GROWTH…Three Reasons why Houston is set for more!

Posted in Houston Market | Posted on 12-20-2013 | Written by Brad Colliander

Houston has had a phenomenal run, outpacing most markets even during the “lean” times. That said, I believe it has a long run of growth in front of it.   Here’s why.  The future of Houston’s residential housing activity is being backed by sound economic fundamentals and reacting to the rules of supply and demand.  The remainder of this post will focus on the factors that are driving residential housing demand in Houston.

1. Domestic Migration and Population Growth – Since 2000, Houston experienced population growth of nearly 120,000 people per year: the equivalent to adding the population of San Angelo, Texas each year.  Approximately, 50% of this population growth is attributed to the natural increase in population (Births minus Deaths), 25% of the growth is Domestic Migration and 25% is Foreign Migration into the Houston MSA.   Historically, households that experience a life change such as a birth, death or relocation tend to purchase a home.  While the economy has driven many of the buyers into the rental market during the past few years, it is likely that we will see shifts back towards for sale housing if affordability is maintained.  The Texas State Data Center is bullish on the population growth for the Houston MSA, increasing from 5.9 million people in 2010 to 6.9 to 7.4 million people in 2020 depending on the growth scenarios.

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Assuming a 2.85 people per household ratio, an additional 350,000-525,000 plus households will be created from 2010 to 2020 or 35,000 to 52,500 households per year. Historically there has been a 3 new single-family homes for every new multi-family home constructed.  At this ratio it is inferred that there will be a demand for an additional 26,000 to 40,000 new homes a year.

2. Job Growth – Houston has been one of the Job Growth leaders in the Nation for much of the past decade.  Due to the strong connection with the Energy industry Houston was one of the last MSAs to enter into the recession but was also one of the first to recover.  By the end of 2011 Houston recovered all the jobs that were lost during the recession and today employs more people than ever before.  According to the Institute for Regional Forecasting, job growth will likely remain at or above the historical average of 60,000 jobs per year during the next 5 years.  Historically it has taken approximately 1.9 jobs to create a new home start in the Houston MSA.  This would generate a need to build 31,500 new homes per year during the next 5 years.

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3. Affordability – Home prices for new and resale homes have been increasing lately, but are still considered to be affordable when compared to other parts of the nation and in Texas.   As Madison Inselmann states in this blog: http://www.metrostudyreport.com/austin-market/housing-affordability-in-texas the median income household in Houston, can afford the median priced home in Houston.

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