Scott Davis, Houston Regional Director
State of the Market Report: Houston
Job growth in the Goliath housing market outpaced the state of Texas (3.9%) as well as the nation (2.9%) in 2014, with a 4.4% gain. The Houston economy continues to be bolstered by the energy sector, and job growth primarily will fuel the housing market in 2015 (so long as decreased oil prices don’t greatly impact the state’s economy overall).
“Mortgage rates should continue to remain low, factors that have contributed to the rapid increase in home construction costs should abate, and lot supply should increase significantly and these should encourage new home sales. But these trends will be overshadowed by concerns over the rapid decline in the price of oil. At present, consumer hesitation over the influence of oil prices is the greatest risk to the market; job increases from oil and gas producing companies have comprised less than 10% of the job increases in Houston over the last year. However, the longer that oil stays below $55/barrel the greater the negative impact it will have on the Houston housing market.”
The median closing price of a new home started the year at $255,900, increased every quarter, and ended at $267,400. Houston is another Texas market placing an affordability squeeze on the entry-level and first-time buyers. The highest concentration of new home sales throughout the year, however, stayed within the $150,000 through $250,000 range. Should Houston hang onto an affordability advantage for another year of solid job growth, the Market should continue to dominate the new home landscape in 2015 for the Texas markets.
“An important driver for new home demand is the extremely tight inventory of resale homes available on the market.Historically low resale inventory levels seem to be pushing would-be resale buyers into the new home market.”
“The growth in the pace of starts continues to increase but at a slower pace, as builders and developers are beginning to catch up on inventory, and the region felt the first effects of the slowdown in the oil patch.”
“Due to builder demand for more lots, large public homebuilders have taken major land positions, representing a significant increase in the share of builder-controlled lots. We expect that some of this inventory will work its way back into the lot or land market as builders look to reduce their land inventory this year.”
New home activity was strong during 2014, with the highest level of starts since 2007, and 7.3% increase year-over-year. New home supply also increased 13% annually, though supply is still tighter than early 2013. Lennar overtook DR Horton in fourth-quarter new home closings in the market with 680.
