In this article we pick up our Taste of Texas series, exploring the Texas real estate market at the beginning of 2019. Read the full intro here.
Weathering the Market in ‘Space City’
Despite the damage inflicted when it made landfall as a Category 4 hurricane in August 2017, Houston weathered Hurricane Harvey and recovered fairly quickly in many ways.
Known as “Space City” as the site of NASA’s Manned Space Center, Houston is the largest city in Texas and the fourth largest in the country. And while its population growth has slowed down, the metro area is projected to exceed 10 million people by 2040.
“Houston is benefiting from people moving from other states,” said Jones, the chief economist at Stewart Title. “We lost thousands of jobs after Harvey, but recovered three months later.”
According to Jones’ data, the number of net new jobs in the Houston metro area were up 3.87 percent for the 12-month period ending October 2018, and up 10 percent for the five-year period through the same month. Unemployment in the metro area was 3.8 percent for October 2018, down from 4.4 percent for the same month the year before.
“We have more jobs than any time in history,” he noted.
Until Harvey hit in 2017, the Houston real estate market was primarily overbuilt, said Jones. Prior to the storm, builders had constructed as many as 70,000 new Class A apartment buildings that sat unoccupied. But Harvey destroyed so many homes that the oversupply of vacant units were quickly absorbed.
“All the indicators for real estate in the market are pretty green right now,” said Brian Foster, head of sales and marketing for Texas Turnkey Properties. “The market is being driven by job growth and that’s driving population growth. All the people coming in need a place to live. The biggest challenge we seem to be facing is getting enough inventory.”
Foster’s company focuses on purchasing homes in the $130,000 to $175,000 price range with three bedrooms, two baths, a garage and a backyard, typically 1,500 to 1,600 square feet.
Foster notes the majority of investors are coming from either of the two coasts. For those who are coming, a 1 percent rent-to-value ratio is the ideal, although not always achievable.
According to ATTOM Data Solutions, affordability in Harris County was down 9 percent in the third quarter from a year ago, with a median sales price of $221,888. Average monthly rent was $1,565 for a three-bedroom home during the quarter, a 9 percent increase in rent from a year ago and providing a potential annual gross rental yield of 9.5 percent.
For the Houston metro area as a whole, the median sales price for a home was $231,563 in the third quarter, a 3.5 percent increase from the same period the year before, and a 103 percent upswing from the post-recession bottom price reported in the third quarter of 2012.
Still, there is opportunity in Houston. While way down from their peak before the Great Recession, the number of foreclosure auctions in the metro area is up 54 percent from a year ago. A total of 8,953 Houston-area properties were scheduled for foreclosure auction through November 2018, up from 5,806 during the same period in 2017.
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