The Houston Housing Market: Three Years, Three Very Different Beginnings
Yes, the 2012 home selling season is quite young but it has started off strong and is worth analyzing. Each of the past two years has started under the influence of exogenous forces leading to much confusion and uncertainty through all levels of the new home process. This uncertainty has delayed Houston’s realization that it has found sound economic footing and is slowly moving toward a housing recovery inclusive of a general economic recovery.
A quick review of previous selling seasons in Houston and their early beginnings:
- 2010: The Federal Government, in an attempt to boost the national housing market which historically would pull the nation out of recessions, offered home buying incentives to stimulate housing demand. The result was a fury of buying and selling that did, temporarily, increase sales activity.
- The downside to this stimulus was twofold: (1) All the people considering buying a new home in 2010 purchased their home in the first 4 months of the year, resulting in a morale crushing hangover for the remaining 8 months, and in many cases, carrying over into the beginning of 2011. (2) Builders picked up production, in an attempt to capture as much of the stimulated demand as possible, adding slightly to any inventory issues the market might have already been experiencing.
- 2011: Still feeling the effects of the Tax Credit Hangover, the first quarter of 2011 had as few starts as almost any quarter during the recession due to builders have little to no backlog entering the New Year. The local economy could boast six straight months of year-over-year job gains but was still hesitant to believe Houston could be doing better than the national headlines read. This reluctance resulted in a majority of the new home activity occurring in the second half of the year, an anomaly for the market.
Housing demand through the first two months of 2012 is being driven by robust job growth, rising rental rates, and historically affordable interest rates. According to our monthly Builder Survey, a survey of 25 local builders accounting for 72-percent of the local housing activity, traffic is up 12-percent and sales are up over 30-percent through the first two months of the year. As a result, builders are becoming more confident in the demand and their prospects’ abilities to qualify for a mortgage. In order to keep this pace up, builders will need new sections of lots, whose supply could be a limiting factor in the Houston market over the next 18 months.
Regardless, if you’re experiencing any feelings of confidence and optimism for housing, know that it is okay to feel this way. After two years of recession, reduction, and uncertainty, the local market is operating under supply and demand dynamics, independent of outside influences. As a businessman and a Houstonian, there’s nothing more the industry could hope for.