Is Houston Overbuilding?
This RisMedia article reports University of Houston economics professor Barton Smith is worried about the housing market. "Ominous signs are looming, Smith said. Foreclosures, for example, are as high today as they were in 1991. And builders in Houston are putting up single-family homes faster than they can be sold."
"In the past year, 42,000 single-family home permits were issued, but the area gained only 15,000 households."
"Developers have been focusing lately on starter homes. But that will be the weakest part of the market because those lower-priced homes are most sensitive to interest rate hikes. Not only are developers overbuilding, but they are building the wrong houses. When the economy improves and people start moving to Houston with money from selling their costly houses on the West or East coasts, they'll be looking for upscale properties, not starter homes, Smith said."
5 Comments:
Well, speaking for California, I'm not sure just how many people will be selling nice houses to move from California to Houston after the economy improves.
Dave,
It's funny how many places view themselves as the next stop for Californians. Thanks for the comment.
As an lupscale lifelong Californian, I'm afraid Houston is not on my short list. Nor is it on my long list. In fact, aside from at the point of a gun, I will likely not be moving to Houston in this lifetime. And even if there is gunplay involved, I might just take my chances.
If foreclosures are mounting now---even as the RE market is still supposedly strong---you can imagine how intense it will get a year or three from now.
Back in the 80s-90s boom/bust in Calif, we didn't see foreclosures start to ramp until the 2nd or 3rd year of the bust. This tells me that the carnage will be awesome to behold. Back in the last boom, buyers weren't overextending themselves the way they are today. We didn't have anywhere near the level of creative finance (I/Os, etc) that we have today. This is setting up to be a doozy...
Anyone think the tide will shift with more folks cashing in their chips from CA and the NE and moving to a $150k home in Houston instead of paying triple that for the same home in Phoenix, Vegas or Florida? All have hot summers, nice golf courses and attractive new suburbs. Houston has the best skyline outside of NYC and Chicago as well as the most diverse economy.
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