HOUSTON HOUSING 4Q16: A Stabilizing Market – Stronger Growth Expected in 2017 & 2018

  • Houston remains the second strongest market in the country for new home starts, only behind Dallas / Ft Worth for 2016
  • New Home Starts for 2016 were down 9% over 2015 levels – from 28,138 to 25,489
  • The highest volume of new home starts is in the $200-299k price range while production of higher priced homes remained steady.

Metrostudy’s 4Q16 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. For 2016, Houston saw 25,489 starts, down 9% from 2015. During this same period, Dallas / Fort Worth achieved 30,094 starts representing a banner year with an increase of 3,099 starts.

“Closings surpassed starts in the fourth quarter, continuing a trend that began in fourth quarter 2015. Builders closed 6,327 homes in Q4 2016, down 5.5% from Q4 2015,” said Lawrence Dean, Director of Metrostudy’s Houston market. “Builders have generally expressed being pleased with their overall sales volume in 2016 but did report margin suppression at the higher price points. Houston continues to experience a very competitive new home sales environment although builders have begun to succeed at selling through previously built up spec home inventory.”

Annual new home starts volume continues to be greatest in the $200,000 to $299,999 price band. Starts volume in the $300,000 to $399,999, $400,000 to $499,999, and $500,000 to $799,999 price bands experienced significant growth between Q2 2010 and Q2 2014, but have continued their general stabilization in starts growth over the past two years since then.

Houston’s resale market closed on 80,089 single-family homes over the twelve months of calendar 2016. Inventory of resale single family homes market wide has remained constant year over year. Currently there is an inventory of 23,372 true resale listings which is 3.5 months of supply, well below the six-month mark considered a healthy equilibrium level. MLS transactions of resale homes reflected a median price of $224,500 in December 2016, up a robust 12.1% from one year ago.

“The market appears to have peaked this cycle in 4Q14,” said Dean. “Metrostudy anticipates a total year over year 3% to 5% increase in Houston single family starts at the conclusion of 2017 followed by a more robust 7% to 9% increase at the end of 2018.”

Metrostudy’s fourth quarter survey reflects a total of 15,238 new homes in inventory, including models, homes under construction, and finished vacant homes. This is down 8.7% from the Q4 2015 overall inventory number. Finished vacant inventory is up 12.1% year over year. Builders continue to contract starts in order to absorb some of this finished vacant inventory: homes under construction decreased by 17.4%, from 10,428 in Q4 2015 to 9,513 in Q4 2016. The percentage of all homes in inventory that are finished vacant has remained above the 35% equilibrium threshold identified by Metrostudy in 4Q for the first time in 2016. The current percentage of all homes in inventory that are Finished Vacant is currently 39.2%.

Lot deliveries continued to exceed starts in Q4, with 7,013 lots delivered compared to 5,574 home starts. The Houston market finished the Q4 2016 with 5,069 more lots delivered than homes over the previous 12 months. That takes the market inventory of VDLs to 46,700, a slight increase over last quarter but still within equilibrium levels at 22.0 months’ supply.

Delays in lot deliveries kept the market in balance below equilibrium levels through 2015. Lot inventories exhibited an increase in 2016. Given relatively low levels of additional replacement lots currently under development, Metrostudy projects most of the nine market areas to remain at or below equilibrium in terms of VDL inventory for the next twenty-four 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.