By Dr. Ted C. Jones | HAR Chief Economist
Sales activity is the leading indicator of the direction of where a housing market is heading. Simply stated, the number of sales indicates the health of the housing.
Clouding the perspective today was the COVID-19 pandemic, which initially stalled house sales, but then ignited demand when 30-year fixed-rate mortgage punctured below the three-percent range. Hot demand exploded prices and demand given the best affordability in decades. Rising mortgage rates since 2022 saw overall housing affordability fall to a level not seen since the early 1980s.
How Do We Know When Housing Sales Are Back to Normal?
The last normal year (pre-pandemic) was 2019, which becomes the key comparison. When sales get back to the 2019 monthly level, housing is back to normal.
Total U.S. existing home sales (in the prior 12-months), as reported by the National Association of REALTORS®, are detailed in the graph below. Current sales are hovering in the low four million range, down from a typical 5.25 million in 2019, the last normal year. Note that U.S. existing home sales are essentially flat in the past year-and-a-half with no recovery in that period nor in the current trend.
Houston MSA Housing Sales are detailed is the graph below with total sales in the prior 12-months on the right axis and median price on the left. Houston housing sales have been back to normal 2019 levels (pre-pandemic) for the past two years. The current 12-month sales level of 86,000+ exceeds all years prior to 2018.
While the U.S. housing market struggles to return to normal levels, Houston housing sales have trended normal for the past two years driven by a strong economy. Home prices, however, are slightly decreasing due to the lowest affordability in 40 years and an inventory trending towards the favor of buyers.
Still waiting for a normal Houston housing market? That happened two years ago and continues today.
