Houston’s close-in neighborhoods, the area in which I focus, makes
up approximately 7% of Houston’s single family home market based
upon the number of homes and just under 12% based upon dollar
volume. In the close-in neighborhoods, the total inventory of single
family homes for sale is higher than in all of Houston, caused by the
price segment of Under $250,000 being higher. In all other price
segments, the inventory level close-in is lower than for all of Houston.
The inventory of homes measures supply compared to demand and
is expressed in months of inventory. In simple terms Inventory Level
is the number of months it would take to exhaust the inventory, if
homes continued to sell at the current rate and no additional homes
entered the market. While a simple calculation, over years it has
provided a quick way to understand the balance of supply and
demand. Most people believe a level of 7 to 8 months is a stable
market. Six months or less is considered a Seller’s market and 9
months or more is a Buyer’s market. The rate of sale used is
normally the previous 12 months of sales.
The period from October to January was affected especially hard
from both the effects of Hurricane Ike and the economic recession.
I thought it would be interesting to measure the Inventory based
upon the rate of the last six months, with the especially slow
October to January months not included. The result is a lower
inventory than the Standard Method in all price ranges.
Shown below is a table showing inventory levels by price range
using both the Standard Method and the Six Month Method. The
Six Month Method shows a Seller’s market forming in the $250,000
to $350,000 segment with all others moving to stability. I now
expect September sales will be at least 20% better than 2008 and
that the following four months will show significant improvement
over the same month in the prior year. If I am correct about the
sales trends, either sellers who have been waiting to sell will begin
to enter the market or we will begin to see price increases. Both
may occur.
Check back over the next few days as I post inventory levels of key
Close-in neighborhoods.
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MONTHS OF INVENTORY |
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Houston Inside Loop 610 |
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October 1, 2009 |
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Standard Method |
Six Month Method |
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Under $250,000 |
7.9 |
6.8 |
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$250,001 - $350,000 |
6.5 |
5.1 |
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$350,001 - $500,000 |
8.5 |
7.1 |
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$500,001 - $750,000 |
9.3 |
7.1 |
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$750,001 - $1,000,000 |
10.3 |
8.8 |
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Over $1,000,000 |
19.3 |
8.9 |
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Total |
9.0 |
7.3 |
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