Is Real Estate In The Heights Really This Hot

[Cortlandt/5th]

I failed to read all of the above comments yet I still find it hard to believe that there were outright "bidding wars" for houses in the heights. If you are telling me that a 1900 sq ft house asking 500k had a bidding war from March - May, then I would say that you are crazy. It didn't happen. Period.

 

Now, I will amend my statement by saying there were "bidding wars" for lower priced houses. Surely, (using the example from above), a 1900 sqft house asking 400 - 425k from March to May did have several different suitors.

 

Bottom Line. Is the price of living in Houston comparable or higher than the other top 10 most populous cities = it's at the low end.

[s3mh]

Most of the bidding wars were for bungalows that got the interest of investors and were in a price range that was more accessible to more people.  But, on my side of town, a 2900 sq ft new construction on a small lot sold for @730k in the spring.  The house had a bidding war just based on word of mouth from realtors and the builder.  I also know some people who paid just over 800k last spring for a new build in the eastern HD and had to out bid a couple of other people.  Both never listed, so I do not know what the builder/investor had for the asking price.  My understanding is that the one that sold for 730k went for tens of thousands above what they intended to be the list price. 

 

 

Houston isn't that cheap when you stop looking at real property prices in a bubble.  When you factor in housing and transportation costs, Houston is only 26th in the largest 50 cities in terms of affordability:

http://blog.chron.com/primeproperty/2013/09/houston-not-so-affordable-after-all/

 

 

 

 

[Marksmu]

In markets like West U and Tanglewood, fully renovated means nothing when it comes to whether the original housing stock will bought to demo or to live in.  Someone looking to build a 2-3 mil house in the neighborhood will not blink at paying 500-600k for a lot.

 

 

You seem to have the very incorrect opinion that people who can spend millions on a home don't care about cost or getting a good deal.  It is quite the opposite.  The people who have millions, have it b/c they are smart and good with money.

 

I have never yet met a person with millions who squandered and spent like an idiot.

[SilverJK]

Most of the bidding wars were 2br bungalows that were listed between 250-350k.  From what I can gather from Realtors and a few friends that sold...  The bidding wars were pretty much just during April-June, and a few of them (one being a friends house) fell through.  I almost listed my house in June... but decided I'd rather rennovate in 2 years as I couldn't find anything in my price range that would compare to my house with a renovation (which will cost hundreds of thousands less with initial cost + rennovation vs buying 3/2 with 2 car garage and yard space and probably 50k less than buying - profit.)  

[s3mh]

You seem to have the very incorrect opinion that people who can spend millions on a home don't care about cost or getting a good deal.  It is quite the opposite.  The people who have millions, have it b/c they are smart and good with money.

 

I have never yet met a person with millions who squandered and spent like an idiot.

 

I was just saying that when your budget for a house is 2-3 mil, 500-600k for land is a perfectly reasonable amount to pay.  And you can expect to find people willing to pay that much.  People are paying 800-1 mil for "teardowns" in River Oaks and Tanglewood.  500-600k for land in West U/Bellaire/Spring Branch is very reasonable if your overall budget is 1.5mil+.  Whether that individual should be putting that kind of money into a house depends largely on individual needs.  I know some big plaintiff's attorneys who put about as much money into their homes as the could possibly manage because Texas has no limit on the homestead exemption for judgment creditors.  If they get sued for malpractice or get in a dispute with a partner, they can just take a line of credit against their house if everything blows up.  But for others who do not carry as much risk in their jobs, it might be smarter to live below their means and keep more liquidity for investment opportunities. 

[livincinco]

Houston isn't that cheap when you stop looking at real property prices in a bubble. When you factor in housing and transportation costs, Houston is only 26th in the largest 50 cities in terms of affordability:

http://blog.chron.com/primeproperty/2013/09/houston-not-so-affordable-after-all/

I believe that same study found New York to be the 4th most affordable, so I'm a little skeptical of their methodology.

[Angostura]

Houston isn't that cheap when you stop looking at real property prices in a bubble.  When you factor in housing and transportation costs, Houston is only 26th in the largest 50 cities in terms of affordability:

http://blog.chron.com/primeproperty/2013/09/houston-not-so-affordable-after-all/

 

 

The study says that someone whose income is at the median can find housing in half of the city that comes in under the 30% of income affordability criteria. So, basically, half of the city is above average.

 

Comparing like-for-like (square footage, quality, proximity to work), Houston still scores pretty well. Try finding a 2300 s.f. single family house in a good neighborhood within 15 minutes of downtown in any top-10 metro area for the same $500k you'd spend in Houston for the same house in the Heights.

 

With respect to the "housing-plus-transportation" argument, based on what I see on freeways and parking lots, it strikes me that people in Houston tend to buy nicer/bigger cars than other cities, largely because they save money on housing.

[s3mh]

The study says that someone whose income is at the median can find housing in half of the city that comes in under the 30% of income affordability criteria. So, basically, half of the city is above average.

 

Comparing like-for-like (square footage, quality, proximity to work), Houston still scores pretty well. Try finding a 2300 s.f. single family house in a good neighborhood within 15 minutes of downtown in any top-10 metro area for the same $500k you'd spend in Houston for the same house in the Heights.

 

With respect to the "housing-plus-transportation" argument, based on what I see on freeways and parking lots, it strikes me that people in Houston tend to buy nicer/bigger cars than other cities, largely because they save money on housing.

 

My point has always been that things are changing in Houston.  Houston is definitely affordable, but gone are the days where $250k got you 3000 sq ft new construction in the burbs with great schools or a cute little bungalow or townhome close in.  Back then, Houston was cheap.  Houston has gone from cheap to affordable and if all things stay constant will begin to push the cost of living in northern cities in a few years.  That is significant because the major advantage Houston has on other cities is gradually eroding away.

 

Of course, I cannot possibly argue with your survey of parking lots in Houston.  That is clearly irrefutable evidence.  You shouldn't be burdened with having to substantiate that assertion. 

[Houston19514]

My point has always been that things are changing in Houston.  Houston is definitely affordable, but gone are the days where $250k got you 3000 sq ft new construction in the burbs with great schools or a cute little bungalow or townhome close in.  Back then, Houston was cheap.  Houston has gone from cheap to affordable and if all things stay constant will begin to push the cost of living in northern cities in a few years.  That is significant because the major advantage Houston has on other cities is gradually eroding away.

 

 

Good points, except I'm not sure that the days of getting 3000 square feet new construction single family homes in the suburbs with great schools for $250k are gone.

[SilverJK]

My point has always been that things are changing in Houston.  Houston is definitely affordable, but gone are the days where $250k got you 3000 sq ft new construction in the burbs with great schools or a cute little bungalow or townhome close in.  Back then, Houston was cheap.  Houston has gone from cheap to affordable and if all things stay constant will begin to push the cost of living in northern cities in a few years.  That is significant because the major advantage Houston has on other cities is gradually eroding away.

 

 

Back then???  even in 2010 you could still get a cute little bungalow for 250k...  You could get one in Brooke Smith for 175 and can still get one for 250 there...  When i first moved to Houston... bungalows that are now going for 300+ were going for 150...    back then you could get a 2500 sq. ft house for less than 200k in the burbs... which you easily still can.   So yeah... the Heights are no longer as cheap as they were (still cheap to comparible cities/proximity to town), but Houston as a whole still is. 

[Angostura]

 

Of course, I cannot possibly argue with your survey of parking lots in Houston.  That is clearly irrefutable evidence.  You shouldn't be burdened with having to substantiate that assertion. 

 

 

Snarkiness aside, it's up to the authors of the study to demonstrate that their finding can't just be explained away by quality differences.  A study that says that ranks cities on housing+transportation as a percentage of income, without adjusting for quality, is pretty useless.

[s3mh]

Snarkiness aside, it's up to the authors of the study to demonstrate that their finding can't just be explained away by quality differences.  A study that says that ranks cities on housing+transportation as a percentage of income, without adjusting for quality, is pretty useless.

 

And an argument that assumes that the methodology of a study is flawed without any actual knowledge of what methodology was used is very useless.

 

The Rice study cites Center for Housing Policy's work.  They use a cost model drawn from peer-reviewed research findings from a number of different sources.  http://www.cnt.org/media/CNT_LosingGround.pdf

Your speculation about vehicle values skewing results is nothing more than speculation.  Until you dive into their methodology, you cannot throw stones. 

 

Also, for what it is worth, accord to Forbes, Texas ranks significantly lower in % of luxury auto sales than other states with large metro areas (Texas 6.5%; Illinois 6.6%; VA 7.2%; NJ 8.5%; NY 11.4%; FL 13.8%; CA 15.9%).  So, with CA and NY having around double the ownership of luxury autos as a percentage of total sales, there is at least some indication that Houstonians are not taking their saving and putting them into more expensive vehicles, despite your expert review of parking lots.

 

Transportation costs and percentage of income measures are important metrics.  Rice is not Berkley.  It is a very moderate school.  The study raises important issues that raise red flags for Houston's competitiveness in the future if the cost of housing continues to rise and transportation costs move in the same direction.  Employers will have to raise pay to attract and retain talent.  When the cost of living and doing business in Houston starts to really push up against places like San Fran, Chicago, LA, Boston, NY, then companies may start looking for cheaper places or opt for the other major metros on quality of life.  Sitting around and saying "you can get a house here for X and you can't do that in San Fran" is a gross oversimplification of a very large and important issue of affordability. 

[livincinco]

And an argument that assumes that the methodology of a study is flawed without any actual knowledge of what methodology was used is very useless.

The Rice study cites Center for Housing Policy's work. They use a cost model drawn from peer-reviewed research findings from a number of different sources. http://www.cnt.org/media/CNT_LosingGround.pdf

Your speculation about vehicle values skewing results is nothing more than speculation. Until you dive into their methodology, you cannot throw stones.

Also, for what it is worth, accord to Forbes, Texas ranks significantly lower in % of luxury auto sales than other states with large metro areas (Texas 6.5%; Illinois 6.6%; VA 7.2%; NJ 8.5%; NY 11.4%; FL 13.8%; CA 15.9%). So, with CA and NY having around double the ownership of luxury autos as a percentage of total sales, there is at least some indication that Houstonians are not taking their saving and putting them into more expensive vehicles, despite your expert review of parking lots.

Wouldn't you consider the sales of luxury autos at the state level somewhat irrelevant to a discussion of transportation costs at the city level? I don't think that you can safely extrapolate car ownership in Houston from state level numbers.

[s3mh]

Wouldn't you consider the sales of luxury autos at the state level somewhat irrelevant to a discussion of transportation costs at the city level? I don't think that you can safely extrapolate car ownership in Houston from state level numbers.

 

I did say "for what it is worth".  However, over 80% of Texans live in urban areas.  So, I do not think that you would see a big adjustment for Houston's numbers versus the entire state.  But my point was more that there is actually some evidence that people are not putting housing cost savings into transportation despite one person's eyeball data from area parking lots.

[Angostura]

I did say "for what it is worth".  However, over 80% of Texans live in urban areas.  So, I do not think that you would see a big adjustment for Houston's numbers versus the entire state.  But my point was more that there is actually some evidence that people are not putting housing cost savings into transportation despite one person's eyeball data from area parking lots.

 

 

There's a lot more to transportation costs than % of "luxury" vehicles. Until Mercedes and Lexus make a pick-up, I don't see luxury brands making up as big a percentage of sales in Texas as they do in California. 

 

I only observed that it seems to me that Houstonians drive bigger cars than folks in higher-cost cities as a way of questioning whether some of the higher spending on transportation in Houston may be voluntary. But since you brought up one piece of data, let me bring up another:

 

Total vehicle miles, by state

Total vehicle fuel consumption, by state

 

Dividing one by the other, CA has an average fuel efficiency of 18.5, NY is 18.6, IL is 16.6, FL is 20.2 and TX is 14.4. 

 

If Texans made the same vehicle choices as Californians, they'd save 22% on fuel costs. 

 

But the larger point is that since a large portion of transportation costs are voluntary (driving a new Tahoe instead of an 10-year-old Honda Civic is a choice, not a necessity), it's silly to take "Houstonians spend X% of income on transportation" to mean "Houstonians MUST spend X% of income on transportation".

[s3mh]

 

There's a lot more to transportation costs than % of "luxury" vehicles. Until Mercedes and Lexus make a pick-up, I don't see luxury brands making up as big a percentage of sales in Texas as they do in California. 

 

I only observed that it seems to me that Houstonians drive bigger cars than folks in higher-cost cities as a way of questioning whether some of the higher spending on transportation in Houston may be voluntary. But since you brought up one piece of data, let me bring up another:

 

Total vehicle miles, by state

Total vehicle fuel consumption, by state

 

Dividing one by the other, CA has an average fuel efficiency of 18.5, NY is 18.6, IL is 16.6, FL is 20.2 and TX is 14.4. 

 

If Texans made the same vehicle choices as Californians, they'd save 22% on fuel costs. 

 

But the larger point is that since a large portion of transportation costs are voluntary (driving a new Tahoe instead of an 10-year-old Honda Civic is a choice, not a necessity), it's silly to take "Houstonians spend X% of income on transportation" to mean "Houstonians MUST spend X% of income on transportation".

 

 

You are just dancing around the fact that you have nothing to offer to refute the methodology used in the study because you have not even tried to look at that methodology.  The fact is that the study used a widely accepted methodology to calculate transportation costs.  Your rebuttal is that you see big cars in parking lots.  So what. 

 

And the fuel efficiency numbers say nothing about how much people are spending on cars.  People in Texas drive a lot of trucks:  http://www.autonews.com/article/20130624/RETAIL01/306249956/as-the-pickup-war-heats-up-gm-barnstorms-top-truck-market-with-redone-#  Dallas and Houston have more truck sales than all of CA.  But, a baseline F-150 costs the same as a Prius, but gets less than half the gas mileage.  So, looking at a parking lot and seeing lots of big things doesn't mean anything.

[Angostura]

You are just dancing around the fact that you have nothing to offer to refute the methodology used in the study because you have not even tried to look at that methodology.  The fact is that the study used a widely accepted methodology to calculate transportation costs.  Your rebuttal is that you see big cars in parking lots.  So what. 

 

And the fuel efficiency numbers say nothing about how much people are spending on cars.  People in Texas drive a lot of trucks:  http://www.autonews.com/article/20130624/RETAIL01/306249956/as-the-pickup-war-heats-up-gm-barnstorms-top-truck-market-with-redone-#  Dallas and Houston have more truck sales than all of CA.  But, a baseline F-150 costs the same as a Prius, but gets less than half the gas mileage.  So, looking at a parking lot and seeing lots of big things doesn't mean anything.

 

 

Yes. That's exactly my point. Texans choose to drive (gas-guzzling) pick-ups instead of (fuel efficient) Prius's, and that costs them more money. (I'm assuming you realize that the price of the car isn't the only component of transportation cost.)

 

 

Regarding methodology, the study says:

 

Transportation costs encompass all the trips that households make as part of 

their daily routine, including commuting, errands, and other travel. For car 

owners this includes the full costs of auto ownership, such as car payments, 

insurance, maintenance, and gas. For transit riders it includes the price of transit.

 

 

Certainly sounds to me like they're just taking gross transportation spending, and not adjusting for quality/consumer choice/fuel efficiency, etc.  Virtually every driver could lower their transportation costs if they wanted to, by choosing to drive a less expensive, more fuel-efficient car. Lower housing costs allow people to allocate more of their income to transportation if they so choose. And fuel efficiency data indicate that Texans don't seem to be too concerned about the fuel portion of their transportation costs.

[livincinco]

Yes. That's exactly my point. Texans choose to drive (gas-guzzling) pick-ups instead of (fuel efficient) Prius's, and that costs them more money. (I'm assuming you realize that the price of the car isn't the only component of transportation cost.)

 

 

Regarding methodology, the study says:

 

 

Certainly sounds to me like they're just taking gross transportation spending, and not adjusting for quality/consumer choice/fuel efficiency, etc.  Virtually every driver could lower their transportation costs if they wanted to, by choosing to drive a less expensive, more fuel-efficient car. Lower housing costs allow people to allocate more of their income to transportation if they so choose. And fuel efficiency data indicate that Texans don't seem to be too concerned about the fuel portion of their transportation costs.

 

Actually, this entire conversation is irrelevant to the criteria of their model because they aren't making any adjustment for the type of car utilized in their methodology.  They're assuming a standard cost of

ownership and per mile cost with some adjustment for the cost of fuel in various regions.  I don't particularly have an issue with the model.

 

They do make an assumption though that all transit costs are non-discretionary (individuals own cars only because they have to own cars) and I don't think that's correct.  I think that it's reasonable to say that there are a significant number of people own cars because of lifestyle choice and treat the purchase of a car as a portion of their disposable income.  In that light, it's not particularly surprising that they find car ownership higher in cities that have lower percentage cost of housing. 

 

For example, Atlanta scores very high in transit cost (therefore car ownership) despite having a reasonably large transit network.  It's seems reasonable to me to assume that some of that car ownership is discretionary.  The same is true of Dallas and Portland.

 

That being said, I do understand that's a very difficult distinction to make when completing a study like this.