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Houston was No. 1 in Nation in Home Building Last Year; Dallas was No. 2

HOUSTON – Houston led the nation in home building in 2015 with Dallas and Austin also cracking the Top Ten, according to the U.S. Census Bureau.

Houston had 38,315 single-family building permits last year, leading the second-place Dallas/Fort Worth which had 22,550.

Atlanta was No. 3 in home building last year, with 16,984 building permits. Other Top Ten markets: Washington, D.C.; New York, Phoenix, Austin, Charlotte, Orlando and Nashville.

However, slower days are ahead for Houston, which suffered a 14.7 percent decline in construction starts in the fourth quarter, Metrostudy reports, and starts will be down about 10 percent this year.

Houston’s economy, under pressure from falling oil prices, is expected to see lackluster job growth in 2016.

Rising prices for new homes also presents a problem for local home builders, which have been facing a tight labor market and rising labor costs. Housing affordability is a more acute problem for home buyers who want to buy a brand-new house, Metrostudy reports.

All of these factors indicate that 2016 will be a down year for Houston home builders.

“Current market conditions are suggesting that we have entered a phase beyond just a return to normal market conditions and we are witnessing the leading edge of a more significant contraction,” Metrostudy reports. “Even so, inventory levels do remain relatively low and most builders have curtailed starts significantly enough that they should begin to affect inventory again.”

“Metrostudy’s fourth quarter survey reflects 16,532 homes currently in inventory; less than 40 homes more than were under construction one year ago. The supply of finished vacant homes, however, has not similarly declined, instead increasing to 5,352, almost 1,600 more homes than one year ago. This number represents about 32% of total housing inventory, just below the 33-35% threshold number for an inflection point for our market.”

The number of finished vacant homes in the Houston market remains at near historic lows as builders see their speculative homes purchased before reaching completion.

“The relative supply of finished vacant homes in the market is at 2.3 months, still below the 10 year average of 2.4 months, but the highest since 2012. As Finished Vacant and Model inventory increased slightly, a nearly 1,000 unit decline in Under Construction inventory was sufficient to offset the increase as months’ supply decreased slightly to 7.1 months for total housing inventory,” Metrostudy reports.

“Delays in lot deliveries kept the market in balance below equilibrium levels through 2015. Lot inventories should increase through 2016, reaching equilibrium levels before pulling back and our best forecast today is projecting lot shortages in 2017-2018 as both private equity and public homebuilders have pulled back on investing in new lot developments in the Houston market,” Metrostudy reports.

Feb. 9, 2016

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