Still booming? (Houston, Dallas, Plano: townhouse, neighborhoods, depreciation)
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I've lived in Calgary and the home prices were outrageously overpriced. Our coworkers paid a million for a small three bedroom house. We just rented a small town home and still spent 2500$ a month. It was absolutely ridiculous.
Calgary is not so diversified as Houston.
The Canadian dollar has fallen to something like 80 cents to the american dollar. So I think it is a bit different to compare the two cities.
Houston will suffer and the real estate market may flatten a bit. We might see a return to earlier pricing on homes, but it won't be a crash.
The market areas I watch many are still going pending within the first week of list. I think it will flattened,but the market will vary from area to area. Maybe even more drastically than in the past. The commute isn't getting an better.
Where I see an issue close in is in 77007, where there is a glut of new, three to four story townhouses with no yard,no elevator, no guest parking, and all list around 700k. I think there will be some good prices drops there, imho.
In the MPC I'm in here in 77433, my builder just raised the prices $12k across the board and opened a new section this past weekend which they've already sold several lots in over the weekend. The two remaining inventory homes in my section sold over the weekend as well. Base price of my home has gone up $26k in less than 12 months. It's still hot out here in CYP.
Quote:
Originally Posted by EasilyAmused
The market areas I watch many are still going pending within the first week of list. I think it will flattened,but the market will vary from area to area. Maybe even more drastically than in the past. The commute isn't getting an better.
Where I see an issue close in is in 77007, where there is a glut of new, three to four story townhouses with no yard,no elevator, no guest parking, and all list around 700k. I think there will be some good prices drops there, imho.
The effects of the crude downturn will still take some time to trickle down to Houston 's housing market. I imagine we will start seeing the effects by the end of this year and into 2015
Sorry to disappoint those hoping for a housing crash because of the softness in the crude oil market, but this is not the 1980's anymore and an oil bust devastating Houston again to that extent is impossible today.
Houston has diversified as has the Oil&Gas business. Those asking what other industries Houston has, let me help you out:
1) Medical/Healthcare- as many have pointed out, the Medical Center is a huge employer. Not just the Medical Center, though, the healthcare industry is pervasive throughout the US economy and in Houston it is not just in the Medical Center. The population is much older now with a lot more treatment options and a lot more bureaucracy to go along with it.
2) Transportation- The Port of Houston is the largest port by gross tonnage imported in the United States and keeps getting bigger. In fact, once the Panama Canal widens in a couple years the Port of Houston is going to grow even more. In 1980 the Port was big, but mostly handling Petroleum related products. Today, it is Petroleum, Containers, Dry Bulk, Automobiles and all sorts of other things. Also, there is many times over more international trade today than in the eighties. And of course, Houston is a railroad town, and that business keeps booming. Latin American trade is exponentially larger than the 1980's. Shipping in general is huge here independent of the Port. There are ships brokers, Energy majors have their shipping businesses here, there are freight forwarders, surveyors, maritime lawyers and any number of other high paying jobs.
3) Commodity Trading- Houston is the center of the world when it comes to trading energy and that business makes more money when prices are volatile. The big Oil & Gas guys participate in the business, but so do commodity trading firms like Vitol, Mercuria and Trafigura. Also investment banks trade energy commodities out of Houston and JP Morgan actually headquarters all of their global commodities business out of Houston whether it is energy or not. These are all very high paying jobs, by the way, not just the Traders but the thousands of professionals that support them.
4) NASA- Yeah, not what it once was, but still employees several thousand high paid Engineers and professionals in the Clear Lake area.
5) Petrochemicals- This business traditionally does better with the price of oil low and is significantly larger than it was in the 1980's. Houston is the place for this business and by the way, those jobs pay way above the median.
6) Oil&Gas- The E&P piece gets beaten down when the price of oil drops, but the midstream and downstream sectors don't usually. The midstream business was almost in it's infancy still in the early 1980's, today it is a huge industry and centered around Houston. Terminals, pipelines, etc are still making money and those are well paid jobs. Refineries have a lot of Engineers and with refining capacity in the US lagging behind the additional production of the past few years those jobs are going nowhere.
I am sure I am forgetting a significant piece of the local economy or two, but I think you get the idea, there is a lot more to the Houston economy today than back in the 1980's.
A couple other factors to consider:
1) In the early 1980's the oil bust was accompanied by a very deep and painful recession nationally which added greatly to the pain here in Houston. With the added diversity in the economy today, though even a vicious one two punch like that wouldn't have the same effect.
2) The aging work force- The Oil&Gas business in particular is extremely top heavy with older workers. The layoffs you see are going to push the old guys out the door into retirement and make room for the cheaper, younger people in the business. But, guess who are buying all of these expensive homes? It's not the 67 year old Engineer or the Land Man who has been in the business since 1970, it's the younger generation in the business, buying the big house to raise their kids. These people are generally going to be the ones keeping their jobs despite the layoffs. They may not feel too confident about dropping $1Million+ on a house in Oak Forest until Oil rebounds, but their house isn't getting foreclosed upon, either.
So, I can see a flat housing market for a couple of years, but short of a big hike in interest rate, I wouldn't count on getting something for 65 cents on the dollar. Except maybe in Alief.
Thanks for your very thorough analysis of the Houston economy (+1). I lived through the 80s bust and left the city in 2011 when the housing market was in its early stages of taking off. I know there has been much touting since the 80s that the economy was no longer reliant on O&G and could weather downturns in that industry. If the price of crude remains in the $50 range, it will be a test of that hypothesis. Even if O&G does go into serious contraction, I still beleive it will have serious impact on Houston's economy, but hopefully not as bad as the 80s due to the factors you outlined above.
The market areas I watch many are still going pending within the first week of list. I think it will flattened,but the market will vary from area to area. Maybe even more drastically than in the past. The commute isn't getting an better.
Where I see an issue close in is in 77007, where there is a glut of new, three to four story townhouses with no yard,no elevator, no guest parking, and all list around 700k. I think there will be some good prices drops there, imho.
Right, so what about my friends, two couples selling in Garden Oaks/Oak Forest, who have been unable to sell or even rent their well-maintained original 50's/60's homes in the last 4-6 months? This has been a very desirable area for awhile...but maybe its turning totally into rebuilds (eg. Why buy an original 50's ranch for $400k if you can buy the house/lot for $350k and build McMansion?). Just wondering why this area isn't moving lately...
Right, so what about my friends, two couples selling in Garden Oaks/Oak Forest, who have been unable to sell or even rent their well-maintained original 50's/60's homes in the last 4-6 months? This has been a very desirable area for awhile...but maybe its turning totally into rebuilds (eg. Why buy an original 50's ranch for $400k if you can buy the house/lot for $350k and build McMansion?). Just wondering why this area isn't moving lately...
It's the new builds that you are in competition with that affects resale, especially if they aren't completely redone. My neighbor wanted to sell his ranch style home for top dollar, but he was competing against flips that have been gutted and redone.
Right, so what about my friends, two couples selling in Garden Oaks/Oak Forest, who have been unable to sell or even rent their well-maintained original 50's/60's homes in the last 4-6 months? This has been a very desirable area for awhile...but maybe its turning totally into rebuilds (eg. Why buy an original 50's ranch for $400k if you can buy the house/lot for $350k and build McMansion?). Just wondering why this area isn't moving lately...
I posted about this a few weeks ago, the inventory level in that area is three times that of any comparable area. And, of course, the old adage, if its not selling it's priced too high.
Sorry to disappoint those hoping for a housing crash because of the softness in the crude oil market, but this is not the 1980's anymore and an oil bust devastating Houston again to that extent is impossible today.
Houston has diversified as has the Oil&Gas business. Those asking what other industries Houston has, let me help you out:
1) Medical/Healthcare- as many have pointed out, the Medical Center is a huge employer. Not just the Medical Center, though, the healthcare industry is pervasive throughout the US economy and in Houston it is not just in the Medical Center. The population is much older now with a lot more treatment options and a lot more bureaucracy to go along with it.
2) Transportation- The Port of Houston is the largest port by gross tonnage imported in the United States and keeps getting bigger. In fact, once the Panama Canal widens in a couple years the Port of Houston is going to grow even more. In 1980 the Port was big, but mostly handling Petroleum related products. Today, it is Petroleum, Containers, Dry Bulk, Automobiles and all sorts of other things. Also, there is many times over more international trade today than in the eighties. And of course, Houston is a railroad town, and that business keeps booming. Latin American trade is exponentially larger than the 1980's. Shipping in general is huge here independent of the Port. There are ships brokers, Energy majors have their shipping businesses here, there are freight forwarders, surveyors, maritime lawyers and any number of other high paying jobs.
3) Commodity Trading- Houston is the center of the world when it comes to trading energy and that business makes more money when prices are volatile. The big Oil & Gas guys participate in the business, but so do commodity trading firms like Vitol, Mercuria and Trafigura. Also investment banks trade energy commodities out of Houston and JP Morgan actually headquarters all of their global commodities business out of Houston whether it is energy or not. These are all very high paying jobs, by the way, not just the Traders but the thousands of professionals that support them.
4) NASA- Yeah, not what it once was, but still employees several thousand high paid Engineers and professionals in the Clear Lake area.
5) Petrochemicals- This business traditionally does better with the price of oil low and is significantly larger than it was in the 1980's. Houston is the place for this business and by the way, those jobs pay way above the median.
6) Oil&Gas- The E&P piece gets beaten down when the price of oil drops, but the midstream and downstream sectors don't usually. The midstream business was almost in it's infancy still in the early 1980's, today it is a huge industry and centered around Houston. Terminals, pipelines, etc are still making money and those are well paid jobs. Refineries have a lot of Engineers and with refining capacity in the US lagging behind the additional production of the past few years those jobs are going nowhere.
I am sure I am forgetting a significant piece of the local economy or two, but I think you get the idea, there is a lot more to the Houston economy today than back in the 1980's.
A couple other factors to consider:
1) In the early 1980's the oil bust was accompanied by a very deep and painful recession nationally which added greatly to the pain here in Houston. With the added diversity in the economy today, though even a vicious one two punch like that wouldn't have the same effect.
2) The aging work force- The Oil&Gas business in particular is extremely top heavy with older workers. The layoffs you see are going to push the old guys out the door into retirement and make room for the cheaper, younger people in the business. But, guess who are buying all of these expensive homes? It's not the 67 year old Engineer or the Land Man who has been in the business since 1970, it's the younger generation in the business, buying the big house to raise their kids. These people are generally going to be the ones keeping their jobs despite the layoffs. They may not feel too confident about dropping $1Million+ on a house in Oak Forest until Oil rebounds, but their house isn't getting foreclosed upon, either.
So, I can see a flat housing market for a couple of years, but short of a big hike in interest rate, I wouldn't count on getting something for 65 cents on the dollar. Except maybe in Alief.
Great analysis. On top of that I would add Houston will still be seeing +100,000 ppl/year, all of that and previous population growth will bring about a institutional building mini-boom. We've passed a bunch school district bonds, UH is growing academically, and we need more hospitals in almost every corner of Houston; building costs should be lowered as we won't be building nearly as much.
Right, so what about my friends, two couples selling in Garden Oaks/Oak Forest, who have been unable to sell or even rent their well-maintained original 50's/60's homes in the last 4-6 months? This has been a very desirable area for awhile...but maybe its turning totally into rebuilds (eg. Why buy an original 50's ranch for $400k if you can buy the house/lot for $350k and build McMansion?). Just wondering why this area isn't moving lately...
Schools haven't caught up with pricing?
I don't watch those neighborhoods, so I can't give much insight. But Meyerland is right about the old v. The new. An old house has to be throughly updated to the current trend, and have a better location to compete with new.
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