MARKET & TRENDS
HOUSTON
Market Spotlight: Houston TX
HOUSING MARKET MOMENTUM IN 2021
by Fred Heigold III with RentRange® - A leading provider of market data and analytics for the single-family rental industry
ouston’s housing market has very strong momen - tum with limited downside risks in the near term.
HOUSTON THE WOODLANDS SUGAR LAND TX 15-YEAR INDEX: 2005 TO CURRENT Houston-The Woodlands-Sugar Land TX 15-Year Index: 2005 to Current
H
Intense buyer demand paired with low rates and low inventory will drive prices higher through 2021. Sin - gle-family rental prices are set to increase in the begin - ning of the year but will taper off when eviction moratori - ums eventually end. Owners have a record amount of equity built up, and now a myriad of government programs exist to protect borrow - ers and mitigate another foreclosure crisis. Once forbear - ance programs end, we expect home prices to flatten or moderately drop with the increase in inventory. The largest concern for home prices may be one to two years away when the FED begins to raise interest rates again. Even if there is a moderate pullback in home prices over the next few years, we don’t foresee a large crash occurring. HOME PRICEMETRICS In December 2020, the Houston Association of Realtors reported prices of single-family homes hit new record highs. The median price rose 8.7 percent to $273,443 while the average price rose 11.4 percent to $347,164. Median price for condos and townhomes went down 2.7 percent YoY, illustrating the market preference for sin - gle-family homes. Single-family rental (SFR) owners in Houston have realized a steady five-year increase of 23 percent and a 10-year price appreciation of over 56 percent. In the 15-year index chart, home prices have accelerated much faster than rent, incomes and employment since 2012. However, prices have only recently caught up to parity with income and rent growth, and just starting to overshoot slightly in the last year. One concern here is weak employ - ment growth over the last five years, and the recovery in jobs has only recently surpassed levels back in 2014.
5%
55%
Legend EGEND
50%
50%
Employment Change Household Income E pl y Househ l I c
45%
45%
Home Value Rental Price Home Value Rental Price
40%
40%
35%
35%
30%
30%
25%
25%
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
-5%
-5%
2006
2008
2010
2012
2014
2016
2018
2020
Houston home prices will continue to rise in 2021. Historically low mortgage interest rates will continue to motivate homebuyers and investors to compete for limited inventory. Rates are expected to remain low until 2022, but signs of inflation are beginning to show, which could cause the FED to raise rates earlier than expected. Currently, the upside demand factors are driving all the market momentum and many of the downside risks are possible. SFR Price Upside Factors: 1 Low mortgage interest rates will continue to drive high demand for homeownership and investing. 2 New listing inventory has been steadily declining, and total active inventory has dropped by nearly 35 percent vs. December 2019. Houston averages about 3.5 months-of-inventory over the past 10 years. In December, MOI was down to its lowest level in history with only a 1.9 months’ supply given the current sales velocity.
Houston MSA Home Price Forecast through 2021: +5 percent to +7 percent
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