Houston's Hot Housing Market Shows No Signs of Cooling
Houston: You don't have a problem. Driven by a robust economy, record-setting low housing inventory and above-average population growth, Houston's real estate market is booming. Job creation across multiple economic sectors, particularly the energy, health-related and distribution industries, has brought stable growth and soothed fears of an economic bubble. Houston's unemployment rate in January 2014 was 5.6 percent, a full percent below the national seasonally adjusted rate. Ranked 10th on Forbes' annual list of America's Fastest Growing Cities, the city's population expansion includes a record increase in the Millennial segment (20-to-34-year-olds), which is projected to grow by 7 percent by 2019.
Housing prices in the Houston area continue to march upward. The average sale price for single-family homes for sale in Houston was up 22 percent in January 2014 from a year earlier. The luxury market is especially hot, with a 45 percent increase in the price of homes selling for more than $500,000 in January 2014 from a year earlier. Houston's housing inventory -- an indicator considered "balanced" at six months -- held at a record low of 2.6 months for the second consecutive month in January 2014.
The combination of low inventory, high demand and rising prices put house sellers in the Houston market in a strong position. With a median sale price of $214,000 for the area, FSBO (for sale by owner) sellers listing their homes without the services of a real estate agent will further benefit, saving the agent's 6 percent commission, an average of $10,620 in the Houston market.
The most important features driving a purchase for Houston home buyers are in the areas of home comforts for the hot climate and floor plans, according to a 2014 survey by ForSaleByOwner.com. Central air conditioning tops the buyers' list of home amenities, a requirement for more than 50 percent of buyers in the Houston market. A garage or carport is next on the list, followed by a single-level home, an open layout and the home being in move-in condition. The most common deal breakers for Houston-area home buyers are a lack of central air, a lack of a garage or carport and a floor plan that is not single-story.
Popular Houston neighborhoods include River Oaks, a central Houston community that became a model of community planning after its establishment in the 1920s and is now among the wealthiest ZIP codes in the United States. Wooded, bike-friendly and artsy, the Heights hosts mansions and bungalows from the early 20th century alongside newer residences that maintain the same feel and blueprint. The Montrose area, the center of Houston's alternative lifestyle community since the 1960s and '70s, has a mixture of residential styles, including beautifully restored mansions and Craftsman bungalows.
Outside of Houston proper are a wide variety of communities. Sugar Land, about 25 miles southwest of downtown Houston, consistently ranks among the list of fastest growing, safest and cleanest cities in the U.S. and has an ethnic diversity -- 35 percent of its population is Chinese, Indian or Pakistani and 18 percent are African American or Latino -- that is unique in the Houston area. To the north of the city is an area called the Woodlands, a planned community of nearly 100,000 people that includes outdoor recreational spaces, pedestrian-friendly shopping areas and corporate campuses.
Up next: Detroit, a market that has a strong demand by first-time home buyers but a low housing inventory and rising mortgage rates.
See what other cities made our Top Real Estate Markets list.