Houston continues to show strong growth in the housing market during the first quarter of 2018 as the city maintains its second-place position behind Dallas-Forth Worth for annual new home starts. According to Metrostudy, Houston saw a 7.5 percent growth rate in new home starts compared to the first quarter of 2017.
Overall, Metrostudy anticipates a 3 percent to 4 percent year-over-year growth on home starts by the end of 2018.
Last year, growth was driven by homebuilders and developers offering more products and more moderately priced homes ($300,000 and less). This has driven the first quarter of the year and is expected to continue through the rest of 2018.
The largest volume of new homes built are currently within the $200,000 to $299,999 price point, but the $300,000 to $399,999 price range saw the highest year-over-year growth at 14 percent. The $400,000 to $499,999 and $500,000 to $599,999 range saw relatively stable growth.
Builders have also seen new home sales grow due to residents whose homes flooded after Hurricane Harvey being able to re-enter the market.
“These buyers have spent the last eight months focused on managing their damaged homes, temporary housing, insurance claims, and FEMA assistance and are just now able to move forward on purchasing new homes until this timeframe,” Metrostudy reports.
Other impacts that builders are reporting at the beginning of this year are increased cycle times from four to eight weeks mainly due to a significant shortage in specialty labor workers who are rebuilding homes damaged by Harvey.
There has also been an increase in demand for build on your own lot (BOYL) homes in Houston. Residents in the Meyerland and western Memorial neighborhoods are choosing to construct new homes in these neighborhoods as they will be built on elevated slabs to fit the new housing requirements. These homes then will be less likely to flood in the future than their previous homes.
However, inventory of resale single family homes is down 6 percent compared to the first quarter of last year, dropping from 16,935 to 16,544 homes sold on the MLS. This is mainly due to the low levels of supply currently on the market.
“In the first quarter of 2018, the number of new lots delivered (5,130) significantly undershot the number of lots absorbed via new home starts (6,693),” said Lawrence Dean, regional director of Metrostudy’s Houston market. “This represents the fifth quarter in a row of low lot delivery numbers relative to lot absorption. The Houston industry is anxious about the impact of announced and planned changes to land development regulations by the City of Houston, Harris County, and suburban counties. The anxiety centers on the potential for delays in lot delivery due to these changes, in an already lot tight market.”