Why was 2019 such a strong year for Houston home-buying?
Houston was coming off a red-letter year for residential real estate as it was, when buyers were driven by low mortgage rates and a stable supply of homes. That trend continued last year. Most of the sales were for single-family homes priced between $150,000 and $500,000, leading to a record in home sales for 2019. “During the latter half of 2019, we had a sense that we were headed toward a record year for Houston real estate, but no one expected it to be this strong a finish,” says HAR Chairman John Nugent with RE/MAX Space Center.
So does that mean we can expect smooth sailing for the housing market this year?
Yes—for now, at least. Many experts are predicting that 2020 will be an equally strong year for sales, although there is already some concern about whether the local housing market will be affected by the uncertainty of the economy, like the fact that oil prices have been hovering around a sluggish $50 a barrel and that Houston’s job growth rate has slowed in recent months. “The Houston market is still healthy, but it’s not as robust as the markets in places like Austin that are seeing much stronger job growth,” says Luis Torres, a research economist with Texas A&M’s Real Estate Center. “Right now the oil downturn is balanced out by other parts of the energy industry that are doing well, so real estate is still pretty strong. But if labor gets hit much harder, we’ll see that start showing up in the housing market.” Still, this year is off to a good start. Houston has a 3.5-month supply of inventory, and sales increased 14.3 percent in January 2020, as compared to January 2019 alone, HAR data shows.
Are there any types of homes or neighborhoods selling particularly well?
Well, you must have noticed all the townhomes and condos going up on every corner in recent years, and there’s a reason for that. While some parts of the market are actually a bit slow-moving—Memorial has seen a 20 percent price decrease over the past five years, probably because of Harvey, and right now tony enclaves like Rivercrest and Memorial Park spend the most time on the market of any sections in the city—a reasonably priced, single-family home, even one located in Willowbrook or Humble, will be snapped up so quickly sellers will have to rush to pack. The reason behind this? There simply aren’t enough houses being built in the starter-home price range. “Ever since the Great Recession, supply hasn’t been able to catch up with demand in the housing market, especially for homes in the $200,000 range, so whenever a home in that price range goes on the market, it sells very fast,” Torres notes. “Builders know this and would love to be building homes in this price range, but land prices have also gone up, and to make a profit these builders either have to build much smaller places, like all of these townhomes and duplexes we’re seeing, or build far enough out from the city that land isn’t as expensive.”
But why can't I actually afford a house yet?
Housing prices are going up, but your income probably isn’t. For years median income was increasing at a faster rate than housing prices here in Texas, but recently that’s reversed—needless to say, people can’t buy homes as easily anymore. That’s also why we’re seeing such marked interest in areas like Humble South, which has the lowest average home price ($115,000) in the metroplex even though the median home price has already increased 39.6 percent in the past five years. Right now a house in Humble South will sell in about 18 days, on average. “People have been flocking here from all over the country for more than a decade because Texas was a place where you could actually afford a home, but that is rapidly changing. Affordability is going to be a major issue going forward for Houston, but also for all of Texas in the coming years,” Torres says. “We’re starting to lose that advantage compared to other parts of the country. The days of buying a sprawling house for $300,000? Those days are gone.”