Allen Brothers Houston Real Estate

Houston Real Estate Market Not Even Close To Crashing In 2015

January 13th, 2015 6:40 PM by AllenBrothers Realtors

The recent drop in oil prices to below $50/bbl has most of the nation in a state of jubilation. Here in Houston, TX, the nation’s energy capital, however, there is a sense of uncertainty about what has been a booming and unstoppable real estate market. This market will probably calm down in the coming year, but by no means will it crash. Inventory remains extremely low, mortgage rates are spectacular and local home builders all report a demand for new construction that is as strong as ever. All of this is according to real estate experts in the area such as Mark Dotzour, a chief economist and director of research at Texas A&M University’s Real Estate Center.

The psychological factor alone may have an effect on the local market, but young Houstonians will also be more empowered to purchase a first home with the money they save at the pumps, another unexpected factor going into 2015. There are currently many new lending programs in place to help such people put themselves into a home-buying position.

Dotzour, at an economic forecast presentation at the Greater Houston Builder’s Association, says he expects builders to pull back on their rate of output in 2015 for the first time in several years, starting construction on between 20,000 and 30,000 homes. Will this resemble the aftermath of other seismic economic downturns of recent decades, such as 9/11, or the 2008 collapse? I don’t think so, said Dotzour.

Builders started 30,100 homes in 2014, as given in an estimate from Metrostudy. That is up 7% from 2013.

Dotzour said home prices will continue to rise in Houston as inventory stays at such record low levels. This will happen despite any potential slowdown in Houston construction.

The psychological factor of oil prices falling to below $50-a-barrel may have an effect on many Houstonians who would otherwise have purchased a home this year, and who may now decide to postpone that purchase. This sentiment was echoed by another economist, retired housing analyst Mike Inselmann, who was also at the forecast presentation.

He was even more confident in local builders, expecting them to start at least 30,000 new homes in the coming year.

The previous fervor and intensity of the market - with two buyers for every one house - will no longer persist, according to Inselmann.

Major building firms at the presentation have not changed any of their building plans for 2015, and have not noticed any slowdown in the demand for housing. They do not see any panic among their competitors and they aren’t panicking either.

Dotzour said that even if home sales were to fall in 2015, the prices would go up, due to the low housing supply.

If oil stays below $50/bbl for the rest of the year, another economist expects employers to add 50,000 to 60,000 jobs and builders to start between 20,000 to 25,000 houses. Prices should be up 5%. This will not resemble the oil bust of the 1980s.

Posted by AllenBrothers Realtors on January 13th, 2015 6:40 PM

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