HOUSTON HOUSING 3Q17: Impact of Harvey Strongest in the Resale Market; New Home Sales Should Surge in 2018

  • Houston’s new home market and general economic conditions cannot be discussed without touching on the impacts of Hurricane Harvey, which damaged 167,000 single family homes throughout the Greater Houston Area.
  • By and large Harvey was a resale market phenomenon due to the locations of most flooding impacts. In general, Metrostudy does not anticipate any significant increase in new home sales demand generated by Harvey victims until 1Q18.
  • Despite the impact of the hurricane, Houston remains the second highest volume new home market in the country, with just Dallas/ Fort Worth achieving a greater number of starts over the 3Q17 trailing twelve months.
  • The sweet spot of the market in Houston continues to be in the $200k – $400k price bands. Starts and closings volume of homes base priced above $400k continue to show YoY declines, which are most pronounced in the $600k and above bands.

Metrostudy’s 3Q17 survey of the Houston housing market shows that Houston has maintained its number two position behind Dallas / Fort Worth in terms of annual new home starts. Houston achieved 27,713 starts, representing a growth rate of 6.4% year over year. Metrostudy anticipates a total year over year 5% to 6% increase in Houston single family starts at the conclusion of 2017 followed by a more modest 2% to 3% increase at the end of 2018. This differs from Metrostudy’s previous 2017-2018 projections: strong starts volume in 2Q and 3Q 2017 combined with current lack of focused growth direction in the energy industry has resulted in Metrostudy projecting a stronger starts rebound in 2017 with a slower continued growth trajectory for 2018.

“Houston’s new home market and general economic conditions cannot be discussed without touching on the impacts of Hurricane Harvey,” said Lawrence Dean, Regional Director of Metrostudy’s Houston market. “In general, Metrostudy does not anticipate any significant increase in new home sales demand generated by Harvey victims until 1Q18. These potential future buyers are simply focused on managing their damaged homes, temporary housing, insurance claims, and FEMA assistance to be able to move forward on purchasing new homes until this timeframe.”

Below are key statistics focused on Harvey’s impact on Houston:

  • Harvey dumped one year’s typical rainfall on the Houston region in five days (49”).
  • Moody’s Analytics estimates total economic losses to the Texas Gulf Coast (including Houston) of $97B, $87B of which is property losses.
  • Upstream Energy, Health Care, and Aerospace, the three pillars of Houston’s economic base saw relatively minimal impact from Harvey.
  • Downstream energy saw greater impact as more than ¼ of the nation’s refining capacity was offline on August 30th due to Harvey. As of September 7th 16% of capacity was offline, and this number continues to improve.
  • Only 40 of the region’s 1,200 office buildings received damage.
  • Apartment Data Services found that 9,662 apartment units in 177 properties, or 1.6% of the overall market inventory, were damaged. Apartment occupancies have improved slightly….but for how long?
  • The Houston region is anticipated to lose approximately 300,000 vehicles with a total value of $2.4B
  • 167,000 single family homes were damaged throughout the Greater Houston Area.
  • Most of the top thirty builders reported flood damage to between 0% and 4% of their homes under construction or in inventory. By and large Harvey was a resale market phenomenon due to the locations of most flooding impacts.

Starts surpassed closings in the third quarter, for the second quarter in a row. Builders closed 7,540 homes in 3Q17, 113 more than in 3Q16. Builders have generally expressed being pleased with their overall sales volume in 2017 but saw more consistent strong sales volume in the first quarter of the year than they did in the 2Q. Houston continues to experience a very competitive new home sales environment although builders have been succeeding at selling through previously built up spec home inventory.

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Annual new home starts volume continues to be greatest in the $200,000 to $299,999 price band. Sales volume in the $300,000 to $399,999 price band has also continued to grow year over year. The sweet spot of the market in Houston continues to be in the $200,000 – $400,000 base price bands. Starts and closings volume of homes base priced above $400,000 continue to show year over year declines. These declines are most pronounced in the $600,000 and above base price bands.

Quarterly lot deliveries were nearly identical to quarterly new home starts in 3Q 2017, with 8,006 new lots being delivered while 8,008 new home starts occurred. On an annual basis growth in new lots delivered remains very tight and similar in volume to lots absorbed. Over the last twelve months 27,798 new lots were delivered while 27,713 lots were absorbed by new home starts. Market-wide inventory of vacant developed lots (VDL) remains constant at 44,460 (down five from the previous quarter), or 19.3 Months of Supply.

Inventory of resale single family homes market wide has grown by 9.3% year over year. Currently there is an inventory of 20,487 true resale listings which is consistent with inventory levels seen one year ago. This reflects 3.7 months of supply which is the lowest level seen in twelve months.

For information contact:
Lawrence Dean – 713-817-0218
ldean@metrostudy.com

About Metrostudy

Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide.  Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day.  www.metrostudy.com

About Hanley Wood

Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

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