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Dallas may have overtaken Houston as the top housing market nationally, but don’t count out the Bayou City.
Houston fell to No. 2 in both new home starts and sales, according to first-quarter results from Meyers Research LLC, a Beverly Hills, California-based residential real estate advisory firm. However, Houston homebuilders should not fret, said Tim Sullivan, managing principal of Meyers Research.
“Houston’s still a sizable market,” Sullivan said. “You’re just going through some shifts in the market. It’s a natural cyclical thing.”
Houston’s once red-hot housing market has cooled amid the oil slump, which has claimed thousands of jobs in the city’s energy sector. New home construction is slowing down as homebuyers become more hesitant to open up their wallets and purses amid the energy downturn.
However, homes priced from the $200,000s to the $400,000s are still selling quickly despite the oil slump, Sullivan said. Millennial homebuyers — some of whom are now starting families — are beginning to jump into the housing market as home prices have flattened and interest rates remain low.
“Home prices at $250,000; $260,000, that’s where we’re seeing the greatest absorption,” Sullivan said. “We see major opportunities here, as there are fewer subdivisions in that range.”
Meyers Research expects many residential developers and homebuilders will continue to develop land in Houston’s outer suburbs to accommodate the growing demand for affordable homes. Brazoria, Montgomery and Waller counties will begin to see more activity in the coming years, especially with major sections of the Grand Parkway now open, Sullivan said.
And, the Bayou City’s growing medical sector will help the region weather the energy slump, Sullivan said.
“The sector we see growing the most nationally right now is the medical industry,” Sullivan said. “Look at San Diego, which has has become a pharma, biotech, tech and education center. Houston has a similar track ahead of it."
Homebuilders ought to capitalize on Houston’s growing demand for entry-level homes and homes near the city’s booming medical sector, Sullivan said. Other demographics, like active adults ages 55 and older and workers in the petrochemical sector, also represent opportunities for builders.
“Houston has hell of an opportunity,” Sullivan said. “The city is diverse, and the product and prices are right. You’re feeling pain right now, but the demographics are in your favor.”
Here are the top-selling residential subdivisions in Houston (including both master-planned and smaller communities) during the first quarter, according to Meyers Research:
- Harmony(60-foot Chateau series) by Taylor Morrison Home Corp. (NYSE: TMHC): Absorption rate of 25.8 homes
- Sweetgrass by Del Webb, a division of Pulte Group Inc. (NYSE: PHM): 13.8 homes
- Parc at Midtown(condos) by Surge Homes Development LLC: 12.5 homes
- Southridge Crossing by Centex Homes: 9 homes
- Mission Trace by Express Homes: 8.9 homes
- Yorktowne Oaks by KB Home (NYSE: KBH): 8.8 homes
- Brookwood Forest Springs by KB Home: 7.7 homes
- Bridges on Lake Houston by D.R. Horton (NYSE: DHI): 7.4 homes
- Deerbrook Estates by LGI Homes: 7.3 homes
- Ranch Crest by LGI Homes: 7.1 homes
Paul Takahashi covers residential and multifamily commercial real estate for the Houston Business Journal. Follow him on Twitter for more.
