Supply, supply, supply……..or lack thereof
The Houston Chronicle:
Houston-area home sales were stronger than ever in July, demonstrating a striking resilience in the face of stubbornly low oil prices that threaten jobs in the region’s dominant industry for the foreseeable future.
Buyers closed on an estimated 8,147 single-family homes last month, the Houston Association of Realtors said in a report released Wednesday. That’s the most on record, underscoring the dichotomy between housing and oil that became evident after oil prices started slipping last summer and local energy companies began cutting jobs and spending. Demand for homes also continues to outstrip supply.
“Unless the downturn gets a lot worse for Houston, the supply side is going to put upward pressure on prices for a while,” said Jesse Thompson, business economist for the Houston Branch of the Federal Reserve Bank of Dallas.
While shopping for a house these days isn’t quite as intense as it was a year ago when desperate buyers lined up for open houses and many made offers within the first day, there’s been little sign of the kind of slump that many would associate with a weakening economy.
The recent housing boom, experts say, is a combined result of this area’s expanding population, a diversified economy and the momentum carried over from the last few years of exploding job growth.
‘Crazier’ market
“There’s just a lot of people coming in,” Thompson said. “A lot of these people are not in the energy business.”
July sales were up 6.7 percent from a year earlier, according to the Houston realty association, which estimates the figures to account for late reporting and other anomalies. The figures are later revised.
Last month, the group reported a 4.1 percent increase in sales for June, while revised calculations show a less than 1 percent increase. That number, however, could change again as the data continues to be adjusted each month.
Sales of high-end homes continued to be strong in July, while activity in the lower-priced market declined.
Michelle Motley feels good enough about the economy and her job at a commercial construction firm to offer slightly above asking price for an updated one-bedroom condominium near Memorial Drive and the West Loop.
Now a renter, Motley wants to start building equity in a home so she started looking late last year for something under $200,000 on the west side of town near her office in the Spring Branch area. She had heard how hot the market was inside Loop 610, in places like the Heights and Garden Oaks, but she wasn’t prepared for outside the Loop to be as strong.
“The market was crazier than I thought,” said Motley, who made her offer on the condo Wednesday morning.
Her real estate agent, Colleen Barnett, said Motley may be competing for the unit against cash buyers, who often come with highly competitive bids.
Hoping prices ease
Several years of steep price appreciation in the local housing market has shut out would-be buyers who are now hoping prices will start to ease. Others are having to adjust their expectations.
Seun Larinde, who works in sales, and his school-teacher wife, Courtney, started looking for a bigger house for their growing family about six months ago.
“Naively, I thought $180,000 would kind of get you where you needed to go. I was sorely mistaken,” said Larinde, who is having a four-bedroom house built in a Harvest Green, a new planned community in Fort Bend County.
Real estate agent Ron Jenkins said he hasn’t seen any softness in the neighborhoods where he works, primarily in the western half of the Houston area.
He said established suburbs such as Katy, Pearland and Sugar Land continue to thrive and farther flung places like Richmond and Fulshear also are blossoming. He said the ongoing Grand Parkway expansion has increased mobility and fed demand.
Many of his buyers, however, are plagued by the lack of inventory, primarily for homes priced in the $80,000 to $150,000 range.
“There’s just not enough good homes out there for the amount of buyers there are,” Jenkins said. “I’ve got some buyers I’ve been showing for eight months. If there’s a good home in the market for that price point, then it has five offers on it within three to five days.”
Many of those offers are from investors, Jenkins said.
Inventory levels, which have been unusually low for the last of couple years, have been slowly inching up, the realtors association data show.
‘Upward pressure’
In July, the estimated time it would take to exhaust the supply of homes on the market based on the last 12 months of sales activity increased to 3.4 months. Experts consider a roughly 6-month supply of homes to represent a balanced market where neither buyer nor seller have the upper hand.
The median price of a home was up 8.6 percent in July to $220,000.
The lack of supply, partly driven by a shortage of builder lots, has led to the surge in home prices, Thompson said.
Inventory, he said, “has never been this low nor has it ever been in a trough that’s lasted as long.”
It may be what keeps the housing market from a significant downturn amid concerns over the energy business and the global economy. U.S. oil fell to its lowest point in more than six years Tuesday after China sharply devalued its currency, another potential hit to Houston’s dominant energy industry.
“Unless the downturn gets a lot worse for Houston, the supply side is going to put upward pressure on prices for a while,” Thompson said.”
Now, some folks might be worried about sales at $HHC’s MPC’s in Houston. I’m not and here is why:
Bridgland sales fell YOY but the reason is simple, the MPC just opened for sale in 2014 and builders bought huge tracks of lots to start initial development. Sales will slow as those lots are developed and sold. That condition will probably last for the remainder of the year (a least Q3). Sales will then continue but at a more steady pace.
The Woodlands sales are slowing just as the company has said they would for a year now. Why? The MPC is nearing completion for SF homes. Sales there will continue to fall (condo and apartment sales are strong). Now the good news is that the retail/commercial developments they have done in the area is doing great as NOI continues to rise, significantly (hotels and more retail/office continues to be built to satisfy demand….more NOI).
Conroe, the final Houston MPC won’t even begin lands sales until late 2015. Based on the Bridgeland example, we should see a large suge initially and then a drop off as the initial lots are developed. Sales after that will be more steady. Due to its location, and the fact it is new, lot sales will be for lower price points than in The Woodlands, when this happens, nothing negative should be read into it. MPC lot sale prices are always lower initially and then rise as the MPC is built out.