Texas’ housing market slowed in August after a surge of pent-up demand inflated sales numbers the previous month.
“Sales activity is no longer catching up from the economic shutdown that hindered the showing of homes and closings at the beginning of the spring buying season,” said Dr. James Gaines, chief economist for the Real Estate Center at Texas A&M University.
“Existing homes sold through Texas Multiple Listing Services peaked in July as the economic consequences of the ongoing pandemic continued to develop.”
Existing-home sales fell 14.6 percent from July but remained 3.4 percent higher than in August 2019.
“Low mortgage rates supported the year-over-year increase, but the effect of that stimulus may dwindle if persistent unemployment shrinks the number of qualified homebuyers,” Gaines said.
According to the National Association of Realtors, existing-home sales at the national level increased for the third consecutive month on a seasonally adjusted basis and maintained double-digit year-over-year growth. They attribute the gains to robust demand but note rising supply-side constraints.
Center Research Economist Dr. Luis Torres highlighted the supply-demand imbalances that will challenge the housing market over the next year.
“While sales surged during the summer, the number of new listings hitting the market has not matched that recovery, worsening the state’s housing shortages, particularly for homes priced less than $300,000,” said Torres. “This mismatch has pulled the months of inventory to record lows of fewer than 2.5 months.”
Diverging trends between the upper and lower price ranges have led to large increases in the median sale price for existing homes, which increased by more than 10 percent year over year for the second consecutive month, according to Center research.
“The initial economic shock from COVID-19 was concentrated in the service sector and other industries that rely on a younger workforce,” according to Torres. “These households are more likely in the market for lower-priced homes, and we’ve seen that market suffer disproportionately. The relative strength in upper price ranges is inflating the median sale price. The Center’s Texas Repeat Sales Index, however, accounts for this bias and revealed more moderate growth at 5 percent.”
Read more about the Real Estate Center’s research staff thoughts on the economic impact of COVID-19.
Funded primarily by Texas real estate licensee fees, the Real Estate Center was created by the state legislature to meet the needs of many audiences, including the real estate industry, instructors, researchers, and the public. The Center is part of Mays Business School at Texas A&M University.