Houston: Frenzy AND Fizzle for First-Time Home Buyers

Houston Texas

Houston is bustling. Houston is growing. Houston is on the progressing. But is Houston really the best place to buy your first home?

While other real estate markets, residential and commercial, are struggling to break away from recession numbers, Houston is floating on cloud nine. Thanks to a healthy economy and consistent job growth Houston is experiencing something of a Golden Age that few cities–even its neighbors in the Lone Star state–have been able to replicate in recent years. Of course the energy sector is big driver of this growth, and energy is a part of the job description for any successful Realtor in the Houston area.

But how much are first time home buyers really benefiting from the growth? Homebuilding projects in the Houston area continue to regularly multiply, but to what extent and to whom is great opportunity afforded to?

Building up, and building out

Construction activity in Houston has been outpacing the national average with expectations calling a 50% increase in new homes in 2014 versus the local historical average. While new construction means more supply the irony is that the new construction is contributing to a supply unattainable to a good portion of active buyers in the market. A unique characteristic of the Houston construction boom is that it is coupled with strong price gains. Unlike most other markets, Houston contractors are reaping the benefits of the increased construction projects. So what’s the problem for first time home buyers in particular? You could expect that with the growth in jobs, influx of new residents, and booming economy buyers would be able to keep up with the pace. But, not so fast.

A closer look at the data shows that Houston builders and developers are creating less offerings for buyers on the lower end of the spectrum and often times these are the first timers. As the housing market in Houston has recovered, so have material costs which builders are passing on to homebuyers. Over time, builders and developers have found that mitigating these increasing costs are easier by building homes at higher price points. Therefore, while developers and builders are still trying to keep pace with overall demand, segments of the market are being left with the dust.  Unless first-time homebuyers are able to shell out for higher price points–sometimes twice as much as the average spend–then newly built homes are out of their reach.

What does this mean for what is in the market?

While newly built homes may be out of reach, this spells a bit of trouble for inventory overall. As inventory dwindles with builders developing less affordable starter homes, the situation becomes a little more cost-prohibitive for first time buyers. In early 2014, only 9.8% of new houses in Houston started in the $150,000 and under range versus 19.1% just two years earlier. On the other hand, the proportion of homes in the $300,000 and over range made up 39.4% of the market. First time buyers are being challenged more and more to meet these higher ranges. What does this mean for current inventory? Buyers will likely fall prey to bidding wars and challenging searches. For those buyers who are less resilient or are financially inflexible relative to the market, continuing to rent may be the only option–at least until an affordable supply becomes available again.

So where can first time buyers find deals?

So if you are a first time buyer in Houston nowadays, there may not be a plethora of deals, but if you are patient and willing to play the game with sellers then your first home could very well be awaiting you.

While the bustle of Midtown may suggest it is a pricier locale, not all neighborhoods are off-limits to buyers. The east end of Midtown yields new to newer townhomes in the $200,000s. Of course as you head west into Midtown prices skyrocket, but if proximity to local bars and restaurants appeals to you it’s not out of reach.

Glenbrook Valley has consistently been a stronghold of affordability. Median home prices hang in the $100,000s, quite the friendly range for younger, first-time buyers. For those who appreciate an older home or are game for a renovation project, Glenbrook has much to offer.

If you are looking for a more suburban home base with an established reputation for homes holding their value, Champion Forest is a winner–no pun intended, of course. Buyers who are able to shell out for a median priced home for $230,000 will enjoy traditional, nuclear-family style homes. The neighborhood also boasts proximity to an airport–Bush Intercontinental Airport–museums, and cultural centers. Champion Forest certainly makes a first time buyer’s dreams of the “American Dream” type home available.

Your first home awaits…

The short of it is this: the Houston market is certainly booming, perhaps more than a first-time buyer on a tight budget can handle. That being said, if you come to the table prepared and with the right Realtor who can help you navigate the market, your first home just might be in booming Houston.

If you are buying or selling a house and are looking to hire a successful real estate agent to help you through the process, take a look at AgentHarvest's list of top-ranking local Realtors in your area. We found these agents by examining their sales track records, awards, rankings, client testimonials and by conducting personal interviews.