Jobs are everything to the economy. Period. And that is the same opening I used yesterday when talking about where things are happening, economically speaking, across the U.S.
This morning I will be speaking in Houston (where I live), which can best be described as an economy accelerating at full throttle — an appropriate reference given the presence of NASA.
The Houston Metropolitan Statistical Area (MSA) includes nine counties with a combined population estimate of 6.2 million people. And it is growing rapidly.
- Harris County
- Fort Bend County
- Montgomery County
- Brazoria County
- Galveston County
- Liberty County
- Waller County
- Chambers County
- Austin County
The Houston MSA added a whopping 85,800 net new jobs in the prior 12-months. While the U.S. still has fewer jobs than as of January 1, 2008, Houston has more jobs than ever before and adds to that record almost each and every month. Houston’s job growth rate is essentially double that of the U.S. As important, it is being driven by a broader array of industries than historically typical. Houston remains the oil and gas technology capital of the world, but also has the second largest port in the country based on tonnage. The Texas Medical Center –the largest medical center in the world, has 21 hospitals and a vast array of research and academic-related institutions. There are multiple higher education colleges and Universities, and the petrochemical industry is expanding at a quick pace given the cost effective feedstock of affordable and abundant natural gas supplies.
All this job growth culminates in demand for housing of all types and rent and price ranges. Housing sales, as reported by the Houston Association of Realtors®, reached an all-time high in 2013, and continue to increase. The first of the following two charts shows the unadjusted monthly sales of Single Family, Condominiums, Townhouses and High Rises. The second graph shows the same data, but with a 12-month moving average which removes the seasonality effects and allows true trends to be revealed.
Keep in mind in the previous graph of the 12-month moving average number of sales, the high in sales seen in 2006-2007 was during the time when subprime loans were readily available. Loans were given, unfortunately, to individuals that, over recurring economic cycles, had no ability to meet the financial obligations of homeownership. The opposite is true today. Record sales are occurring under an environment of perhaps the most restrictive mortgage loan underwriting in decades. It’s all being driven by a growing economy and thousands of new jobs.
Unlike much of the U.S., while Houston did have an increase in sales during the subprime-driven housing bubble, home prices systematically progressed without bubbling up. The first of the following two graphs shows the monthly unadjusted median home price, while the second graph displays the 12-month moving average of median prices. In the 12-months ending February 2014, the moving average median price was up 11.1 percent (very close to the 10.7 percent seen nationwide).
So why didn’t Houston participate in the housing price bubble seen in many parts of the U.S.? I believe that the massive downturn in housing in the late 1980s (seen across much of Texas) still burned in people’s memories and they simply knew better.
The last unique twist in Houston’s housing markets is that differing segments of the market are growing in demand. Within the Houston Association of Realtors Multiple Listing Service (MLS), total home sales increased 17.5 percent from 2012 to 2013. Single family sales were up 17.2 percent, townhouse-condos up 22 percent, and high rise up 12.9 percent. For $1 million and up properties, however, sales from 2012 to 2013 jumped 42 percent. In the $1 million and up range, single family sales jumped 39.7 percent, townhouse-condos rocketed 325 percent and high rise gained 89.5 percent. The higher luxury-end of the market in the Houston MSA is booming, with the number of months of inventory in most segments considered small enough to be classified as a seller’s market. This is a story recurring across much of the nation.
My expectations are that job growth rates will slow slightly in Houston as the year progresses, but the Bayou City will still see from 70,000 to 75,000 net new jobs added again in 2014. I expect that home sales will continue to increase, but perhaps at a slower rate than in 2013. Prices too will rise, but again not in the double digit range. Hence I stick with my national forecast here:
- Existing home sales up 4 to 6 percent
- Existing home prices up 5 to 7 percent
Want to see what Houston homes cost? Click onto www.HAR.com the consumer-facing Website of the Houston Association of Realtors. You can see that, in many parts of the Houston MSA, homebuyers get a tremendous bang for their buck in housing. Builders are also doing a tremendous job offering a lot of house for the money in Houston.
Houston – At Full Throttle.