Houston homebuyers increasingly are putting the oil slump behind them, snapping up houses in record numbers and paying more for them than ever. But economic trauma in the region's signature energy industry continues to haunt real estate's office market, pushing the local vacancy rate higher than it's been in decades.
The residential segment's hot streak accelerated in June, with gains from the luxury to the lower end. Monthly home sales figures released Wednesday show buyers closed on 8,414 single-family homes, a 8.3 percent increase over the same month last year and the largest one-month sales volume in history, besting a record set a month earlier.
The positive data from the Houston Association of Realtors show housing benefitting from pent-up demand even as the Houston economy continues to grapple with further fluctuations in oil prices.
"This summer has been such a busy summer for me. It's kind of like Christmas. When someone's looking in 100 degree heat, they're serious," said Ruthie Newberry Porterfield of Martha Turner Sotheby's International Realty.
Yet in the also-critical real estate market, office landlords are doling out generous concessions in an increasingly desperate bid to reel in tenants.
After 10 consecutive quarters of rising vacancy, more than a fifth of Houston's office space is sitting unused. In a quarterly report, real estate service firm NAI Partners called that the highest vacancy rate since the firm began tracking data in 1999.
That remains well below the numbers of the bust in the 1980s, but the 20.5 percent vacancy rate is evidence of the lingering fallout from oil and gas companies slashing budgets and cutting workers, eliminating the need for all the office space they occupied.
"Houston has diversified tremendously," said Dan Boyles, a partner at NAI. "Still, in order to bring the vacancy rate down we're going to need to see a more significant turnaround in the oil and gas business."
Factor in sublease space and the NAI pegs the vacancy rate at more than 26 percent.
A slate of other commercial real estate firms, which use slightly different parameters to measure the market, offered similarly grim views of a sector still on the decline, even as the rest of the city shows signs of recovery.
Travis Taylor, a principal at Lee and Associates, attributed the depressed market largely to a building boom during the days of $100-per-barrel oil.
"A run of high demand from energy related businesses drove historic price increases in Class A downtown space, as well as a wave of development," he said. "Unsustainable growth coupled with the downsized energy business formed a correction in the office market that has been unfolding for almost three years."
The correction in housing, however, has long passed.
Year-to-date, single-family home sales are ahead of last year's volume by 7.4 percent.
Hitting a new high, the median price of a single-family home was $239,023 in June, $4,000 more than last month and $6,000 more than last year at this time, according to the Houston Association of Realtors.
But Realtors caution that the rising median price has largely been bolstered from strong sales in the market's highest end.
Prices are actually quite flat, said Marilyn Thompson, president of Martha Turner Sotheby's.
Sellers who overprice their homes are seeing them sit, she added.
"Buyers are out there," Thompson said. "If a house has not sold, it's overpriced for the market."
Michael Rohan just pulled his Montrose townhouse off the market after about four months and lowering his asking price several times. The home was last listed at $500,000.
Rohan said he's competing with new townhomes all over his neighborhood.
"Someone would rather pay $600,000 for new townhouse than $500,000 for a used one," he said.
Across the Houston area, housing inventory swelled in June to a 4.4-month supply, the highest in almost five years, according to the data, which are based on sales handled through the Multiple Listing Service throughout Harris, Fort Bend and Montgomery counties and parts of Brazoria, Galveston, Waller and Wharton counties.
In the townhome and condominium sector, sales edged up 1.2 percent with 678 units selling at a median price of $171,000, up 3.6 percent. Inventory also grew to a 4.3-month supply.
Porterfield, who works in the high end of the market, said many of her buyers are Houstonians who have decided now is the time to move up into a bigger or nicer home.
According to the housing data, June was the eighth straight month that the luxury segment — where homes sell for $750,000 and up — saw rising sales.
The $150,000 to $250,000 market had a good showing last month, too.
Meanwhile, rising vacancy in the office sector is being largely driven by continued completion of ambitious new projects that launched during more prosperous times. With financing secured and concrete poured, developers couldn't just pull the plug as tenant demand weakened.
"You can't stop once you start construction," JLL executive vice president Steve Burkett said. "That is very expensive."
About 2.3 million square feet of office space came online in 2017, with about 2.4 million square feet still under construction in July, down from about 10 million square feet in 2014.
For example, the office tower 609 Main downtown will add almost 500,000 square feet of vacant space to an already crowded market.
However, the majority of the most recently started projects were commissioned with a particular tenant in mind. That includes downtown's Capitol Tower being built for Bank of America and an office in Springwoods Village for HP and the American Bureau of Shipping.
