The Houston Real Estate Market Could be a REAL Gusher

Houston, Texas

Recovery has recently been good to the real estate market, and even kinder to Texas. They say, “everything is bigger in Texas” and growth, as of late, in Houston is truly an example of that. While home prices are rising nationally, Houston is not only playing a major part in those demand statistics, but it’s simultaneously growing in supply as well. As of the spring, Houston has outpaced major cities—and even trumps all of California—for the most new-home construction nationwide. It’s both a welcomed sign and result of economic growth for the Houston metro area.

The skinny on what’s fattening the market

The past couple months have seen marked growth in the economy and job market in and around Houston. There has been a year-over-year increase in employment numbers, and it comes as no surprise as Houston has been amongst those in the forefront of job creation like the San Francisco Bay Area, New York, and neighboring Austin and Dallas/Ft Worth. While tech has driven growth in three of the just mentioned cities, the energy industry is taking the bull by the horns and propelling Houston forward. So long as energy giants continue to add jobs at the rate we’ve seen in recent years it will be no surprise that Houston will end up meeting expectations that Houston alone will create more new housing than the state of California by year’s end.

It’s true that, like any market, a rise in employment rates means a growing population and increased demand for housing—Houston is no different in those cases. But, if anything, Houston is special in its own right. The Houston job market has been on pace with gains made in tech-rich San Francisco and San Jose metros. What makes this factor key to understanding the real estate market boom is that the market predictions of continued growth over the next three to five years will be heavily dependent on growth within the local economy itself if the boom is to be sustained. Build them and they won’t necessarily come. However, keep employing them, and they will come—and need a place to live.

New construction: The boon of growth

What we are seeing most rapidly and notably in and around Houston is a boom in new construction. Whereas cities like San Francisco and New York are seeing spikes in home sales, Houston’s market is uniquely making gains via new home sales. Even with the growth in new home construction, demand is still outpacing supply, which lends itself to continued gains in new home prices. Add that to the strong economy and population growth and new and old home prices will continue ticking upward. Whether you’re looking to buy in long-coveted neighborhoods like West University or growing Beachtown, you will find that new-construction abounds throughout Houston’s neighborhoods.

All this new construction is great of course—so long as the market holds. However, it is important to note a particular caveat: new homes are springing up in more affluent neighborhoods for more experienced buyers. Demand on the upper end of the market is largely propelling new unit construction and sales, and builders are flocking to that side of the spectrum. What we are seeing as a result of rising costs too is that new homes are being gobbled up not by first time homebuyers, but rather their more seasoned counterparts. While the city is certainly making gains, it’s important to breakdown the demographic and acknowledge where they’re coming from.

First time homeowners are not so lucky

Houston, for what you get in property, has consistently been an affordable place for buyers. By even the most basic comparisons, you get more bang for your buck in land and square footage here than other booming parts of the country. Think two bedroom condo and no outside space in San Francisco versus four bedroom single family home and over 2000 square feet of living space on the inside alone in places like Beachtown. That being said don’t knock location for being the culprit in why one metro bests the other. More heavily trafficked neighborhoods like Midtown Houston are filled to the brim with retail shops, hip restaurants, and bustling bars and also seeing just as much real estate interest as Haight Ashbury in San Francisco. We are seeing that the people taking advantage of the hot market aren’t first-time homebuyers, but current homeowners, moving to hot areas or selling in hot areas at premium prices. Even with its traditionally younger vibe, more and more middle-aged buyers are snatching up property in Midtown.

One big advantage of homeownership that makes it more attractive than renting is building up equity. In an affordable market, this has been a key driver for first time homebuyers. Unfortunately, while Houston is a more affordable market by national standards, it has become markedly less affordable for people looking to buy their first home. Not only are these potential buyers under pressure to keep up with rising mortgage rates but they are also contending with financial difficulties inherent to this generation including student debt. Additionally, recent numbers show that there is a decline in apartment dwellers moving toward homeownership signaling an indicator that younger, first time buyers are having trouble chasing the heat of the Houston market.  This trend may prove to be an opportunity for upscale apartment developers.

What about sellers?

Despite the rise of new construction, the demand continues to skyrocket in the Houston market. Sellers, just as much as real estate developers, are finding success, like same day sales, and selling above list price, but sellers still need a good agent that knows how to make your listing compete in this aggresive real estate market. Failure to do so may leave money on the table. Whether your listing is in Downtown or the Museum District a seasoned real estate agent will know best how to navigate the market and make sure you benefit from the boom or not overpay in the heated frenzy of the boom.

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.