HOUSTON – (By Dale King, Realty News Report) – For the 12 months that ended in the first quarter of 2018, Houston remained the second highest volume new-home market in the country, with only Dallas/Fort Worth achieving a greater number of home starts.
If that was the only good thing reported about the Bayou City during last week’s “Metrostudy Housing Webcast – 2Q18,” it might have been enough to engender applause.
But there were additional kudos.
Housing starts in Houston exceeded closings in the first quarter of 2018 as well as most of 2017, reported Lawrence Dean, regional director of Metrostudy’s Houston market. The only glitch was in the fourth quarter of 2017, he said, when “builders were focused on accomplishing fiscal and calendar year-end closings in a post Hurricane Harvey landscape of 4-8 week increased cycle times due to shortages of specialty trades, including drywall finishers, trim carpenters and highly skilled painters.”
Harvey is gone, but not forgotten, Dean noted. “[Its impacts] continue to be felt in the market as shortages of specialty trade labor are adding 4-8 weeks to cycle times.”
Metrostudy’s hour-long webinar delivered May 17 the Dallas-Fort Worth, Austin, San Antonio and Houston housing markets. It also provided time for Bosch Residential Solutions to discuss the growing interest in energy-efficient homes. The direction of mortgage rates and the job market was also on the agenda.
Dean noted that in the last 12 months, Houston has attained 27,675 home starts, representing a growth rate of 7.5%, or 1,927 more starts year over year. He said Metrostudy anticipates a more modest 3% to 4% annual year over year starts growth rate at the conclusion of calendar 2018.
Volume growth in 2017 was driven by builders and developers increasingly offering a greater share of more moderately priced, attainable product ($300,000 and below). “This growth dynamic continued in the first 90 days of 2018, and is expected to continue over the balance of 2018 and beyond.”
In addition, “annual new home starts volume continues to be greatest in the $200,000 to $299,999 price band. However, starts volume in the $300,000 to $399,999 band achieved the greatest year-over-year starts growth with an increase of 14.0%.”
The “sweet spot” of the market in Houston, he said, continues to be in the $200,000 – $400,000 base price bands. “With that said, the $400,000 to $499,999 and $500,000 to $599,000 base price bands have exhibited stabilized starts volume, achieving 8.7% and 0.9% year-over-year starts growth respectively.”
Houston’s market areas with greatest year-over-year new home starts volume increases continue to be the Far North, Central, Northeast, and West Northwest Market Areas.
Also, MLS transactions of resale homes reflected a median price of $214,000 in March 2018, up 5% from one year ago, he said.
Dean did caution about some potential dark clouds on the horizon:
1Q18 is the fifth quarter in a row of low lot delivery .
The Houston [housing] industry is anxious about the impact of announced and planned changes to land development regulations by the City of Houston, Harris County and suburban counties.
Production builders have reported cycle times increasing from four to eight weeks. These longer production times are largely attributed to drastic shortages in specialty labor…. due to greatly increased demand for specialty trades rebuilding homes damaged by Harvey.
Regarding Harvey, Dean said builders have begun to report “slight increases” in sales of new homes since February 2018 to those whose homes flooded in Harvey. These buyers have spent the last eight months focused on managing their damaged homes, temporary housing, insurance claims, and FEMA assistance and are just now able to move forward on purchasing new homes.
Production builders have also reported significant growth in demand for BOYL (build-on-your-lot) product after Hurricane Harvey, focused heavily in the closer-in, formerly first-ring suburban neighborhoods of Meyerland and western Memorial. These areas are within the 100- or 500-year floodplain, requiring new construction homes to be built on elevated (four-foot to six-foot) slabs.
“Families are choosing to construct these homes on their flooded lot or another flooded lot in these close-in neighborhoods because these elevated new homes are significantly less likely to flood in future flood events than their previous non-raised 1950’s or 1960’s home.”
Metrostudy is a provider of primary and secondary market information to the housing and related industries nationwide.
May 21, 2018 Realty News Report Copyright 2018