Every week, we ask a Houston real estate professional for their thoughts on the top three stories from the week before. This week, we spoke with Will Holder, President at Trendmaker Homes.
Houston Agent (HA): With the Houston market currently focusing on luxury homebuyers, do you think the trend will change, and if so, what will cause that change?
Will Holder (WH): New homes have to position themselves in a luxury vein. Even starter homes today are luxurious by standards of 10 to 20 years ago. A starter home today is like the dream home I had. When I was buying my starter home, it was a very basic home. Today, buyers expect more. They expect homes to be modern, and to have a very high level of finish. Buyers are looking for homes to be energy efficient, to be maintenance free, the characteristics you would expect with luxury homes. Standards have gone up significantly, and you have to meet their expectations to be competitive.
HA: How do you expect the drop in oil prices will affect the Houston market?
WH: The strongest indicator of the new home market is net job growth, or lackthereof. Houston is the number one homebuilding market in America and, while it will slow down, I believe it will remain number one. Houston is heads above the number two market, so I believe we can experience a decline and still remain the number one housing market in America.
Additionally, there have been about 100,000 new jobs in Houston created each year over the past few years. Historically, the ratio of new jobs to new homes is about three to one. At that rate, we should have been building around 33,000 homes. Instead, Houston’s seen around 25,000 new housing starts. The remainder went into apartments or rentals. For a majority of those people, that’s not a permanent solution. They spend about a year or two feeling out the area, getting to know the commute, what schools to send their kids to, and then they buy. This is a common pattern in growth markets. What that means is that, over the new few years, those renters will become buyers, and while that won’t completely undo the slower market, but it will soften it.
HA: Do you think the slowdown will affect that job growth?
WH: About 20 percent of jobs created in Houston are in the oil and gas related industries, but 80 percent are not. We have a diverse economy. Houston is supported by the largest port in the United States in tonnage. That port was just recently dredged to support deep water ships. The healthcare industry is gigantic in Houston with larger staff needs as more hospitals go up.
That’s not to underplay the slowdown of the oil and gas markets. That’s huge, but looking at it in a myopic way is a mistake. It’s not like the automobile industry in Detroit. Houston is diverse enough to endure.
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