The market for new homes in Houston is expected to be flat for the next couple of years amid a tight supply of lots, a local housing analyst said.
"It's not particularly due to a lack of market demand, but wholly due to a lack of available places to build these homes," Lawrence Dean, Houston regional director of residential real estate data firm Metrostudy, told builders at a quarterly housing market briefing at a conference center in west Houston. "We broadly characterize what we expect to see in the next couple of years as bouncing around at the top of what may be top of this cycle in Houston."
After two years of annual increases in starts, uncertainty in the housing market crept in last year as interest rates began to rise. Yet the average rate for a 30-year fixed mortgage is now 4.41%, the lowest it's been in 10 months, according to a weekly survey by Freddie Mac.
"Things seemed a little dicey last quarter. Everybody got cautious, but it never really got bad," said Kenneth Williams, owner of Colina Homes, which built 320 homes in the Houston area last year at an average price of $235,000.
Recent and projected job growth bodes well for Houston builders, Dean said. Houston employers created more than 100,000 jobs last year, according to estimates, and while some economists are expecting that number to be revised downward by as much as 25,000 jobs, what's left is still strong.
"We're continuing to see those jobs added in sectors that help us sell new homes," Dean said, citing new positions in professional and business services, construction and manufacturing.
Builders started 30,146 homes last year, up 10.4% from 2017, solidifying this area's ongoing position as the second-highest volume new-home market in the country. Buyers closed on nearly 28,000 new homes in 2018.
The west and southwest parts of the Houston region, including Katy and the Richmond/Rosenberg area, continue to be the highest market volume areas, while lot availability remains constrained
That's the case areawide. Developers added fewer than 28,000 new lots to their inventories in 2018, some 2,000 less than the number of homes started. Based on historical observations, Dean said, that number should be reversed to have a healthier supply of lots.
Last year's median price for a new home was $300,000, with homes priced in the $200,000 to $400,000 range making up 71% of starts last year. Within that range, homes priced between $200,000 to $249,000 make up the biggest piece.
As that market gets more competitive, Dean said more builders are incorporating new designs into their homes to help them stand out.
"You can actually get shiplap as option," he said.
