HOUSTON HOUSING 4Q18: Houston Finishes 2018 as the #2 Market for New Home Starts – Driven by Moderately Priced Attainable Product
- Houston remains the second highest volume new home market in the country, with just Dallas/ Fort Worth achieving a greater number of starts in 2018.
- Houston saw 30,146 new home starts in 2018 – up 10.4% from 2017 levels.
- Volume growth in 2018 continued to be driven by builders and developers increasingly offering a wider product offering including a greater share of more moderately priced attainable product – $300k and below.
- The Houston industry is still anxious about lot supply and the volume of new subdivision developments in the pipeline.
Metrostudy’s 4Q18 survey of the Houston housing market shows that the region has maintained its number two position behind Dallas / Fort Worth in terms of annual new home starts. In 2018, 30,146 new homes were started in Houston – up 10.4% year over year. Annual new home starts volume continues to be greatest in the $200,000 to $299,999 price band. Year over year starts volume saw the greatest increase in the $200,000 to $299,999 price band (up 26.2%) and the $300,000 to $399,999 price band (up 10.7%). The sweet spot of the market in Houston continues to be in the $200,000 – $400,000 base price bands. Annual starts also increased by 18.5% in the $1M+ price band, although this makes up less than two percent of all new home starts in Houston.
“Volume growth in 2018 continued to be driven by builders and developers increasingly offering a wider product offering including a greater share of more moderately priced attainable product – $300k and below,” said Lawrence Dean, Regional Director of Metrostudy’s Houston market. “As a result, volume growth is due to product line and store count growth more than increased position by position performance. This growth dynamic is expected to continue over the balance of 2019 and beyond. Starts exceeded closings in both the fourth quarter of 2018 as well as the trailing twelve months ending in same.”
New home starts were greatest in the West Southwest market area, which has consistently been the case for the last forty eight months. However, the market areas with the greatest year over year new home starts volume increases were the Far North (largest increase for four quarters now) followed by Southwest and West Southwest. These areas saw year over year starts growth ranging from 15.5% for West Southwest to 28.5% in Far North. This represents a significant increase in Y-O-Y starts growth in the important West Southwest market area.
Overall, Finished Vacant Homes in inventory stand at a 2.2 months of supply condition for the second quarter in a row, which reflects a slight decrease from 2Q18. This is still less than the 3.0 months of supply identified by Metrostudy as equilibrium. Increased numbers of new homes under construction across the market create a risk of FV M-O-S increasing in 1Q19. Such an increase was not yet visible from 4Q18 data. In the fourth quarter of 2018, the number of new lots delivered (6,068) very closely mirrored the number of lots absorbed by starting homes on them (6,525). Over the course of the year, 27,818 new lots were delivered which represents a deficit of 2,328 versus the number of lots that were absorbed by new home starts (30,146.)
The Houston industry is still anxious about lot supply and the volume of new subdivision developments in the pipeline. 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 21.8 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. Metrostudy currently identifies 243,018 total future lots in the overall Houston pipeline. Of these, 26,928 of them are currently under construction and will convert to buildable VDL in the near term. This represents a slight decrease over 3Q, but also an increase versus the concerning low volume of lots observed under development in 2Q: 22,411 lots. However, the current volume of future lots under development is still significantly lower than the 32,238 future lots of which Metrostudy observed current land site development in 4Q17, and lower than the 32,959 future lots Metrostudy observed under development in 1Q18.
In the calendar twelve months of 2018 82,177 total single family homes have sold on the MLS, 67,163 of which were true resales. Inventory of resale single family homes market wide is up 16% versus twelve months ago, with 17,823 properties currently on the market. While a 16% increase appears large, the Houston region was still coping with the impacts of Hurricane Harvey twelve months ago and as a result had an abnormally small resale home inventory currently on the market at the time. This reflects 3.2 months of supply. MLS transactions of resale homes reflected a median price of $224,000 in December 2018, up 4% from one year ago.
For information contact:
Lawrence Dean – 713-817-0218
About Metrostudy: Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com
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