Housing may avoid much of energy’s pain
Real estate economist tells builders the Houston area’s home market is likely to hold up relatively well
A prominent real estate economist told Houston builders on Tuesday that the energy slowdown will continue to hamper the local economy for the next two years, but the housing market is likely to hold up relatively well as long as inventory remains in check.
“It’s amazing how resilient the housing market in Houston is right now,” Mark Dotzour told a lunch crowd of some 700 at the Greater Houston Builders Association 2016 midyear economic forecast event. “It’s almost beyond economic reasoning how sturdy this economy has been.”
Despite low oil prices, home values and sales haven’t collapsed. That’s because the real estate market wasn’t overbuilt when the slowdown began.
“There are not enough homes for sale in this town,” said Dotzour, who stepped down last year from his long-held position as chief economist for the Real Estate Center at Texas A&M.
In a typical Texas cycle, the residential real estate market falls in concert with oil prices. But today’s low inventory is proving a blessing, he said.
“There’s no massive overbuilding of houses here whatsoever, so we’re poised to come out of this really strong,” Dotzour said.
Still, the housing market will not be totally unscathed.
Dotzour estimated that a year from now, new home sales will have fallen about 10 percent.
Sales of high-priced homes are softening the most, and builders are now looking to capitalize more on more moderately priced properties, where demand remains strong.
For the first time since
2009, the average price of a new home in this region fell slightly in the first quarter compared with the previous three-month period, residential data firm Metrostudy reported earlier this month.
After the Tuesday event, Lawrence Dean, Metrostudy’s Houston regional director, echoed Dotzour’s comments that the local home building market could avoid a painful downturn.
Part of what will help the market recover, they both said, is the millennial generation.
“They are aging out of apartments. They’re aging out of being single,” Dean said. “They’re aging into home ownership. There’s a lot of validity to that.”
Chris Patterson, a vice president of RVi Planning & Landscape Architecture, which works on masterplanned communities, said his company is busy.
Builders are adjusting to the softening at the higherend of the market.
“We’ve seen some people reposition,” Patterson said, referring to builders focusing on smaller and less expensive homes.
“But there’s still activity out there,” he said.
Dotzour also addressed the national economy and how the housing market will help boost the country overall.
“I think nationally we are in the early stages of a real bull market in housing that could last for quite a while,” he said.
Dotzour was cautiously optimistic about the energy business, too.
“Last year was a miracle,” he said, as energy companies were still making money because of hedges that allowed them to sell oil at high prices.
The bankruptcies and layoffs, he said, will reach “peak intensities” over the next year or two.
On mortgage rates, Dotzour said not to expect an increase anytime soon. That’s because they are closely tied to inflation and the U.S. economy isn’t growing that quickly.
“Until we have any inflation in this country,” he said, “mortgage rates will not go anywhere.”