(Houston, TX– November 1, 2011) Houston’s economy recovers further during 3Q11, driven by positive job growth, according to a recent report by Metrostudy, a national housing data and consulting firm that maintains the most extensive primary database on residential construction in the US housing market.

At the end of August 2011 the Texas Workforce Commission reported that the Houston job market added 65,600 jobs over the previous twelve months. As a result, Houston regained 80 percent of the jobs it shed during the recession that ended, locally, only 20 months ago. “Over the next 5 years Houston is expected to add roughly 150,000 new residents each year. Therefore, new development activity in 2011 and going forward will be driven by real demand created by strong job growth and a truly recovering local economy,” said David Jarvis, director of Metrostudy’s Houston division.

During 3Q11, 4,947 new homes were started, 20% more than in 3Q10. 5,363 new homes were closed during 3Q11, only 1% down from 3Q10.

The 4,251 finished vacant homes counted during the 3Q11 survey represent a 2.8 month supply. This is down 30% over the past two years. Units currently under construction represent the largest share of new home inventory. The 5,207 homes currently under construction are the most since the expiration of the federal tax credit programs in
2010. “In 3Q11, there are more homes under construction than there are finished and vacant, which points to a stabilizing of new home inventory,” said Jarvis.

“Both builders and lenders have cut down on speculative building programs in the face of a tightened lending environment. The strong growth in sales, year over year, experienced during the summer months is the driver behind the increase in homes under construction,” said Jarvis.

For information contact:
david jarvis @ 713.622.9909 x 132
email djarvis@metrostudy.com

About Metrostudy
Metrostudy is the leading provider of primary and secondary market information to the housing industry and related industries nationwide. In addition to providing its own primary housing data for approximately 70% of the United States housing market, the company is recognized for its consulting expertise regarding real estate development, marketing and economic issues, and is a key source of research studies evaluating the marketability of residential and commercial real estate projects. Services are offered through an extensive network of offices located in major metropolitan areas throughout the U.S. For more information, visit www.metrostudy.com.

National woes persist but Houston’s economy and housing starts continue to improve and lead the nation. Join us at our 3Q-2011 Executive Briefing where we will discuss what is driving this improvement and how it will affect your customers and your business for the rest of the year.

WHEN: Thursday November 10, 2011 8:15am – 10:00am

INFO: email David Jarvis djarvis@metrostudy.com

Loren Steffy’s story in this mornings Houston Chronicle (http://www.chron.com/business/steffy/article/How-regulation-saved-Texas-economy-2141745.php) does a good job of describing how good mortgage laws in Texas helped Texas’ housing values hold up in the face of this country’s worst recession since the Great Depression. While many people in states like California, Florida, Nevada and Arizona were refinancing their homes to take out their equity (at the top of the housing market) after a 5 year run up of unsustainable appreciation (the housing bubble), Texans were capped @ 80 percent. The graphic below gives an example of home price appreciation for a hypothetical $200,000 house purchased in each state in the first quarter of 2001, according to the figures from the Federal Housing Finance Agency.

I appreciate the good mortgage laws in Texas and the “steady as you go” housing appreciation we enjoy as illustrated in the graph below. Outside of Texas, only California home values are showing signs of stabilizing.

Besides better mortgage laws, Texas has fewer regulations on new housing development which helped us avoid a shortage of homes that forced up home prices in those other states. The state’s ability to increase housing supply to meet demand is more important to maintaining a balanced supply of homes than the mortgage restrictions.

As expected, homes sales through the summer months of 2011 are outpacing those experienced during the same period last year in the wake of the expiration of the Federal Tax Credit. According to Metrostudy’s July 2011 Builder Survey, the twenty three builders surveyed, who represent roughly 67% of all new home activity in the Houston market, reported 1,265 net sales, a 40 percent increase from July-10. At the same time, the Houston Association of Realtors recorded 5,962 closings through its Multiple Listing Service in July-11, a 17.1 percent growth from the same period twelve month ago.

It is important to note that year-over-year comparisons through 2011 will be skewed due to the Tax Credit stimulus experienced in the early part of 2010. The tax credit did little to help the housing market recover, leaving a skewed selling season as its lingering effect. In any given year, whether boom time or recession, the natural home building cycle (pictured below) will start the year with steadily improving new home starts through the month of May. As the summer wears on and families take vacations, the cycle starts a gradual decline and then finishes the year at its slowest pace in the late fall and early winter months, a period that hosts numerous holidays which eat into a family’s availability to shop for homes. Because of the consistency of the cycle, home builders and land developers have built their business models around this expectation.

For the Houston market specifically, the tax credit hit just before the housing market achieved its true “bottom.” The hangover effects of the expiration of the tax credit then dropped Houston to its bottom in the last two quarters of 2010, when the market started fewer than 7,700 homes. When the market is that volatile, it muddies the outlook for “real” new home demand. This created the same kind of uncertainty in the home building industry that the new healthcare bill created for hospitals’ five-year outlook.

Metrostudy Houston Director David Jarvis will sit on a Business Forum to be held prior to the Mayor’s presentation at the Heights Chamber of Commerce’s Mayoral Luncheon. In addition to Mr. Jarvis’ insight into the dynamics of Houston’s housing market, other panelists will include experts from the Houston energy and healthcare fields.

When: Tuesday August 23, 2011 @ 10:00am

Tickets can be purchased through the Heights Chamber of Commerce. For more information contact info@heightschamber.com

(Houston, TX– August 1, 2011) Houston’s economy continues to show signs of recovery, according to a recent report by Metrostudy, a national housing data and consulting firm that maintains the most extensive primary database on residential construction in the US housing market.

Houston’s unemployment rate currently rests at 8.2%, almost a full percentage point lower than then nation’s 9.2%. As of May, Houston has added back 81,600 of the 110,000 jobs it lost during the recession.

During 2Q11, 5142 new homes were started, 13% less than in 2010. 4,593 new homes were closed 2Q11. The annual pace of closings stood at 18,211 at the end of 2Q11, and annual starts stood at 16,605. Annual closings have outpaced starts since the first quarter of 2007, as the market absorbed the excess inventory since the downturn began. “As new home demand stabilizes, Metrostudy expects the gap between starts and closings to narrow going forward,” said David Jarvis, director of Metrostudy’s Houston division.

The 4,799 finished vacant homes counted during the 2Q11 survey represent a 16% decline from a year ago. “The number of finished vacant homes in the market continues to decline, pointing to the trend that builders are eliminating pent up inventory and restricting the number of spec homes they’re carrying each quarter,” said Jarvis.

“Typically when the number of new homes under construction is greater than or equal to those units sitting finished and vacant the market is considered to be level or improving and this is beginning to be the case for the new home market in Houston,” said Jarvis. “Inventories are at pre-housing bubble lows and demand is present though qualifying is a constant challenge.”

For information contact:
david jarvis @ 713.622.9909 x 132
email djarvis@metrostudy.com

About Metrostudy
Metrostudy is the leading provider of primary and secondary market information to the housing industry and related industries nationwide. In addition to providing its own primary housing data for approximately 70% of the United States housing market, the company is recognized for its consulting expertise regarding real estate development, marketing and economic issues, and is a key source of research studies evaluating the marketability of residential and commercial real estate projects. Services are offered through an extensive network of offices located in major metropolitan areas throughout the U.S. For more information, visit www.metrostudy.com.

The overall occupancy for Class A and B apartments is now over 93%. So far this year over 10,000 apartments have been absorbed and another 6,000 apartments are expected to be rented by year’s end. If you are finding it tough to find a nice apartment now, just wait until the end of the year (maybe you should ask Santa Clause to bring you one). Come December 2011, we expect less than 25,000 total units to be available to choose from. That’s not many when the city adds 125,000 people a year and the apartment market is absorbing 15,000 units a year. Apartment owners and operators are taking liberties with their renters and withdrawing concessions and concurrently raising their rents. Rents are up an average of 4 to 5 percent in the past year. If you’re looking for an apartment around the Galleria, good luck. Rent’s are up over 14 percent. To top it off, gone are the days when you could walk in to renew your lease and be greeted with a smile and 6 weeks free rent. As of July, only about half of Class-A and Class-B apartments are even offering concessions. The complexes that are offering concessions are offering less than one month’s free rent. According to Camden properties, about 64% of apartment units turnover each year. To a leasing agent, this means they have the opportunity to lock 64% of their complex into an elevated rate should they look to renew from December 2010 to December 2011, or before new units are brought to market.

All of this is happening as renters save their money for a down payment and build their credit for a real home. It’s an interesting phenomenon that we buy TVs and Blue Rays when they’re on sale and we buy homes and stocks when the prices are going up. If only 20 to 25 percent of Class A and Class B renters come out to buy a home when prices and interest rates go up, that’s a pent up demand of 70,000 to 80,000 buyers. This is good news for home builders and home owners looking to sell their existing homes now and take advantage of good housing prices and unbelievably low interest rates. In the meantime, rents are rising, 30-year mortgage rates are holding low for the time being and the local economy is growing. The continuation of these trends will cause the housing market to look markedly different in the summer of 2012. For those buyers who are willing and able to buy, the time may be sooner rather than later when it comes to moving forward in this Recovery.

For my wife and me, we’re looking to take advantage of the high rents and long-term rental agreements by purchasing our next home now, while it’s on sale. Then stay in our present home and rent out that next home letting the renters pay off the mortgage. We’ll sell our current home when prices head up again. Let me know how renting works out for you.

Texas Cities Dominate the Top 15 Metro Areas ranked by Population Growth from 2000 to 2010. http://bit.ly/nTG2RV

1. Houston – 1,231,393

2. Dallas/Fort Worth 1,210,229

11. Austin – 466,526

13. San Antonio 430,805

The Wall Street Journal quoted me regarding the government’s New Home Sales statistics that just came out showing an increase in sales activity. The article was brief, but there is actually a lot more to the story, and in this blog post, I add some more analysis to the topic, and I relate the sales and inventory situation to trends in new home prices.

The government release yesterday said sales in April were up 7.3%… plus or minus 16.6%! So, they might have gone up a lot, or they might have gone down a little. The government data suffer from a small sample size, a lack of market-level detail, and from the fact that they ignore cancellations of contracts.

I thought it would be useful to add some local market color to the issue, using the data from our in-field research in dozens of markets nationwide (actual counts, so there’s no confidence interval). Our research shows that absorption is running higher than new construction nationwide (see data table at the end of this post). We noted in our first quarter study that absorption rose strongly in South Florida, Naples/Ft. Myers, and the Triad of North Carolina, but that most other markets experienced decreased absorption during the January through March. Our weekly sales and traffic data for April and May do show some gradual improvement as we shake off the first quarter decline and get back to normal. We experienced a double dip in housing (largely due to the post-tax-credit hangover), and the evidence is that we are lazily climbing out of it. Recent improvements in job formations are helping.

We also find that inventories have fallen dramatically since their peak in all of our markets, and they continued to fall in the most recent quarter. This is good news. Hard-hit markets like Chicago, Phoenix, Las Vegas, and Sarasota posted the largest decreases in our finished, vacant inventory counts in the latest quarter (finished vacant “standing” inventory is a good leading indicator of home prices).

With regard to prices of new homes, there also are some scattered glimmers of light. We are certainly not out of the woods, and many builders are still lowering prices in an effort to compete with short sales and foreclosures, but there are some scattered projects and submarkets where builders are raising prices! For example, at the Woodlands master planned community in Houston, Lennar has raised prices by about $10,000 in the past four quarters (subdivision called Jagged Ridge, where the Sam Houston model was $219,990 back in 2Q10, and now is $229,990, for 2,109 square feet; larger models there had slightly larger price increases over the period).
But that’s Texas, and everybody knows Texas is doing better than anyplace else in the country right now. Where else are prices starting to tick upward? There are some other examples, but typically the increases are not ‘across the board.’

Within the D.C./Northern Virginia market, prices have been increasing at a number of projects in Loudon and Prince William Counties. Toll Brothers has increased prices on their smallest models at Loudon Valley Villages (townhomes) by $10,000-$12,000 over the past year (+4%-5%). In another “A” submarket, Brookfield boosted prices recently at one model at Meadows at Morris Farm in Prince William County, from $399,000 up to $450,000 this latest quarter. Victory Lakes (townhomes) also in Prince William, increased prices over the past year by between 2% and 6%, varying by model.

In the Bay Area of northern California, there have been some scattered increases. The Preserve Townhomes raised prices on some models and lowered prices on others, and this some-up, some-down situation is a common occurrence these days.

In South Florida, Monterra is an excellent example of a project where the lack of viable competitive projects has worked to the favor of the builders. Prices on several products have increased, while others have been flat, and there have been some recent decreases on certain models.

In the Boynton/Delray submarket of Palm Beach County, Canyon Springs showed very strong price increases between the 2nd and 4th quarters of last year, but the other Canyons communities have been flat.
In this blog article, I have not looked into concessions, and in some instances, builders are either adding or removing incentives, which alters the value equation.
There are still relatively few examples of builders raising prices on new homes, but just the fact that any builders are raising base prices at all is a remarkable turn of events. The increases are only occurring, as I was quoted above as saying, in projects ‘where all the stars are in alignment.’ As the economy and the housing market improves further, price increases will become more widespread, but for now, we are just watching for further signs of a turning point.

Annual Detached Single-Family Data

(data are for the four quarter period 2Q10 through 1Q11)
Starts Absorption

Northern Virginia 3,578 3,983
Southern Maryland 3,582 3,605
Twin Cities 2,652 2,942
Salt Lake City 3,382 3,889
Indianapolis 2,796 3,143
Northern California 3,688 4,512
St. George 802 870
San Antonio 7,002 7,609
Tampa 3,175 3,447
Las Vegas 3,886 4,843
Dallas-Ft. Worth 13,742 15,240
Nashville 2,705 3,264
Austin 5,504 6,289
Denver 5,096 5,470
Houston 16,704 18,674
Boise 1,281 1,543
San Diego 1,629 1,701
Central California 3,637 5,009
Naples-Ft.Myers 1,261 1,437
Albuquerque 1,290 1,608
Jacksonville 2,301 2,769
Rio Grande Valley 2,165 2,191
Sarasota-Bradenton 1,505 1,686
Phoenix 7,479 9,845
Charlotte 3,793 4,700
Raleigh 4,268 4,918
Southern California 5,456 6,944
Orlando 7,459 8,109
Chicago 1,926 2,659
Triad 1,301 1,636
South Florida 1,932 2,541
Reno 326 454
Atlanta 4,634 7,492

Source: Metrostudy (actual counts)

The industry is optimistic, but nervous. Jobs and oil prices are up, but the housing tax credits are history. People want to buy, but mortgage loan approvals are tough for all but most qualified. The industry still faces a variety of cross currents as it struggles to get traction.

Join us at The Lakewood Yacht Club where Houston Metrostudy Director David Jarvis will discuss how these factors are affecting Houston’s new home sales and the outlook for the Summer market.

Contact Jennifer Wilkins for more information: info@bacren.com or 281-299-2288