HOUSTON HOUSING 3Q18: Nation’s #2 Market Bypasses Affordability Woes of other Regions by Offering a More Moderately Priced Product Line

  • With 29,370 Annual New Home Starts through 3Q18, Houston remains the second highest volume new home market in the country, with just Dallas/ Fort Worth achieving a greater number starts
  • The sweet spot of the market in Houston continues to be in the $200k – $400k base price bands with the $200-$299k band up 19.5% and the $300k-$399k up 7.8%
  • In 3Q18, the number of new lots delivered (8,333) very closely mirrored the number of lots absorbed by starting homes on them (8,369), yet the Houston industry is still anxious about lot supply and the volume of new subdivision developments in the pipeline.

Metrostudy’s 3Q18 survey of the Houston housing market shows that in the third quarter, Houston has maintained its number two position behind Dallas / Fort Worth in terms of annual new home starts. Houston achieved 29,370 starts, representing a growth rate of 6.0% year over year. Starts exceeded closings in both the third quarter of 2018 as well as the trailing twelve months ending in same. This trend was also observed for most of calendar year 2017 with the exception of the fourth quarter. In 4Q17 builders were focused on accomplishing (fiscal and calendar) year-end closings in a post Hurricane Harvey landscape of 4-8 week increased cycle times due to shortages of specialty trades including drywall finishers, trim carpenters, and highly skilled painters. Metrostudy anticipates a slightly more modest 5% to 6% annual year over year starts growth rate at the conclusion of calendar 2018.

“Annual new home starts volume continues to be greatest in the $200,000 to $299,999 price band,” said Lawrence Dean, Regional Director of Metrostudy’s Houston market. “Year over year starts volume saw the greatest increase in the $200,000 to $299,999 price band (up 19.5%) and the $300,000 to $399,999 price band (up 7.8%). The sweet spot of the market in Houston continues to be in the $200,000 – $400,000 base price bands.”

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Volume growth in 2017 was driven by builders and developers increasingly offering a wider product offering including a greater share of more moderately priced attainable product ($300,000 and below). As a result, volume growth is due to product line and store count growth more so than increased position by position performance. This growth dynamic continues within the first nine months of 2018, and is expected to continue over the balance of 2018 and beyond

In the third quarter of 2018, the number of new lots delivered (8,333) very closely mirrored the number of lots absorbed by starting homes on them (8,369). This condition has continued to improve since first quarter during which 1,563 fewer new lots were delivered than were absorbed. The Houston industry is still anxious about lot supply and the volume of new subdivision developments in the pipeline. However, this anxiety is partially relieved by the continued increase of new lots being delivered in the second and third quarters of 2018.

Houston’s market-wide inventory of vacant developed lots (VDL) has decreased by 56 lots since 2Q 2018, resulting in an inventory of 45,632 VDL, or 18.6 months of supply. Every one of the nine geographic Market Areas in which Metrostudy divides the city currently have a months of supply of VDL within or below the 20 to 24 M-O-S equilibrium identified by Metrostudy for the Houston market. Even the Far North Market Area, which is comprised of most of north suburban Montgomery County, now has just 22.5 months’ inventory of vacant developed lots. The Far North had seen as high as 36 M-O-S of VDL in 4Q 2016, and has exceeded equilibrium every quarter of 2016, 2017, and the first quarter of 2018. This is now no longer the case.

In the first nine months of 2018 62,966 total single family homes have sold on the MLS, 52,072 of which were true resales. Inventory of resale single family homes market wide is down 3% versus twelve months ago, with 18,996 properties currently on the market. This reflects 3.3 months of supply. MLS transactions of resale homes reflected a median price of $225,000 in September 2018, up 5% from one year ago.

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. To learn more visit 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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