Houston's housing market/prices

[rps324]

With all the talk about real estate slow downs, east & west coast real estate bubbles etc. I am wondering what everyone's observations have been on the housing markets in their areas. I guess I want to see if it is just my imagination, but I am getting the sense that we may be entering a period of really strong appreciation, despite the doom & gloom you hear about for property values. That is not something based on the rosy reports coming out of HAR every month, although they certainly seem to back it up. It is not based on aything more than just an impression I am getting. I am curious if others are seeing similiar signs.

For example, in Westbury/Parkwest a house just went on the market for $274,900. I thought no way. It has pergo flooring in the kitchen, no hardwoods, the baths have been redone but are pretty plain. Formica counters. It's nice, but no hardwoods, granite or pool. Less than 2500 sq ft. but it went under contract in less than 30 days. Another one south of Bellfort on McKnight with a pool went up for $232,900. That is a lot for that section of Westbury, especially since it still needed some things done like the hardwoods refinished. My mod sale on Warm Springs for $220k was the highest sale in that section previously. I had a buyer put in an offer of $227,500 on the McKnight house and they were out bid! It wasn't long ago you just didn't see these prices in Westbury.

In Idylwood one closed today for $216,000 that was under 1600 sq ft. There is one house asking over $300k that is under contract in there. Another sold quicky in the upper $200's. I had a buyer put an offer in on one in there, offering below asking, but at a price per foot that would have been a new record in Idylwood from what I could tell. The seller wouldn't take it & did end up selling it within $1000 of their asking price. The rehabbed house I had in Houston Country Club on Fair Oaks for $189,900, that some on the board loved, and some hated, had three offers my seller had to select from.

Even in Glenbrook, there is one house that was about 3100 sq ft with a pool that was remodeled in the 80's. It wasn't updated, but it wasn't the cool original mod style either. It's nice & all, but on a standard lot for that area, not backing up to the bayou or anything. It just sold in 7 days, to a cash buyer I think, for $275,000 or around $87 a foot, when most things have been running closer to $65 psf in there.

I am seeing this sort of thing happening all over & with more frequency. Are others seeing signs of upticks in their neighborhoods? I am curious if it is just my imagination.

[mpbro]

Scanning some nationwide RE forums, I've seen a lot of buzz about Houston RE speculation from "investors" who have taken gains in hot markets. Don't know if this data point is statistically significant, but even 2 years ago, I doubt "hot" and "Houston realty" would occur in the same sentence.

I've seen strong appreciation in almost all ITL subdivisions. In my own neighborhood (Southgate), I've seen annualized appreciation rates over the last few years of around 10%. Increased tear-down activity, much of it custom. You aren't likely to see Las Vegas "investors" building many of those in Houston--more likely spillover from West U. Good sign of organic growth and a hot economy. Hope it keeps up!

[Wide Eye]

With all the talk about real estate slow downs, east & west coast real estate bubbles etc. I am wondering what everyone's observations have been on the housing markets in their areas. I guess I want to see if it is just my imagination, but I am getting the sense that we may be entering a period of really strong appreciation, despite the doom & gloom you hear about for property values. That is not something based on the rosy reports coming out of HAR every month, although they certainly seem to back it up. It is not based on aything more than just an impression I am getting. I am curious if others are seeing similiar signs.

For example, in Westbury/Parkwest a house just went on the market for $274,900. I thought no way. It has pergo flooring in the kitchen, no hardwoods, the baths have been redone but are pretty plain. Formica counters. It's nice, but no hardwoods, granite or pool. Less than 2500 sq ft. but it went under contract in less than 30 days. Another one south of Bellfort on McKnight with a pool went up for $232,900. That is a lot for that section of Westbury, especially since it still needed some things done like the hardwoods refinished. My mod sale on Warm Springs for $220k was the highest sale in that section previously. I had a buyer put in an offer of $227,500 on the McKnight house and they were out bid! It wasn't long ago you just didn't see these prices in Westbury.

In Idylwood one closed today for $216,000 that was under 1600 sq ft. There is one house asking over $300k that is under contract in there. Another sold quicky in the upper $200's. I had a buyer put an offer in on one in there, offering below asking, but at a price per foot that would have been a new record in Idylwood from what I could tell. The seller wouldn't take it & did end up selling it within $1000 of their asking price. The rehabbed house I had in Houston Country Club on Fair Oaks for $189,900, that some on the board loved, and some hated, had three offers my seller had to select from.

Even in Glenbrook, there is one house that was about 3100 sq ft with a pool that was remodeled in the 80's. It wasn't updated, but it wasn't the cool original mod style either. It's nice & all, but on a standard lot for that area, not backing up to the bayou or anything. It just sold in 7 days, to a cash buyer I think, for $275,000 or around $87 a foot, when most things have been running closer to $65 psf in there.

I am seeing this sort of thing happening all over & with more frequency. Are others seeing signs of upticks in their neighborhoods? I am curious if it is just my imagination.

Are you sure that the buyers you talked about are not from California? Just curious.

[flipper]

I see what you are seeing in Westbury/Idylwood areas also, but with my tainted flipper perception.

I see the comps going higher and higher, which I want. But I also see the price gap between completely remodeled houses and owner "updated" houses closing.

Imagine how I feel when I work on a house for 3 months, put fifty thousand dollars into it, sell it at the high end of the comps only to see a homeowner get that same price for their "updated" (new fixtures) house a month later.

Homeowners "hear" what the house down the street sold (or is listed) for and they feel theirs is worth the same or darn near close to it because it is just as nice! And if someone will buy it for that price, who can blame them.

This really is only an "inside the loop"ish phenomenon as I see it. (Yes I know westbury is not inside the loop)

I'm rambling, but my point is that I'm noticing the same thing you are. Would you believe I paid 78,000 for a house in HCC a few years ago?

flipper

[rps324]

Are you sure that the buyers you talked about are not from California? Just curious.

I am not sure where the buyers are coming from, although I believe the Glenbrook sale was a Lawyer moving from the Heights. I think it is coming from all-over. Things, to me, seem to have heated up even since last Spring.

[PapillionWyngs]

Guess it depends on where you are. Things are as normal in Clear Lake. The higher end houses in the normal price subdivisions are sitting there and wilting, as always.

[flipper]

Guess it depends on where you are. Things are as normal in Clear Lake. The higher end houses in the normal price subdivisions are sitting there and wilting, as always.

Can you expound on this a little?

I've been toying with the idea of doing some high end rehabs in neighborhoods like Oakbrook West.

flipper

[uncertaintraveler]

I am seeing this sort of thing happening all over & with more frequency. Are others seeing signs of upticks in their neighborhoods? I am curious if it is just my imagination.

What you describe sounds to me like the textbook definition of irrational exuberance. People believe they are getting good deals, or they believe they have to buy now or they will never get to buy, or that their asking--or buying--price is supported by the market, but in virtually every case, they are incorrect. Astronomical price increases (astronomical being a relative term, of course) are simply not sustainable over the long term, especially when there is no fundamental justification for said increase.

[TJones]

I agree RPS, I am noticing and upturn in my own NEW neighborhood. I think people have realized there are some real jewels to be had for updating and flipping in Bear Creek.

[rps324]

What you describe sounds to me like the textbook definition of irrational exuberance. People believe they are getting good deals, or they believe they have to buy now or they will never get to buy, or that their asking--or buying--price is supported by the market, but in virtually every case, they are incorrect. Astronomical price increases (astronomical being a relative term, of course) are simply not sustainable over the long term, especially when there is no fundamental justification for said increase.

I kind of thought it was something like that at first, but it seems like it is happening too much to be just that. (again heavy emphasis on seems) In some instances I have buyers willing to pay top dollar for houses, but they are getting out-bid. So it isn't like there was just one lone sucker from California that the seller got to pay some high price. In some instances there seems to be a line of people wanting to pay some of these prices.

I know I keep seeing a lot of out of state plates running around, and of course we've gotten a lot of middle class & up buyers from Louisiana, (I have sold two of my listings to N.O. people this summer). So maybe that it is. A lot of new people. I have no idea. Maybe it is just a seasonal "blip" or the start of another era like the period from about 98 to '02 or so, when everything seemed to jump in price.

Edited October 6, 2006 by rps324

[TheNiche]

With all the talk about real estate slow downs, east & west coast real estate bubbles etc. I am wondering what everyone's observations have been on the housing markets in their areas. I guess I want to see if it is just my imagination, but I am getting the sense that we may be entering a period of really strong appreciation, despite the doom & gloom you hear about for property values. That is not something based on the rosy reports coming out of HAR every month, although they certainly seem to back it up. It is not based on aything more than just an impression I am getting. I am curious if others are seeing similiar signs.

Oil prices are the key variable. That they've dropped to about $60/bbl now concerns me. Its still a good price and it'll still support a solid local economy, but further declines in price could be problematic...especially if pricing starts becoming less volatile. Less volatile prices might also result in a cutback in the energy trading business.

After that, interest rates are most important. The yield curve is flat, so I'm optimistic on that end.

I don't perceive that Houston's housing prices are too far off from equilibreum, considering how well off our economy has been lately. My only concern, really, is that the equilibreum itself could shift.

[uncertaintraveler]

I kind of thought it was something like that at first, but it seems like it is happening too much to be just that. (again heavy emphasis on seems) In some instances I have buyers willing to pay top dollar for houses, but they are getting out-bid. So it isn't like there was just one lone sucker from California that the seller got to pay some high price. In some instances there seems to be a line of people wanting to pay some of these prices.

Umm....ever heard of "herd mentality"???

Fundamentally, I can't believe that a consistent, yearly 10% increase in housing prices is justifiable, much less sustainable. Whatever increase in prices that are due to the infux of Louisianians should have already passed and stabilized, given that we are one-year past Katrina.

I fully expect housing prices to fall in the near future, especially as adjustable-rate mortgages start to "re-adjust" and some homeowners realize they bought more than they could truly afford.

[RedScare]

Oil prices are the key variable. That they've dropped to about $60/bbl now concerns me. Its still a good price and it'll still support a solid local economy, but further declines in price could be problematic...especially if pricing starts becoming less volatile. Less volatile prices might also result in a cutback in the energy trading business.

Oil has just now dropped back to the same price it was last October. It historically drops after Labor Day, when the summer driving season ends. Plus, the Administration has throttled back on it's rhetoric with Iran and North Korea, which tends to cause the market to jump. We also had an uncharacteristically slow hurricane season.

If you believe there will be no more hurricanes in the Gulf, and no more saber rattling in the Middle East, then oil prices could decline more. Color me pessimistic on those two things happening.

As for housing in Houston, the City estimates that the population just in Houston has jumped 250,000 since the 2000 Census, with over half of that increase in the last year and a half. The economy, oil prices and the slow reality that New Orleans' recovery will take years instead of months have probably all contributed.

What I have noticed in the Heights is more huge homes being built, but they seem to be sitting on the market longer. The mid-size and smaller homes seem to sell in under 90 days.

[jm1fd]

I see what you are seeing in Westbury/Idylwood areas also, but with my tainted flipper perception.

I see the comps going higher and higher, which I want. But I also see the price gap between completely remodeled houses and owner "updated" houses closing.

Imagine how I feel when I work on a house for 3 months, put fifty thousand dollars into it, sell it at the high end of the comps only to see a homeowner get that same price for their "updated" (new fixtures) house a month later.

Homeowners "hear" what the house down the street sold (or is listed) for and they feel theirs is worth the same or darn near close to it because it is just as nice! And if someone will buy it for that price, who can blame them.

This really is only an "inside the loop"ish phenomenon as I see it. (Yes I know westbury is not inside the loop)

I'm rambling, but my point is that I'm noticing the same thing you are. Would you believe I paid 78,000 for a house in HCC a few years ago?

I'm seeing the same thing in Shepherd Forest, although a more extreme example. A house that was pretty much fully redone by a flipper went for $145k. A house the same size that was all original, but in solid condition went for $120k. Now there's a listing for a house, same size as the other two, that is largely original with some paint and granite countertops listed for $150k, and it is in a less desirable section.

[rps324]

Umm....ever heard of "herd mentality"???

Fundamentally, I can't believe that a consistent, yearly 10% increase in housing prices is justifiable, much less sustainable. Whatever increase in prices that are due to the infux of Louisianians should have already passed and stabilized, given that we are one-year past Katrina.

I fully expect housing prices to fall in the near future, especially as adjustable-rate mortgages start to "re-adjust" and some homeowners realize they bought more than they could truly afford.

The herd mentality is hard to apply to this situation when buyers make offers on properties and are not even aware there are other bidders on it until they are already in the process. You have to be aware of a herd to follow a herd.

city wide average increase from 04 to 05 was just 3.8%, so I don't know that we have seen consistent 10% year over year increases, but when the reports come out I expect there to be a bit of a spike 05 to 06. I don't think we have created a pricing bubble yet, that could burst and create a drop in prices, but only time will tell I suppose.

[uncertaintraveler]

The herd mentality is hard to apply to this situation when buyers make offers on properties and are not even aware there are other bidders on it until they are already in the process. You have to be aware of a herd to follow a herd.

Ah, but most--if not all--home owners and prospective home owners are aware that the housing market has increased in value of late, and I submit that most prospective home owners fear being priced out of the market unless they buy a home now. So although any one particular bidder may not be aware that other individuals are making bids on the same property, all bidders (and home owners) are certainly aware of overall housing market and, arguably, act as a herd as a result.

Edited October 6, 2006 by uncertaintraveler

[PapillionWyngs]

If the bubble ain't here, it's on it's way!

[flipper]

If the bubble ain't here, it's on it's way!

Papillion, Would you mind ellaborating?

flipper

[Parrothead]

We have a while yet before that happens (bubble). I'm not even sure we'll see a "bubble" but more like a blip.

rps, that's interesting you say that. I've noticed even with established west Houston neighborhoods such as Deerfield Village, Bear Creek, etc prices are appreciating. Homes that were going for $50-$60 a square foot just two years ago are hitting $70 and up. It is my opinion that when the Katy Freeway project is close to completion, we'll see even more of an appreciation. Who knows, though?

[rps324]

Does anyone have any info on job growth? I know it has been strong, but has it been stronger than in years past?

[ricco67]

I can't say for certain that job growth is happening here, but I have a feeling that, at the very least, it will be steady or have modest growth.

As far as the housing goes, I recently talked to someone who sold their townhome on Commonwealth in the montrose for under what they paid for.

This is the 3rd or 4th instance of this happening over the past year. They were "motivated" sellers, so I don't know how much that affected the price.

I'm certainly hoping for a bit of a bubble so I can actually afford a place.

[TheNiche]

Does anyone have any info on job growth? I know it has been strong, but has it been stronger than in years past?

Job growth has been very strong throughout 2005 and 2006. I'll post a chart tomorrow. If anybody's impatient, try www.tracer2.com. That's the Texas Workforce Commission's website.

[rps324]

I'm wondering if the "uptick" we had in interest rates for awhile got a lot of people "off the fence" to buy.

[Scharpe St Guy]

Ping... I would like to see any updates from RPS/NICHE/etc... as to how the market is doing here in Houston as of late???

Scharpe St Guy

I'm wondering if the "uptick" we had in interest rates for awhile got a lot of people "off the fence" to buy.

[TJones]

What I think the trend here, now, is that the prices are what we consider, ridiculous, while people transplanting form New York and Florida and California, are thinking, "OH MY GOD, what a steal!" $225k for 1800 to 2000 sqft. is a bargain compared to the $500k they just sold that only had 1600 sqft. and no backyard. The prices are inching up and investors are finally taking notice. I got my house for a song, and could easily ask for $25k more than what I paid right now. Can't wait to see what happens in 5 to 10 years. By then though, I won't be able to sell, because there won't be anything worth buying in my opinion, for the money they will be asking. CATCH 22!

[Parrothead]

HAR reported a great September for home sales, and condominiums saw the largest increase in price, 12.1% over last year.

http://www.har.com/rs_houston_market.htm

[mpbro]

HAR reported a great September for home sales, and condominiums saw the largest increase in price, 12.1% over last year.

Argh, HAR and their damn frames! Here's the story I think he wanted to link to.

[Parrothead]

oops, sorry! Thanks for fixing

[TheNiche]

Ping... I would like to see any updates from RPS/NICHE/etc... as to how the market is doing here in Houston as of late???

Scharpe St Guy

Not much has changed in 20 days as far as my outlook is concerned. Oil is still the key variable, and it seems to be holding stable. OPEC has rattled their sabres a bit, IMO to try and keep energy traders on their toes, but their approach has really been pretty soft and prices reflect that.

The yield curve is now inverted, meaning that investors tend to believe that lower interest rates are on the horizon. Although some would probably argue that the market has been tapped out and that the lower price of debt won't do much more to stimulate housing demand, I'm inclined to say that this would bode well for housing demand and prices, especially in parts of the country with stable/growing local economies.

I noticed this morning and also a week or so ago that the Chronicle is running AP articles that discuss falling home values, and I know that this is just a scare tactic designed to get people to read their material. But it doesn't apply so much to Houstonians, and I think most people recognize that.

[mpbro]

Not much has changed in 20 days as far as my outlook is concerned. Oil is still the key variable, and it seems to be holding stable. OPEC has rattled their sabres a bit, IMO to try and keep energy traders on their toes, but their approach has really been pretty soft and prices reflect that.

The oil industry may be one of the few where recent income growth exceeds (greatly) core inflation. When I argue for the efficacy of Houston's housing market, this is the argument I usually invoke. I don't have any stats on total Houston-area households involved in oil or oil services, I'd guess it is between 500K and 1M. I think you've seen real wage growth both in blue collar and white collar segments of the industry. Good for a broad-based continued rally in land value.

If oil stays high, of course. ;-)