As region pulls out of bust, housing market booms

“I analyze numbers to death,” said Shelor, who recently left his longtime job as an energy trader to move closer to family and start his own bakery. “Before we even sat down with a Realtor I had forecasted what I thought we were going to list it at.”

The couple just put up the for-sale sign, confident they could have a contract in as few as 14 days. Their optimism may be well-founded.

As the greater Houston economy slowly climbs out of one of the worst oil busts in decades, the housing market is soaring to new heights.

Houstonians purchased more homes in this region last year than any year on record and at a median price never before reached in Houston, new data show.

From Cypress to Baytown, Fort Bend to Friendswood, two-thirds of Houston-area neighborhoods saw sales price gains in 2016, according to an analysis of home sales and prices collected by the Houston Association of Realtors for the Houston Chronicle .

Analysts attribute the strength to improving consumer confidence, still-low mortgage rates and a seemingly endless pent-up demand.

“We still have a very dynamic housing market,” said Ted Jones , chief economist for Stewart Title Guaranty Co. “We’re on track for another record, no question.”

From Jan. 1 through April 15, sales among the largest segment of the market – homes below $500,000 – were up about 3 percent over the same period last year. The million-dollar-and-up market, which slowed last year, was up 16 percent.

Records, however, can be both a blessing and a curse.

While sellers are doing well, buyers have been grappling with rising housing costs, exacerbated by limited supply and increased demand for moderately priced houses.

The median price of a single-family home that sold last year was $221,500, up 4.5 percent over 2015 and a striking 43 percent from 2011, the Houston Association of Realtors found.

Rising mortgage rates stand to further squeeze buyers already feeling pinched by higher prices.

Those anticipating a rate increase are trying to lock in what they can now, said Cheryl Young , senior economist at Trulia .

“The consensus is there will be a couple more rate hikes this year, which will affect 30-year fixed rates,” she said.

Despite widely discussed concerns over the cost of housing in Houston, once considered a bastion of affordability, Jones said the age-old ‘Drive till you qualify’ mantra still rings true, meaning there’s reasonably priced real estate the farther you get from the city center.

“If you go out to Katy or Sugar Land or The Woodlands, our new-home builders are building a lot of bang for the buck,” he said.

Realtors, too, say sellers are becoming more realistic with their prices.

Vikki and Rich Evans recently outlined to their clients the importance of pricing a home to sell.

“In a hot market with many buyers, a fairly priced home could receive multiple offers because people recognize it’s a good deal. It may even spark a bidding war that drives the final offer above your asking price,” the couple wrote in an email promoting one of their listings in West University that sold above list price in three days.

To be sure, the downturn in upstream energy put an end to the red-hot job growth that made Houston the envy of other major metros.

But instead of collapsing the economy, job growth continued, albeit much slower, thanks to health care, retail and other industries that have helped diversify the city beyond oil and gas.

Jones said the boom in leisure and hospitality jobs helps explain why the housing market is doing so well.

“This is my leading indicator of consumer confidence,” he said. “If you have losses in leisure and hospitality, you have people that are retracting. They’re not spending money. They’re worrying about the future.”

Gains in that sector show people are going out and generally feeling positive.

“I think it also explains whey we’re seeing people buy houses,” he said.

Now that oil prices seem to be stabilizing at around $50 a barrel, energy and manufacturing sectors are again starting to grow.

Consulting firm Meyers Research estimates sales of new homes in Houston will be up as much as 10 percent this year.

“We still have a fair amount of expensive inventory to work through, but it’s improving,” said Scott Davis , senior vice president for Meyers in Houston.

Single-family sales were up 3.7 percent last year, with 76,449 homes selling through HAR’s Multiple Listing Service .

Last summer Jeff Hollinden received an unsolicited offer for his 1950s ranch-style home in Old Braeswood, a tactic often employed during the boom before the oil bust.

Hollinden and his wife have lived in the house 15 years and had talked about moving before they were approached by a local couple who liked their neighborhood and the nearby schools.

The pairs started talking and got close to a deal, but the homeowners ultimately had a change of heart.

“They made a very fair offer, but then we thought, ‘What are we going to do next?’ We like our house too much,” Hollinden said. “We had to call and renege.”

Across town in Glenbrook Valley, a historic district near Hobby Airport , there’s been little for sale, propelling home prices to new highs.

Longtime Glenbrook Valley Realtor and resident Robert Searcy put his own house on the market at the end of March and he had a full-price offer in seven days.

He was asking $345,000 for the mid-century ranch with vintage tile bathrooms, a mahogany-paneled den and original cabinetry and hardware in the kitchen that’s been refinished.

Searcy said there are only six active listings out of 1,254 homes in the neighborhood.

“For years it was customary to have a couple dozen houses on the market,” he said. “There’s only been single-digit availability.”

While the overall inventory of homes for sale in the Houston area has been inching up, many homeowners are staying put longer before selling.

During the first quarter of 2017, local homeowners had lived in their house an average of 7.4 years, up 2 percent from a year ago, according to ATTOM Data Solutions.

That’s part of what can create a logjam in the housing market. If a homeowner can’t trade up to a nicer or bigger house because prices are too high or there’s little available, then first-time buyers have less to choose from.

“We call that phenomenon gridlock,” said Young, the Trulia economist. “People get stuck and that keeps inventory from replenishing the starter-home market.”

Court Simpson, who recently moved back to Houston after living in Seattle for several years, finds the real estate market here to be uneven.

“If you asked about Seattle I’d categorize it as overpriced, cramped,” he said. “Here’s its just all over the place. It’s frenetic, scattered.”

Simpson is looking at townhomes inside Loop 610, but he’s been cautious to jump in.

A property he toured in Montrose that was listed for $799,000 “had been sitting there for a while.”

He said a lot of what he’s seen seems overpriced.

“Then I heard on NPR this morning that the price of oil is going up,” he said earlier this month, “so I’m thinking it might be time to do something.”