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Is Real Estate In The Heights Really This Hot


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About 4 days ago, 1606 Harvard went on the market for $459,000.  That's $386 per square foot.

 

Today, it appears the listing has disappeared -- could it have sold that fast?  Anyone have access to someone that is "in the know" about this house?

 

If I could get $386 per square foot for my house, I'd sell today!

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About 4 days ago, 1606 Harvard went on the market for $459,000. That's $386 per square foot.

Today, it appears the listing has disappeared -- could it have sold that fast? Anyone have access to someone that is "in the know" about this house?

Sounds like a bargain to me, which is why it probably sold so fast. I bet they had 15+ showings the first day and at least two offers.
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I refi'd my mortgage 3 months ago, and the appraised price psf ended up well over $300 psf. Standard lot, but extensive renovations, including new garage with apartment above. But $300 is $300.

 

What is a bit scary is that these prices have pretty much jumped just in the last year. Mine is up over 15% in 2 years.

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It's not going to last. New home sales nationwide are already coming down hard as rates go up. Typically there's a few months lag between rate moves and home price reaction, but its coming. Houston is relatively insulated, but I've had so many people tell me Houston housing prices are just going higher that I firmly believe they have to pull back a little bit

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1606 Harvard was sold as is in 2012 and got renovated. Given the market, it may have sold before it listed. Realtors will still put it up on HAR to do a victory lap and get their name out. Per sq ft isn't a very solid metric for the Heights as there is so much variation from one property to the next and from one street to another. Harvard and Cortland get a premium. So do Woodland. Bayland and Highland. Slight discount if you are too close to Shep, Main or the highways. Harvard and Travis get a bump in price, but I have not seen much difference between homes between 20th and 11th in the EHD from those zoned to Harvard. Updated kitchen and bath with tasteful high end stuff goes a long way versus crunchy older house flipper junk.

But prices are way up based on very solid demand bumping up against low inventory. Initially the spike in prices was more a result of pent up demand coming up against very little construction during the bust. But now investors are getting very aggressive and building where ever they can get property. Yet it is not enough to keep up with demand. It is not just the Heights. Sales in West U dropped because inventory is so low.

Fact of the matter is that Houston is no longer cheap. But it is still relatively affordable. In San Fran, you need $800k just to get in the market. There is pretty much no such thing as a single family home under 1 mil in the decent parts of DC inside the beltway.

I think prices have plateaued for the short term and the steep run up in prices will moderate just due to the fact that rising prices make the market more exclusive. But as long as Houston continues to grow, prices will not come back at all. If there is a big shock in the energy biz, we all lose our hats.

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What is a bit scary is that these prices have pretty much jumped just in the last year. Mine is up over 15% in 2 years.

I'm sure the influx of people moving to Houston is a factor. I actually agree with s3mh's take that someone with $900k from a home sale in San Francisco views $500k in Houston as a sweet deal.

What we don't tell them is that July electric bill to cool a 3500sqf house is a doozy. That and property taxes.

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I'm sure the influx of people moving to Houston is a factor. I actually agree with s3mh's take that someone with $900k from a home sale in San Francisco views $500k in Houston as a sweet deal.

What we don't tell them is that July electric bill to cool a 3500sqf house is a doozy. That and property taxes.

 

On taxes, someone who lives in a $800k house is probably paying  north of $10k in California state income tax. Even with our higher property tax rates, the  new resident comes out ahead. When we moved back to Houston from California, our property taxes went from $1900 to $3600, but our state income tax went from $6000 to $0. That's a big win for us.

 

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When you talk to people who move to Houston from places like CA, NY, UK, Norway, etc., it's like Superman leaving Krypton and coming to Earth. Everything (still) just seems so cheap. A $750k, 3000-s.f. house in the Heights seems like a raging bargain. They can live in a close-in neighborhood, in a nicer house than they could buy with twice the money in the market they're coming from.

 

 

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You may be the only person to think that in the entire world.

 

 You have never been to the Midwest. 

 

Inside the loop, most of the new to newer apartment complexes want $1500 for a 1 bed.  When I first moved inside the loop, $1,000-$1,200 was as high as anyone would dare ask in the newest complex.  There were plenty of big complexes renting for $800-900.  Now, $800-900 will get you into an old garden style junker. 

 

Most of the new and newer townhomes in Rice Military are $400k and up.  A few years ago, $350k would buy you all the townhome you needed in Rice Military.  And we all know what has happened in the Heights.

 

In Cleveland, OH, a friend of mine just moved into the newest complex with a lake view, just off of downtown and is paying $1,000 a month for 800 sq ft.  His sister bought a flipped house in Fairview Park (closer in suburb, 15 min to downtown) for $180k (2000 sq ft).  Quiet neighborhood, no crime, great schools, walking distance to the Rocky River Reservation.  That just does not exist within 15 miles of downtown Houston. 

 

Houston is certainly cheaper that the other major metros (DC, NY, CHI, BOS, LA, San Fran), but it used to be that Houston even compared well with the lesser metros.  Now, Houston is definitely more expensive than the smaller markets.  Houston is not cheap anymore.  If things continue to appreciate at the current pace, Houston will definitely lose its cost competitiveness.  All the cheap land is gone in Houston.  If you own, it is a great time to be in Houston.  If you are buying, better get in before things get too good.

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Yeah houston doesn't exactly end once you go outside of 610 (despite what we all think/feel).  Still plenty of cheap apartments and houses outside of the beltway.

 

 

I have family in Omaha... its similar pricing there to the burbs here... whats your point? 

 

 

You can't compare Houston's inner city to lesser metro's inner city, that wouldn't make any sense. 

 

 

 

Houston is Cheap.  Some pockets of houston have greatly increased in value lately (mostly in the loop) but overall for houston the increase hasn't been nearly as drastic plus the starting point was insanely low.  Compare the innerloop to similar area of any other similar metro and it is obviously still a bargain.  (AKA CHEAP)

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Houston remains cheap in the outer areas, and there are thousands of homes at reasonable prices. At some point, redevelopment will move to the near North side, then on to Denver Harbor, etc. There is a lot of land inside the Loop with potential.

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Yeah houston doesn't exactly end once you go outside of 610 (despite what we all think/feel).  Still plenty of cheap apartments and houses outside of the beltway.

 

 

I have family in Omaha... its similar pricing there to the burbs here... whats your point? 

 

 

You can't compare Houston's inner city to lesser metro's inner city, that wouldn't make any sense. 

 

 

 

Houston is Cheap.  Some pockets of houston have greatly increased in value lately (mostly in the loop) but overall for houston the increase hasn't been nearly as drastic plus the starting point was insanely low.  Compare the innerloop to similar area of any other similar metro and it is obviously still a bargain.  (AKA CHEAP)

 

 That all gets back to the study Rice did that debunked the Houston cost of living.  You can get a great house out in Cypress with great schools, but your transportation costs and time spent sitting in the car negate the cost savings.  In smaller cities, you can cut your commute time by a third compared to Houston and get the same house with great schools. 

 

Of course, you say that you cannot compare Houston's inner city to lesser metro's inner city, but that is probably what people say in NY, CHI, BOS, LA, San Fran when comparing their cost of living to Houston. 

 

And Houston isn't that much cheaper than comparable big cities anymore.  $2,000 a month will get you an apartment in most of the comparable cities' urban core, save and except Manhattan.  $1,500 a month in Houston is cheaper, but not that much.  If trends continue, Houston will start to bump up against the other major metros and won't even be that much cheaper.

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Blah, Blah, Blah, Blah, Blah....

http://www.infoplease.com/business/economy/cost-living-index-us-cities.html

S3mh sounds like he knows what he is talking about until facts show up.

Oh, for a good laugh, compare Houston to Cleveland. :lol:

Way to cherry pick data from 2010. I bought my house for about $80k less than it would get today back in 2010. If you would actually read some of my posts you would understand that my whole point is that the recent boom in residential housing has pushed Houston out of its previous comfort zone on housing costs. If you told someone in 2010 that they would have to pay 1500 for an apartment inside the loop they would tell you that you were nuts. Houston's housing costs have crossed a threshold and are no longer cheap. You can pretend it is still 2010 to try to find irrelevant facts. But otherwise the reality is clear to everyone else.

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The market in the Height has cooled off since its peak in May.  It is still high, but in May there was a frenzy where everyone was literally running around like Chickens with their heads cut off.  Realtors were telling their clients they had to be over asking to stand a chance, and relatively modestly priced homes were getting into bidding wars...People want to be in the Heights right now and it all peaked in May.  There were a few really high prices that did close, but several, I can think of at least 3 properties just off hand without digging through HAR realtor data, that went pending, but failed to close because they could not appraise.

 

It became a real problem...people were bidding up houses for more than they were worth, and then banks refused to lend...One house in particular went pending twice, different buyers, did not appraise either time and returned to the market with the same asking price and has now been sitting for 4 weeks.

 

The market is up about 20% since 2006...new construction is driving about 65% of the sales, and existing bungalows and newer construction is the remaining 35%.  Based on the data and comps I see now, we have peaked and prices will likely stay where they are or fall modestly in the next year.  The rapid appreciation of this area was unsustainable, the increase in opportunity crime (car & house burglary) are causing more folks who bought here to rethink their choices, and the lack of quality schools will prevent the housing from skyrocketing any further.  Most of the new residents are families with children or planning on having children, and they are generally only 7 year residents, generally moving on once Kindergarten of first grade hits.  

 

If the Heights could improve the schools, the market in the neighborhood would continue to rise....but until the schools catch up with the price, I think we have reached a peak. 

 

 

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Speaking of cherry picking, did anyone catch the cherry picked data s3mh used in his posts to attempt to make Cleveland cheaper than Houston? Anyone catch the apartment rent numbers that he completely pulled out of his ass? And using his own guess at what his house is worth...is there anything more cherry picked than that?

 

Typical s3mh post. I don't know why he even wastes his time.

 

 Yes.  There is something that is more cherry picked than that.  Using 2010 numbers to argue that the recent spike in housing prices in Houston have not affected the cost of living for Houston.  In fact, calling that cherry picking is being too kind.  It is just outright dumb.  The very first post in this thread is about the most recent rise in housing prices.  All the arguments about whether Houston is cheap or not are centered on the recent rise in housing prices.  And you come in slinging your usual childish insults and tell us how the 2010 cost of living numbers show that the rise in 2013 housing costs are just my imagination.  If you do not like the numbers I related for Cleveland, come up with your own and prove me wrong.  However, this time you will need to use numbers that are actually from the relevant time period for starters.

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The market in the Height has cooled off since its peak in May.  It is still high, but in May there was a frenzy where everyone was literally running around like Chickens with their heads cut off.  Realtors were telling their clients they had to be over asking to stand a chance, and relatively modestly priced homes were getting into bidding wars...People want to be in the Heights right now and it all peaked in May.  There were a few really high prices that did close, but several, I can think of at least 3 properties just off hand without digging through HAR realtor data, that went pending, but failed to close because they could not appraise.

 

It became a real problem...people were bidding up houses for more than they were worth, and then banks refused to lend...One house in particular went pending twice, different buyers, did not appraise either time and returned to the market with the same asking price and has now been sitting for 4 weeks.

 

The market is up about 20% since 2006...new construction is driving about 65% of the sales, and existing bungalows and newer construction is the remaining 35%.  Based on the data and comps I see now, we have peaked and prices will likely stay where they are or fall modestly in the next year.  The rapid appreciation of this area was unsustainable, the increase in opportunity crime (car & house burglary) are causing more folks who bought here to rethink their choices, and the lack of quality schools will prevent the housing from skyrocketing any further.  Most of the new residents are families with children or planning on having children, and they are generally only 7 year residents, generally moving on once Kindergarten of first grade hits.  

 

If the Heights could improve the schools, the market in the neighborhood would continue to rise....but until the schools catch up with the price, I think we have reached a peak. 

 

 Plateau, yes.  Peak.  No.  Things have leveled off because sellers are now pricing according to the current market.  In the spring, a lot of sellers were pricing behind the curve and bidding wars erupted.  As you noted, there is finally some significant new construction coming onto the market.  In the spring, there just wasn't close to enough to keep up with demand.  But if the demand continues unabated, the amount of new construction will bell curve and begin to fall off as flip-able land begins to become scarce.  Cottage Grove, Shady Acres, 1st Ward, Sunset Heights, etc. are filling in very rapidly.  Once the easy land runs out, prices will surge again if demand is still high.

 

The only thing that would put a dent into demand is a bust in the economy that damaged the oil industry.  Crime and schools have been issues in the Heights since 2006 and are always issues for urban neighborhoods.  If anything, the neighborhood will become even more popular in the future as all the new retail/restaurant development continues to surge and amenities like the extension of the hike and bike and a potential park amenity at the Rutland detention pond emerge. 

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 Plateau, yes.  Peak.  No.  Things have leveled off because sellers are now pricing according to the current market.  In the spring, a lot of sellers were pricing behind the curve and bidding wars erupted.  As you noted, there is finally some significant new construction coming onto the market.  In the spring, there just wasn't close to enough to keep up with demand.  But if the demand continues unabated, the amount of new construction will bell curve and begin to fall off as flip-able land begins to become scarce.  Cottage Grove, Shady Acres, 1st Ward, Sunset Heights, etc. are filling in very rapidly.  Once the easy land runs out, prices will surge again if demand is still high.

 

The only thing that would put a dent into demand is a bust in the economy that damaged the oil industry.  Crime and schools have been issues in the Heights since 2006 and are always issues for urban neighborhoods.  If anything, the neighborhood will become even more popular in the future as all the new retail/restaurant development continues to surge and amenities like the extension of the hike and bike and a potential park amenity at the Rutland detention pond emerge. 

Peak was a bad word...plateau is a much better word.  I do not see the market increasing any more over the next year at all....The Heights has now priced itself into a bit of a corner...the newer prices are in line with areas of River Oaks, West U, Memorial, Bellaire, etc.  All of these areas have many of the same amenities as the heights, good parks, good trails, good locations to downtown and other business centers, good restaurants, close shopping, etc, but they also have way less crime and far better schools.  Prior to this year, the Heights was much cheaper than these areas...now - the Heights is priced nearly the same, and in some cases more than some comparable properties in these areas.  With smaller bungalows in the 15-1900sq size getting $300/sqft and nice new construction in the 3,000 sqft range getting$260-$300/sqft...the Heights has lost the affordability it once had....Its going to be a while before we see a notable increase in value again.  To get another 15-20% bump, the Heights is going to need to do SIGNIFICANTLY better on crime, or do SIGNIFICANTLY better with schools.  The problem with the schools being there are still too many low income apartments dragging the Heights schools down.

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Housing costs are, of course, driven by scarcity in relation to demand.  That scarcity can come from a lack of available land, or from restrictions on what can be done with available land. Houston doesn't really suffer from either of these problems.

 

If you look at the more desirable neighborhoods, the entry price to live in them hasn't really moved much, but what you get for that money HAS changed. Ten years ago, $400k would get you a bungalow in Montrose, 5 years ago, a townhouse. Today the equivalent of that monthly payment gets you an apartment.

 

In the Heights, $400k or so used to get you a single family home on a full size lot, then a single-family home on a 3300 s.f. lot, now a townhouse. 

 

Exceptions to this are places where (a) land is still cheap (it's pretty easy to find $5/sf dirt within a 30-min commute of the energy corridor), so prices are still stable; and (B) places which restrict the ability to reduce lot sizes, like River Oaks and the Villages. Houses zoned to the better SBISD schools sit on dirt that's no more expensive than Heights dirt (usually cheaper), but a comparable given house comes with four times as much of it, which is why the entry price there is north of $1M.

 

 

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Peak was a bad word...plateau is a much better word.  I do not see the market increasing any more over the next year at all....The Heights has now priced itself into a bit of a corner...the newer prices are in line with areas of River Oaks, West U, Memorial, Bellaire, etc.  All of these areas have many of the same amenities as the heights, good parks, good trails, good locations to downtown and other business centers, good restaurants, close shopping, etc, but they also have way less crime and far better schools.  Prior to this year, the Heights was much cheaper than these areas...now - the Heights is priced nearly the same, and in some cases more than some comparable properties in these areas.  With smaller bungalows in the 15-1900sq size getting $300/sqft and nice new construction in the 3,000 sqft range getting$260-$300/sqft...the Heights has lost the affordability it once had....Its going to be a while before we see a notable increase in value again.  To get another 15-20% bump, the Heights is going to need to do SIGNIFICANTLY better on crime, or do SIGNIFICANTLY better with schools.  The problem with the schools being there are still too many low income apartments dragging the Heights schools down.

 

The difference between the Heights and places like Memorial or River Oaks (close-in neighborhoods with good zoned schools), is that, while a comparable house in the Heights (3500 s.f., huge lot) is approaching the price of those neighborhoods, buyers have the option of something cheaper. Decent single-family houses in the ~2000 s.f. range, big enough for 2 kids, can still be had for around $500k. Not much available for that price in either Memorial or R.O.

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And Houston isn't that much cheaper than comparable big cities anymore.  $2,000 a month will get you an apartment in most of the comparable cities' urban core, save and except Manhattan.  $1,500 a month in Houston is cheaper, but not that much.  If trends continue, Houston will start to bump up against the other major metros and won't even be that much cheaper.

 

Ok... first thing, $2,000 a month will not get you an apartment in the city core of the other cities (at least one that is anything close to the $1,500 houston one). 

Second... not that much cheaper?  2,000 a month would be 33% more expensive... what would be too much then?  Here on earth 33% is a massive difference.

 

 

 

Houston is cheap.  FACT. (even if the heights is more expensive than it was)

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On taxes, someone who lives in a $800k house is probably paying  north of $10k in California state income tax. Even with our higher property tax rates, the  new resident comes out ahead. When we moved back to Houston from California, our property taxes went from $1900 to $3600, but our state income tax went from $6000 to $0. That's a big win for us.

 

I'm not sure your statement is always true.  Someone in an $800k house in Houston with a homestead exemption will pay about $16,000/year in property taxes (~2%).  I believe that the equivalent tax on an $800k house in CA would be about $6,000 (0.75%), so it is a wash between the two states (assuming $10k in income tax).  

 

Furthermore, once you stop working, you still have to pay the property tax every year, but your income tax is minimal.  So if your Texas home appreciates to $2 million by the time you retire, you're on the hook for $40k/year in property tax after retirement.   Meanwhile in CA, I believe you are paying property tax based on the year you bought the home (no appreciation), so about $6k, and your income is significantly lower.  So your combined income and tax bill in CA is drastically lower than someone in Texas.  

 

I'm sure in many instances someone moving to Texas is better off in terms of lifetime taxes, but I don't think that is always the case.  

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Ok... first thing, $2,000 a month will not get you an apartment in the city core of the other cities (at least one that is anything close to the $1,500 houston one). 

Second... not that much cheaper?  2,000 a month would be 33% more expensive... what would be too much then?  Here on earth 33% is a massive difference.

 

 

 

Houston is cheap.  FACT. (even if the heights is more expensive than it was)

 

 http://www.apartments.com/District-of-Columbia/Washington/Camden-Grand-Parc/22270?searchCriteria=Dy2hfU5rAXd7IxFaKtBPNxOFXed7T2UEI9u0CA0EAfydBPAxPAPXFwuIsmuQ1rK8805FxLecCevKChEhnqUGVTr2LViBHliOJNzo73e9wN6Z/j6u/cQQpyjjgAGcYo/OBa6JsfExlWu7HDlo7XnhtceYQaD7ydHsGiAWjl5rtfrFiD8ngfPAeJO/RYTGvabiAXr270fGQMqxG1759vYIcqN-|-|HVDa9cY&sid=f2132308-f67f-4825-910b-3040ce6ed9fe&stype=cityseo&match=4

 

http://www.apartmentguide.com/apartments/California/Los-Angeles/Hikari/75268/

 

http://www.columbusplaza.com/chicago-chicago/columbus-plaza-columbus-plaza/floorplans/

 

Yes, Houston is cheaper, but not cheap.  That is my point.  You are doing a nice job of trying to change the subject, but the fact is that Houston is not cheap. 

 

And $500 a month is significant except that in places like DC, San Fran, Chicago, and NY, you can get by without a car, especially now with the option of Zipcars and similar services.  When you factor that in, Houston's price advantage becomes much less significant.

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I'm not sure your statement is always true.  Someone in an $800k house in Houston with a homestead exemption will pay about $16,000/year in property taxes (~2%).  I believe that the equivalent tax on an $800k house in CA would be about $6,000 (0.75%), so it is a wash between the two states (assuming $10k in income tax).  

 

Furthermore, once you stop working, you still have to pay the property tax every year, but your income tax is minimal.  So if your Texas home appreciates to $2 million by the time you retire, you're on the hook for $40k/year in property tax after retirement.   Meanwhile in CA, I believe you are paying property tax based on the year you bought the home (no appreciation), so about $6k, and your income is significantly lower.  So your combined income and tax bill in CA is drastically lower than someone in Texas.  

 

I'm sure in many instances someone moving to Texas is better off in terms of lifetime taxes, but I don't think that is always the case.  

 

I think that you're underestimating the tax burden in California.   The main reason being that housing costs in California for comparable sizes/areas are significantly higher so you're paying taxes against a much higher selling price going in.

 

The base property tax rate in California is 1%, but there are a series of other taxes/fees that can drive that up, so generally tax rates are in the 1.25% range.  Also, while Prop 13 does limit the incremental increases in taxable property value, it's pretty hard to see significant benefit in the short term. 

 

For comparison purposes, you're referencing an approx. 3500 sq foot house for $800k in the Heights.  In a comparable neighborhood in the SF Bay Area, a similar house would be well over $2 million.

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I think that you're underestimating the tax burden in California.   The main reason being that housing costs in California for comparable sizes/areas are significantly higher so you're paying taxes against a much higher selling price going in.

 

The base property tax rate in California is 1%, but there are a series of other taxes/fees that can drive that up, so generally tax rates are in the 1.25% range.  Also, while Prop 13 does limit the incremental increases in taxable property value, it's pretty hard to see significant benefit in the short term. 

 

For comparison purposes, you're referencing an approx. 3500 sq foot house for $800k in the Heights.  In a comparable neighborhood in the SF Bay Area, a similar house would be well over $2 million.

Correct -- the analysis would be different if you were dealing with two different priced properties.   I was assuming similar priced properties -- I think most people buy what they can afford, so would be getting roughly the same priced house (albeit that house in Houston may have much more square-footage).  

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