Houston’s Mid Year 2018 Real Estate Market Report

Houston’s Mid Year 2018 Real Estate Market

So, What Has Really Happened To The Houston Real Estate Market Post Hurricane Harvey & Tax Reform?

Best Houston Housing Segments

As we’re approaching the one-year anniversary of Hurricane Harvey, Houston real estate has experienced several large factors that could impact our market:

  • We’ve had six months of sales data since the signing of the Tax Reform bill and reduction in SALT tax deductions.
  • While oil prices have nearly doubled in the last two years to hover around $70 / barrel, we haven’t experienced the return of strong energy job growth yet.
  • Interest rates have consistently increased over the past year.
  • The overall aftermath of Harvey still lingers in many parts of the city, with longer-term outcomes in those areas still largely unknown.

In an effort to evaluate how the market has changed, we’ve compared trends on 12 different segments of the real estate market and analyzed sales data from 52 Houston neighborhoods.

Houston’s Real Estate 2018’s Mid-Year Notable Highlights

There are a few big unknowns that we’re watching and there is not enough data to extrapolate what this means for the future of home values:

  • Post-Harvey, quality contractors can be hard to locate. We’re still seeing backlogs with quality project managers, crews, some materials / supplies and the permitting process.
  • As such, many buyers are leaning toward “updated” homes (as to avoid the costs and timing involved with renovations, given the post-Harvey constraints.)
  • As construction & rebuilding isn’t complete in many segments of the market, there is not enough true data to understand the “difference” in value between a flooded home, a renovated-flooded home and a never-flooded but non-renovated home. This divides the market segments dramatically in some areas and additional study is needed. This may take several years to see how this flushes through the system.
  • In April 2018, the Houston City Council approved the first overhaul to building code regulations in effort to alleviate future flood damage on homes. These regulations take effect on September 1 and will have an impact on both the 100 & 500-year flood zones. The impact of these regulations on construction costs and resale is yet unrealized.
  • There have not been many sales of flooded & renovated homes yet. As such, there’s not statistically significant data to tell us “what’s the value of fixing up a home that flooded?” Email us for anecdotal data in your neighborhood.

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EXECUTIVE SUMMARY

It’s a good time to be a buyer of:

It’s a good time to be a seller of:

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downtown houston main stNeighborhoods doing well include:

  • Garden Oaks
  • Highland Village / Midlane
  • Memorial Park
  • River Oaks
  • Washington East / Sabine

While each neighborhood is different, much of the common growth has been due to:

  • The areas did well during Harvey.
  • New builders have acquired land and started builder “nicer and larger” homes at higher price points.
  • In three of the cases, base land values for the area were lower than adjacent neighborhoods and they’re getting closer to parity.

In the table below, you can see where sales are lower or slower. While each neighborhood is different, much of the common issues are related to:

  • Parts of each area experienced heavier flooding than other parts of Houston.
  • Material increase in homes “sold at lot value.”
  • Higher percentage of homes going through permitting process & renovations than other parts of Houston. (It has been unnerving to some buyers to drive through streets where a lot of renovation work was going on, even if the home they were considering had no water damage.)

2018 TRENDS BY PROPERTY TYPE & PRICING

We segmented the Houston real estate market into:

  • Three main property types (single family homes, townhomes, highrise condos).
  • Four main price tiers.

Then, we analyzed this data by comparing the following for each of the 12 segments:

  • # of properties sold from Jan – Jun 2018 vs Jan – Jun 2017.
  • Current absorption rates.
    • This is the amount of time it would take to sell all of the current inventory, based on the current rate of sales.
    • A balanced market is 5-7 months.
    • A lower number is good for sellers. A higher number is good for buyers.
  • 1 year appreciation rates.

2018 Mid Year Sales Volume

Historically, low- to mid-priced properties in close proximity to major job centers (e.g. DowntownMedical Center or Galleria) have sold very well. (See Best Houston Neighborhoods in Appreciation.)

Single-family homes continue to dominate the Houston housing market, with 2018 sales of SFH in the $500k-$1M and SFH in the $100-$250K range outpacing its numbers from last year.

In addition, here are some of the key success themes for the three property types that appreciated the most over the past 10 years:

  • School zoning;
  • Close proximity to a major job centers (Downtown, Galleria or Medical Center).
  • The Medical Center area has also been in continual high demand.
  • Two bedrooms are often easier to resell or rent out, as it can be rented to people with a roommate.
  • Access to public transportation (METRORail or good bus lines).
  • Try and avoid being right on a railroad or freeway.
  • Having a good floor plan matters.

2018 Mid Year Appreciation Rates

When comparing 2017 results to YTD 2018 data, the trends are very notable, including:

  • The Single-family home market has bounced back strongly from the effects of Hurricane Harvey. Usually (and provided the property is in an area that has no history of flooding and is near top Houston schools), the larger the lot the better for resale value. (See Best Houston Neighborhoods In Land Value Appreciation.)
  • Sales of Luxury townhomes $1M+ remained flat, while movement townhome properties in the $500k – $1M slowed down slightly. One notable trend: townhomes within Houston’s Best Gated Communities continue to sell well.
  • Highrise developers have nearly doubled Houston’s inventory of condos available. This has hurt resale in a number of buildings (especially specific, mostly older, buildings with high HOA fees). (See Guide to Houston Condos HOA Fees & Amenities.) Historically the condo market normalizes when supply & demand reach equilibrium. (See Best Houston Condos In Appreciation.)

Please contact me if you’re interested in seeing how your home, neighborhood or area of interest has performed over the last decade.

2018 Mid Year Absorption Rates

The absorption rate shows how many months it will take to sell out the current supply of homes available (excluding any new listings) based upon the current rate of sales.

As a sample, if there are 10 homes for sale on your block, and 1 home sells every month, then there are 10 months of inventory (e.g. it should take 10 months to sell all of the homes on your block.)

5 – 7 months is a “balanced market.”

A smaller number is better for sellers.  A larger number is better for buyers.

Right now, in Houston, it’s a good time to be a buyer of:

  • Luxury condos ($500k+)
  • $250k-$500k condos
  • $1M+ Single family homes in non flooded parts of neighborhoods that had some water (many buyers are “throwing the baby out with the bathwater.”)

Right now, in Houston, it’s a good time to be a seller of:

  • Single family homes in hot neighborhoods with good school zoning (West U, Heights, Oak Forest)
  • $100k – $250k townhomes in areas close to the major job centerss
  • $100k – $250k single family homes

Change In Median Home Price By Neighborhood

In an effort to highlight the trends amongst different parts of the city, we analyzed 52 Houston neighborhoods.

CAVEAT: The 2018 data below looks at sales between January 1 – June 30, 2018. In some of the smaller neighborhoods the data is not as statistically significant as others (e.g. in small areas a few “big” sales will change the averages more than in large areas.) We compare the total sales price, in each area, between Jan – Jun 2018 versus the full year 2017 data. We used full year 2017 data so it was more statistically significant and update these trends bi-annually. If you have any questions about your neighborhood, contact me.

Below, please find the change in median home prices of selected Houston neighborhoods.

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Notable Highlights:

  • Neighborhood with the largest appreciation, on average, benefited from:
    • Doing well during Hurricane Harvey.
    • Material increase in new construction home sales (e.g. Builders bought teardowns, and built new, large and expensive homes).
    • Close proximity to the major job centers.
  • Neighborhoods with the largest declines, on average, suffered from:
    • Hurricane Harvey flooding.
    • Material increase in homes “sold at lot value.”
    • Reduced buyer demand. (Some buyers “won’t even consider anything at all, even close, to any area that flooded.”)

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Houston Real Estate 2018 Mid Year Winners

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Disclaimer: The neighborhoods below do NOT represent the full list of Houston areas that recorded positive (and negative) sales trends the past year. The list follows no specific order. The neighborhoods listed were picked to highlight the areas that did well (and poorly) the last 12 months.

Garden Oaks

Garden Oaks Houston Location

2018 Median Land Value Price / Sq Ft: 13%
2018 Median Price / Sq Ft: 9%
2018 Median Home Price: 27%

Garden Oaks has been consistently among Houston’s Best Performing Neighborhoods.

Garden Oaks is a neighborhood of approximately 1400 homes located north of the North Loop (610), and bordered by Ella Blvd. to the west and Yale St. to the east.

Nestled among towering pines and grand magnolias, Garden Oaks feature cottages, bungalows, ranch, and traditional-style homes.

Garden Oaks is near enough to main districts making daily commutes a breeze, and yet far enough for the residents to enjoy a private and quiet neighborhood.

Oak, pecan, and pine trees tower over homes in Garden Oaks. Massive lots (median lot size is 12,000 square feet) with lush yards compliment the tree-roofed neighborhood.

Garden Oaks 10-Year Real Estate Appreciation

Winner: Highland Village / Midlane

Highland Village Houston Location

2018 Median Land Value Price / Sq Ft: 23%
2018 Median Price / Sq Ft: 11%
2018 Median Home Price: 22%

Highland Village is a deed-restricted residential enclave located about 6 miles west of Downtown Houston.

Located along Westheimer and a stone’s throw away from Southwest Freeway and Loop 610, Highland Village has convenient access to key Houston areas like the Galleria, Museum District, Downtown, and the Medical Center.

The neighborhood has plenty of shopping options nearby: the Highland Village Shopping Center, Central Market, Galleria, Uptown Village, and Rice Village.

From vintage single-family homes from the early 50s to new construction custom-built homes, Highland Village offers a great selection. Surrounded by some of the most expensive neighborhoods in Houston, Highland real estate are slightly more affordable than those in River Oaks and Afton Oaks.

Highland Village 10-Year Real Estate Appreciation

Memorial Park

Memorial Park Houston Location

2018 Median Land Value Price / Sq Ft: N/A%
2018 Median Price / Sq Ft: -6%
2018 Median Home Price: 18%

The historic Memorial Park, a sprawling 1,400-acre green space, is home to one of Texas’ top municipal golf courses, miles of multi-use trails, and various sports and outdoor facilities.

Nestled south of I-10 and east of Loop 610, the Memorial Park area is one of the most popular neighborhoods within the Inner Loop.

The 18-hole municipal golf course covers 300+ acres, and features a golf museum, a clubhouse, a lighted driving range, and putting and chipping greens. First opened in the 1920s, Memorial Park Golf Course today welcomes more than 60,000 visitors every year. The John Bredemus-designed course has a 73 course rating and a 122 slope rating. (See Houston’s Best Golf Course Communities)

Memorial Park residents have easy access to the park’s many sports facilities, including a croquet court and sand volleyball courts. The park’s various sports fields can be used for rugby, softball, baseball, and flag football. The Memorial Park Tennis Center features 18 hard courts, while the Memorial Park Fitness Center offers an indoor swimming pool and exercise equipment.

Memorial Park is known for its many trails, varying in size (from small paths to wider roads), surface (from paved to rougher sections), and degrees of difficulty (color coded from easy to advanced). Mountain bikers, nature trekkers, joggers, and skaters frequent specific trails, including the popular Picnic Loop and the Seymour Lieberman Exertrail. Most Memorial Park neighborhoods have direct access to the park’s trails.

River Oaks

River Oaks Houston Location

2018 Median Land Value Price / Sq Ft: -24%
2018 Median Price / Sq Ft: 14%
2018 Median Home Price: 12%

Home to CEOs, celebrities and the wealthy, River Oaks is Houston’s most expensive and exclusive neighborhood.

Forbes, Fortune, and The Wall Street Journal have featured River Oaks in their rankings: “Best Places To Live,” “Top Places to Live Well,” “The (Multi) Millionaire’s Haven.”

With a median home price of over $2.5M (and estates $10M+), River Oaks is Houston’s Most Expensive Neighborhood. River Oaks Elementary is one of the best schools in Houston (or anywhere in Texas).  The area also boasts great access to premier private schools.

River Oaks is one of the Hottest Neighborhoods in the Inner Loop. Centrally located, residents have easy access to all major job centers including Downtown, The Medical Center and Galleria.

Based on Land Value Appreciationand Real Estate Appreciation reports, River Oaks is one of the top performing neighborhoods over the past decade.

Retail and entertainment venues, including River Oaks Shopping Center, Highland Village, and the Galleria, are minutes away from River Oaks homes. Multiple restaurants, boutiques, bars, and lounges also line Westheimer and San Felipe. Residents can also take a short drive to Montrosedowntown, or Upper Kirby for more options.

River Oaks Houston Map

River Oaks Houston Stats

Data & Methodology

  • Source data from Houston Association of Realtors Multiple Listing Service.
  • Data deemed reliable but not guaranteed and should be independently verified.
  • Segment data based on MLS sold properties in areas 2,4,9,16,17,22,23,24. Comparisons data is all based on median sold price per square foot.

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