New Housing Construction Statistics
New construction in Houston has sustained despite the low price of oil these past several years. This is far different then the last several oil price cycles Houston experienced in the past several decades. Those oil market corrections left new construction in Houston running for cover and property values stifled for years. The past several years Houston housing starts have reduced from an estimated 64,000 in 2014 to a respectable estimated 45,000 in 2016. After leading the nation in housing starts 2012 – 2014, Dallas has dethroned Houston in 2015 & 2016 as the leading city in starts, according to the US census; https://census.gov/construction. According to Metro Study, during 2016 the actual single family home starts were approximately 28,000 leaving the remaining starts in multi-family and attached housing, such as condos and townhomes.
The Houston housing market new construction consist of both single family detached, single family attached and multifamily housing. Single family home starts typically represents about 3/4 of Houston’s annual housing starts while multi-family annual starts make up the difference. The total amount of the 2016 housing starts (45,000) represent a valuation of approximately $7.4 billion to the Houston local economy. The total amount of existing homes sold in Houston during 2016 annually was in the neighborhood of 80,000 according to MLS. This represents approximately $25 Billion in transactions. The historical results suggest that the existing single family homes sold annual in Houston have an annual range of approximately 50,000 – 70,000 homes.
The new construction Houston housing market consists of 23% of the total sales of home sales in the Houston housing market. The remaining Houston housing market consist of resale homes (70%), REO sales (5%), and foreclosures ( 2%). Single family homes in Houston are typically grouped into multiple price segments. The MLS uses ($100k – $250k), ($250k – $500k), ($500k – $1M), ($1M +). They also distinctively classifies housing as townhomes, condos and single family homes for these same price groupings.
Metro Houston Housing Market Factors
According to the Greater Houston Partnership the projected Houston population trends suggest that Houston will continue to add between 100,000 – 150,000 people annually to the overall population. This growth trend is predicted from historical migration patterns established and adjusted from the past 15 years. The growth in Houston is attributed to the a number of factors such as lifestyle affordability, job growth, housing cost and a steady flow of Fortune 500 companies expanding in the region.
Much of the Houston population growth can be attributed to the abundance of job employment opportunities. During periods of higher oil prices, there is enormous pressure on labor needs. This demand results in a larger amount of migration to Houston to seek employment. This has been a developing trend since the 1970’s due in part to the presence of all the major oil companies. In recent times, oil prices have fallen close to pre 1998 prices. Although oil prices are not expected to rise dramatically for some time due to the abundance of oil inventory, Houston has a strong enough business commerce to continue to grow and attract professionally skilled and semi skilled labor for the foreseeable future.
The vacant lot inventory in Houston continues to shrink, placing increasing price pressure on older homes for the values of the land. This in turns adds more cost to new housing due to the land price component. Land cost traditionally represents between 20% – 35% of the total infill housing construction cost. It is due to this factor that has led builders to construct higher density housing the past decade. There is no reason to believe that this trend will not continue.
The shortage of vacant lot inventory also contributes to rising price pressures on metro area new construction cost of higher end homes. The land prices for buildable lots in finer neighborhoods has more the doubled the past decade. As previously suggested this places greater pressure on rising new construction cost and ultimately trickles down to resale home prices. The cost of new construction has a profound economic impact on all housing during high and low demand housing periods. It is due to many of these factors that have sustained home and land values even during major economic downturns the past several decades.
The current housing inventory levels shift with the supply and demand of sellers and buyers. As oil prices has weaken some of the market demand for higher end homes the past several years, the lower end of housing has picked up a great deal of steam in Houston. The demand for new construction continues to be brisk. Houston has increased the total number of new housing starts 8 consecutive quarters, after a 33% decrease in starts after oil prices plummeted in 2014.
In most US cities this type of dramatic drop would cause a huge spike in inventory levels. This is not the case, rather Houston’s housing market was so hot in 2013 – 2014, that in fact the current level of the general housing inventory has placed the market in a stage of equilibrium. The term equilibrium is used to suggest that there are as many buyers as there are sellers. Hence the market economics are balanced. Currently the high end market is referred to as soft, while the lower price end is strong. The volatility of the housing market and general statistics provide us with an indication for future trends. In Houston, the new construction housing trends are very positive and suggest continue growth for the future.