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Houston’s housing market never experienced serious declines during the downturn, but the upswing has been fierce. Single-family home sales have risen for 34 straight months, and prices have been climbing for two years, as a growing economy continues to fuel home buying in many parts of town.
Even as a historically low inventory has made it tough to nab a piece of the American dream, more than 73,000 buyers closed on homes last year. That is up 18% over 2013, according to an analysis prepared by the Houston Association of Realtors. The median price for a home was $180,000, a 9% jump. Though the industry appears healthy, there are concerns about rising interest rates, affordability and persistently low supply.
To get an indication of where the market is headed, we asked four housing experts to weigh in on some of the key issues. Their edited remarks follow:
Q: What do you see as the strengths and weaknesses of Houston’s Real Estate market?
A: “We’re still quite affordable compared to other places around the country,” said Shad Bogany of Better Homes & Gardens Gary Greene in Bellaire and 2014 immediate past chairman for the Texas Association of Realtors. “The weakness of the market is – it sounds contradictory – but I think we’re becoming less affordable for the first-time home buyer. They’re being priced out because of rising costs.”
Builders indeed have focused on providing housing for the upper end of the market, where there’s been growing demand.
“If you’re in the lower end of the housing market, there’s just so little inventory,” said Chaille Ralph of Heritage Texas Properties and chairwoman of the Houston Association of Realtors. The high end, however, is also facing shortages. There are less than two months’ worth of inventory in the West University, Bellaire and Braeswood neighborhoods, Ralph said. “Inventory is a challenge,” she said, noting a recent weekly sales meeting at her office where agents presented 23 new listings. “Close to half of them were already pending.”
Q: When will the first-time buyer market return?
A: “We believe that’s actually happening right now,” said Josh Askins, BBVA Compass’ area mortgage sales manager for south and east Texas. Houston homeownership rates are relatively low, he said, but there are strong indications the market is there. “Houston is growing about three time the national average. A lot of those folks will need to buy a home,” Askins said. consumer confidence is coming back, he added. “Consumers are much more confident that they were even a year ago,” he said.
“First-time buyers will come back once the market becomes more stable in terms of inventory and pricing,” said Luis Bernardo Torres, a research economist with the Real Estate Center at Texas A&M University. He points to the large millennial population. “When they get married and start having kids, that’ll change their perspective, and they’ll want to buy houses,” Torres said.
Q: Will prices start to ease any time soon?
A: Prices will continue to rise through 2015, but perhaps not at the same pace they’ve been growing,” Ralph said. Additional supply will lead to moderation in prices, too.
“Once builders catch up, it will slow it down a little bit,” Bogany said. “The market is just moving at a pace I’ve never seen since I’ve been in Real Estate, and I’ve been here the last 30 years. This is probably the best market. We’re at the 2005, 2006 peak and rising.”
Q: Geographically, where do you see the future housing growth?
A: The Woodlands, Katy and the Inner Loop are the hottest growth areas.
“Today we’re seeing growth all over Houston with very few exceptions,” Askins said. “A lot of the growth will happen where there’s room to grow. You see a lot of that in some of the suburbs: Sugar Land, Katy, and The Woodlands.”
Bogany said growth will continue in popular Inner Loop neighborhoods like the Heights, Oak Forest, West University, Bellaire and River Oaks. But the east side of town has more affordable Real Estate with stong upside potential, he said. “If i’m buying, that’s the area I’m going to buy in because its the most affordable inside the Loop area where the growth has not been pushed to the limits,” Bogany said. “There’s room to grow based on the rail system and the UH expansion. To me that’s the diamond in the rough.”
Q: How will rising mortgage rates affect the market?
A: “Historically speaking, rates are still very low, and there are not any strong indicators they’ll sharply rise anytime soon,” Askins said. He said if they did, the increase would be slow and steady.
“Inflation is a key reason rates go up,” Torres said, and “right now inflation is really low, The Fed is more worried about deflation.”
Still, higher rates could hurt demand, but “just a little bit,” Bogany said. He added that consumers have gotten so used to low rates that they don’t realize “this has been uncommon. In their minds, this is normal. People think 3, 4, 5 percent is normal, and its’ not. It’s abnormal,” he said.
Q: What worries you about the market?
A: “The supply has to kick in,” Torres said. “The builders have to build houses so it continues to be affordable.”
Lack of inventory and off-the-market transactions are Ralph’s biggest concern. Not offering homes for sale on the Multiple Listing Service “limits the value you may receive for it,” she said. “Viable, potential buyers in the market place aren’t able to see it because maybe they’re selling it to a friend of a neighbor,” she said.
Bogany worries about affordability. “A lot of the jobs are low-paying jobs. If you make $35,000 a year and you’ve got a car note of $300 a month, how do you afford a house? How many builders are building $120,000 houses? Most aren’t because the cost of building is going up, the cost of labor,” he said.
Askins pointed to one potential risk. “If we saw a sharp decline in the oil and gas market, that could create a risk,” he said. “However, Houston’s economy is more diverse that it’s probably ever been. Were seeing growth in health care, biotech, transportation and finance, to name a few.”
Information from the Houston Chronicle.