anticipated is the oversupply of both new and resale high-end inventory to coincide with generalized uncertainty about the economy, which would have affected buyer behavior either way. In fact, in the month of October, new construction active listings were up about 20% in all of Houston compared to last year. Suffice it to say that there is now an inventory imbalance in new construction and in the higher end.

Another Houston Chronicle headline from last month captured our sentiments plainly: Homebuyers appear to be in waiting game. Largely drawing from Metrostudy survey data from builders, the article echos what most realtors and builders had come to terms with already this year, “The buying process has elongated for the buyers out there today,” stated one builder. “There’s competition. There are choices. There’s opportunity out there for buyers. They’re seeing the headlines of what’s going to happen in Houston and oil prices. They’re thinking, are they better off waiting or pulling the trigger?” Unfortunately, this skittishness doesn’t end with an accepted contract, as Metrostudy’s data also shows that the average cancellation rate jumped to 26% in September.

In short, the 3.4 MOI supplying all of Houston may still technically constitute a shortage, but in the inner loop there is arguably oversupply, especially in the high-end market and in new construction. Therefore, the buyer hesitation that is currently widespread can reasonably be expected to last well into next year in the $500s+ market in Areas 9,16,17, as there is simply too much inventory competing for their attention.

Showing Data

The general acknowledgement that there is pause in the marketplace isn’t only indicated by sales, but is even more striking in the available showing data. Based on our own analysis of available HAR showing data for single-family homes, here are some snapshots:

This chart and the one below shows not the average number of showings per listing, but rather the the ratio of all showing activity against all listings. Market-wide in 2014, on average there were .62 showings for every listing. In the inner loop, there were on average 2.7 showings for every listing. On average, Area 9 buyers sought less showings at a ratio of 1.16 showings for every listing, while the discerning buyers in Areas 16 & 17 demanded an average of 4.68 and 4.65 showings for every listing, respectively. This illustrates, as expected, lots of showing activity during the busy spring selling season with drops in the fall.

This chart most remarkably shows that 2015 has been characterized by less gross showing activity than the year before. Whereas the busy spring selling season of 2014 yielded 3.17-3.82 showings for every listing in the inner loop, the same period in 2015 yielded only 2.32-2.6. Averages throughout the year also showed significant drops in the inner loop and broken out by close-in areas:



Inner Loop

Area 9

Area 16

Area 17

2014 Avg.






2015 Avg.






% change






It  may go without saying that a slowdown in the market as indicated by sales would also be characterized by a slowdown in showings, but considering the huge inventory gains this year, it is a borderline demoralizing macro picture for the seller.

This shows that there were incremental gains in inner loop inventory throughout last year and that the number of showings was relatively stable in the second half of the year.

This shows that as there have been continued gains in  inventory throughout this year, the gross number of showings is more or less the same as in 2014. Far more offerings on the table, the same amount of buyer activity.

Summary & Outlook

We center our discussion around the inner loop, which we define as areas 9, 16, and 17 because it is where Boulevard Realty has the largest share of production. These areas in particular have had gains in inventory that will more than sustain the demand for the foreseeable future, especially in light of the downturn in relocation and job creation in Houston. After adding more than 120,000 jobs in 2014, Houston will create close to zero net jobs in 2015, according to the Federal Reserve Bank in Dallas. Slowdowns market-wide also mean that there is less migration from Houston’s outer areas to the inner loop as those potential close-in buyers have difficulty selling their suburban properties.

Fortunately, we can reasonably expect the segmental oversupply to taper off. New residential permits by the City of Houston were down 66% year-over-year in September, though they did jump again by 22% in October. A stalled economy for at least part of 2016 will not necessarily mean that demand for housing will drop, but that the demand for housing at higher price points will. The GHP is quite measured in their thoughts on this: “What Houstonians actually face is a limited supply of affordable housing in close-in neighborhoods, not a dearth of affordable housing altogether...Even with a weakened economy, Houston’s population growth will continue: conservative projections expect the region to add another million residents over the next 10 years. Those new residents will need both apartments and single-family homes.”

Slowly but surely, prices in the most desirable areas are reflecting the softened demand, as indicated by the earlier statistics. Prices may be the crux for keeping the ball rolling to any extent in the inner loop market, and action will be required on the part of both buyers and sellers. Buyers will need to act at some point in submitting offers of any amount to send a clear message to seller about their market value. Sellers will need to realize that there is simply too much competition to continue to be bold in their pricing. Builders will need to delay starts, buy less land, and build more affordable product.As trusted advisors, we must set more reasonable expectations for our sellers in both pricing and when to enter the market.

Here is an excerpt from our editorial in the winter issue of Heights Pages magazine:

What we all have in common now is uncertainty, and I believe it will take a fair amount of time to get past this uncertainty. Rather than wonder if the market is strongest in your favor when it comes to buying, ask yourself if that outweighs the desire (or need) for more space, a better neighborhood, or a higher quality of life. On the selling side, rather than wonder if you can still capitalize on the seller’s market of years past, ask yourself if pushing the market price-wise is worth the waiting game on the market or the ability to simply move on in life.

As the market rebalances in 2016, the only way to assure any outcome is to act so that you find yourself at the negotiation table. Those one-on-one moments where we have the ability to reconcile each of our needs, perceptions, and values on a personal level are what ultimately lead to that same sense of calm in the marketplace, not the other way around. With an experienced local realtor as a trusted advisor, you’ll ultimately find that the market cannot assign a value to peace of mind.

So, how do you think the real estate market is doing? And what can a Boulevard Realty agent do to help?


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