While the rest of the world was going up in flames in 2020, Houston real estate managed to have one of its best years in recent history.
Home sales broke 2019 records—even though there are about 30 percent fewer homes on the market than in an average year. In 2020 homebuyers bought more expensive homes—those upward of $500,000—at a higher rate, helping to inch the average sales price up by about 6 percent, too. Even the folks at the Houston Association of Realtors were surprised. “In my 50 years in the real estate business, I have never seen a market defy supply and seasonality the way Houston has—amid a pandemic, no less,” HAR Chairman John Nugent, of RE/MAX Space Center, noted as the year drew to a close. “It’s quite extraordinary to watch consumers take advantage of historically low interest rates and be able to choose their dream homes from among the tightest housing inventory this market has ever experienced.”
Those record low interest rates certainly helped facilitate the brain-bending boom. But the fact that Houstonians (and the rest of the world) spent a downright excessive amount of time at home over the past year seems to be the true driving factor behind the busy Bayou City housing market. Suddenly, homes became the backdrop for almost every aspect of life, and that factor was quickly reflected in the market. “Housing now has the highest intrinsic value to people that it’s ever had, and it impacts you more than ever before,” says Ted Jones, chief economist and senior vice president at Stewart Title, who compiles HAR’s monthly reports.
Home has now become the space where most of us live, work, and play—but not exactly in the exciting way every apartment complex’s marketing materials, circa-2015, made it seem. Rather, the past year has stretched many of our spaces—and those who occupy them—to their limits. People need their homes to be versatile now more than ever, as these structures are no longer just a stopover point between work trips or a place to rest your head at night.
Still, how could a record-breaking season of home sales coexist with Houston’s 8.8-percent unemployment at the end of 2020? And was the desire for a more functional home enough to overcome these economic obstacles and bolster the market—scratch that—set it ablaze?
The short answer: yes. But it’s a little more complicated than that.
The pandemic hurt the economy and forced many out of their jobs. That’s a fact. But according to Jones, the people most affected by job losses or earnings reductions weren’t those who were in the home-buying game in the first place. “Homebuyers have been pretty well taken care of,” Jones explains. “It’s actually our renter segment that is bearing the brunt of this economic burden.”
Typical homebuyers lost jobs, too, of course—there are very few that have not felt the impact of the pandemic’s economic fallout—but enough people kept their jobs and had built up a strong enough desire to move to keep the market going. And if they could swing it, this was a market where they had a tremendous amount of power. In fact, the circumstances for buying had almost never been more in their favor.
Why? For starters, the Federal Reserve was pumping money into the economy to encourage qualified applicants to take out loans as part of efforts to inject some movement into the sluggish economy. And because everyone was staying home all the time, those who kept their jobs (and resisted indulging in too much online shopping) were saving money hand over fist. “They actually came in with one of the best savings rates we’ve seen in our lifetimes,” Jones says of this group of prospective homebuyers. “This banked money actually helped pay for some of the down payment purchases we’re seeing right now.”
Savvy investors also realized that real estate was their safest bet, compared to the volatile stock market or low-yield savings accounts. And many looking for a change were no longer limited to Inner Loop addresses, as working from home became a long-term option and trading a short commute for abundant square-footage actually became viable. “Working from home doesn’t have to be an expensive, super-great location,” Jones explains. “We can actually jump out to the ’burbs and lower your costs. For your lifestyle, it may be a lot better for you and your family.”
The building world followed a somewhat similar trajectory. Though the market was bracing for the worst, it saw a surprising influx of those ready to start anew in Harris, Fort Bend, and even Galveston counties. And renovations, add-ons, or total overhauls are continuing in order to make living space actually livable in these home-centric times.
“During March and April, I was pretty concerned that things were going to slow down quite dramatically, but it was actually the opposite of that,” says James Evans, AIA, at Collaborative Designworks. “We actually probably had more inquiries for new projects at that time than we’d had for a while. It initially seemed that people were having time to think about projects and about where they were living and wanting to do something new.” He says things have calmed down slightly since the summer, but his firm has kept busy during the entire pandemic.
Too, second homes are supplementing many builders’ work as more and more people look for safe, easy options to get away from it all without having to drive across the country or board a flight.
“I’ve had a lot of interest from people who want to do little vacation getaways. Right now we’re doing a prefab out in Marfa,” says Brett Zamore, AIA and founder of Brett Zamore Design. “It’s just because people are like, ‘We don’t want to be stuck, we want to be able to escape.’”
Michael Silva, who founded Happen Houston, known for tasteful new-builds and renovations around Garden Oaks-Oak Forest and The Heights, says he’s seen a growing demand for new and clean homes that have never been lived in. Most of his clients, he adds, weren’t even considering a move before 2020’s circumstances gave them the opportunity (and/or the push) to make a change. Silva thinks the trend is only going to continue. “I believe we will see more new homes being built in the next year—more than we have in quite some time,” he says.
And according to the experts, Silva is on to something: The growth in Houston’s market isn’t going to be extinguished any time soon. Jones predicts 2021 will be another solid run for the industry, although the brisk pace is still directly tied to the pandemic. In other words, he doesn’t expect that this boom will go on forever.
“As more and more people become vaccinated or we approach herd immunity, you’re going to go out and travel again, and the home is no longer going to be as important. And when the home no longer has a highly intrinsic value to you, then your demand will decline on housing,” Jones says. “That time will come. I truly do believe that. But I think we’re six months to 12 months away.”