It’s one of the nation’s most affordable cities and consistently creates jobs. As a result, Houston has strong demand for housing and has set several records for price rises and sales. But what’s in store for the Houston property market this year? Analysts are unanimous that although sales will be slower the city will still see the highest prices ever.
The big picture
Like all real estate markets, Houston is affected by the economic climate as a whole and by interest rates. With the former poised to slow down and the latter set to continue to rise, the Houston property market faces some challenges in 2019. However, analysts are quick to point out that this doesn’t necessarily mean a falling market.
One of the pillars of the Houston economy stands on the oil industry, which saw barrel prices plummet at the end of 2018. Since then, they have stabilised, a trend expected to continue. “Houston will do reasonably well if barrel prices remain at between US$45 and US$55,” said James Gaines, chief economist at the Real Estate Center at Texas A&M University and quoted in Chron broadsheet.
Houston created thousands of jobs in 2018 when it saw big employment gains. Analysts put this year’s figure at around 71,000 new jobs, enough to keep up strong demand for housing in the city.
Shannon Cobb Evans, chair of the Houston Association of Realtors (HAR) believes that “Houston is poised for a great year”. Interviewed in Chron, she pointed out that the Houston property market offers some of the most affordable homes in the country.
The city has plenty of land and lots of development is currently taking place to meet the demand, according to Cobb Evans. She also pointed out that Houston is a very desirable place to live. “It has lots of positive energy and focuses on quality of life,” she said.
Figures for 2018
The Houston property market notched yet another record year in 2018. Some 82,177 single-family homes changed hands, up 3.8% on 2017. Both years set records for sales. Prices too rose to their highest ever last year to reach a median of US$237,500, up 3.3%. The total dollar volume was considerably higher – up 21.5% to a historically high US$28 billion.
Reflecting the high demand were low inventory levels. Supply remained well below the 6-month level considered by experts to indicate balance. Between June and September, supply hovered at around 4 months, but by the end of the year it had dropped to 3.5 months.
Rental potential on Houston property market
Uncertainty over oil prices and rising interest rates may discourage buyers, but both have very positive effects on the rental market. Relocators prefer the flexibility of rentals and real estate agents have noticed a rise in demand for high-end rental properties in Houston. The higher cost of borrowing also holds buyers back with more demand for rentals as a result.
Houston recorded a very positive year for rentals in 2018. In December alone, leases for single-family homes went up by 13.2%, according to figures from HAR. The average monthly rental rate for single-family homes stood at US$1,771 at the end of the year.
Another record in 2019
On balance, analysts expect more of the same for Houston this year. The Realtor.com forecast for the city predicts a very slight rise in sales – up 0.4% - and a 3.1% increase in prices. The latter figure is considerably higher than the 2.2% increase expected at national level. These forecasts lead Gaines to expect “another record year for the Houston property market”.
(Sources: Chron, HAR)