Real Estate Update: Houston, TX
Home prices in Houston continue to rise as the housing market shows steady improvement. The first quarter of 2013 shows an incredible run on year over year statistics, which defines the housing market and how it is shaped. The rise in prices and lower inventories clearly show that the mortgage crisis of 2007-2012 has disappeared. The economic strength of the city continues to remain stronger than other major metropolitan areas throughout the U.S. The demand for new homes in the city continues to remain high and the area is continually turning into a sellerâ€™s market.
The Current Rise in Home Prices
Rising home prices is a great indicator of a sustained housing recovery. This has a trickle-down effect on the Houston economy as rising demand leads to increased supply, therefore creating much needed construction jobs. As a whole, the entire nation saw a 12.1 percent price increase for April 2013 as compared to the beginning of the housing crisis in April 2012. Another key indicator shows that housing inventories (the number of available homes currently for sale) is down nearly 14 percent nationwide, while inventories in Houston remain stable. As of now, local housing supplies across Houston stand at 3.4 months of inventory, which is a record low.
Record Price Levels and Supply and Demand in Action
Houston home prices currently stand at record price levels for the month of April. High demand and low inventories drove the home prices to this record high and the demand by investors remains strong. Investors are creating a home-buying bonanza in Houston which will sustain the record home prices and possibly move the prices to even higher highs. The trend clearly shows how supply and demand work, as the higher the demand on a good or service with low supply illustrates why prices remain high. However, with the strong housing market and record prices, there could be negative consequences in the not too distant future.
Final Thoughts on the Houston Housing Market
Some experts believe that the housing boom in the Houston area could lead to a housing bubble and a possible housing crisis. With demand far exceeding supply, some investors or home buyers may start purchasing homes that are worth far more than their actual value. This could lead to a mortgage trap if they are using financing with an adjustable rate mortgage. The rate could rise over a two to three period stretch increasing the monthly mortgage payment and causing the home value to go deeper underwater. This could have disastrous implications as investors and home buyers may start walking away from their home. However, many experts agree that this scenario is far into the future and the housing market in Houston will stabilize before an event such as that occurs. Essentially it means demand and supply eventually will balance out creating a highly stable market.
The good news is the housing market in Houston remains strong. Prices do not show any type of trend to the downside any time soon, and this creates more good news for the Houston economy as a whole. Strong housing markets create new jobs and represents a chance at home owner ship for many.
Peter Wendt is a writer, researcher and aspiring real estate investor. He has spent the last year speaking with real estate agents in the Houston area and is almost ready to make a down payment on a second home in the growing city. Wendt found the agents at ULR to be incredibly helpful throughout his housing search.