Harvey’s Impact on the Houston Housing Market
The following message was sent out to all Hanley Wood employees from our CEO, Peter Goldstone, earlier this week: “Only days after Harvey made landfall the effects of this storm continue to ravage the greater Houston area. Fortunately, most everyone in the Hanley Wood family has emerged relatively unscathed, but the same cannot be said for the thousands of people whose lives have been uprooted by this catastrophic storm. I have heard from many of you asking how you can help.” And thereafter, Peter provided instructions and links to charities working in the Greater Houston area, and pledged that Hanley Wood would match employee donations dollar for dollar.
As we begin to recover from this devastating storm, inquiries are already arising with regard to the impact on Houston’s housing market. Our 2nd quarter analysis presented Houston’s housing market as over supplied – both in terms of single-family and multi-family product. Though permit activity is falling, over 26,000 new apartments were introduced in Year 2016 in the Greater Houston area. Before the storm, rent concessions were rampant in Houston’s apartment market. Single-family permit activity was also trending downward, but the entire Houston housing market was estimated to be over supplied by over 62,000 homes and apartments in Year 2017 – at least before Harvey hit. There is no way to know yet how many homes are damaged beyond repair, but the points set forth below reflect trends that are likely to quickly emerge:
- The over supplied apartment market in Houston will immediately tighten as displaced households and longer-term aid workers seek lodging.
- The remodeling market, which was already fairly healthy in Houston, will surge as residents begin repairs on damaged properties. Watch for HW’s Residential Remodeling Forecast Index for Houston to soar in our 3Q’17 report.
- Economic and employment growth, which have already begun to recover in recent months, will experience a short-term surge as re-building efforts begin and as workers/relief organizations around the country are drawn to Houston. During the 12 months prior to Harvey, over 40,000 jobs were created in Houston for a 1.3% job growth rate – not impressive, but reflecting recovery. This growth rate may surge to over 4.0% as recovery and re-building and infrastructural repair begins, and as public sector dollars pour in.
- Over supply will diminish as thousands of homes are condemned or damaged beyond repair. Home prices for damaged homes in flooded areas may slide further as weary home buyers avoid market areas prone to flooding. Home prices for homes on high ground or areas that were relatively unscathed may experience a short-term surge. Residential land sales for ‘safe’ areas may experience a short-term gain in price and activity.
- In the short-term, damage to offshore wells and Houston’s refineries will result in an increase in gasoline prices throughout the country. In the longer term, Houston’s oil industry will recover. Indeed, inklings of recovery were already noticeable before Harvey.
As Houston begins the process of recovery, we will continue to monitor marketplace activity. Meanwhile, our models will be adjusted to reflect the predicted impact on Houston’s housing market.
For those interested in donating to those affected by Hurricane Harvey, the following charities are currently directing resources to the disaster relief efforts: