Metrostudy has released results from its 2Q14 survey of the Houston housing market, and for eight consecutive quarters we have seen an increase in the annual starts rate. The quarterly starts rate in Houston rose 16% to 7,977, and was up 3.5% when compared to the second quarter of 2013. The annual starts rate increased 1%, to 28,990 over the previous quarter, and up 10% from the second quarter of 2013.

The annual closing rate was up 13% from a year ago, the strongest level since the second quarter of 2008. Finished, vacant home supply continues to be constrained. The Houston market was at 2.7 months of supply.

“Houston’s housing market continues to outperform. We are seeing strong pricing appreciation and low levels of inventory of finished product and vacant developed lots,” said Scott Davis, Regional Director for Metrostudy’s Houston Market. “After five and half years of strong job growth, the real challenge for builders in Houston’s new housing market is finding affordable lots in desirable locations.”

This finished-vacant months-of-supply metric is the number of finished-vacant homes divided by the number of move-ins over the last four quarters, then multiplied by twelve. Metrostudy has observed over the years that when this number rises above 3.0 and stays there, builders tend to reduce prices or make concessions, so this indicator is closely observed each quarter for emerging trends. Vacant, developed lot (VDL) inventory continued to fall, down to 36,128 lots in the second quarter.

This represents 15.0 months-of-supply, down from 43 months-of-supply recorded in the second quarter of 2009. At 15 months, this figure is far below the 20-24 months of supply that Metrostudy considers “equilibrium” for the Houston market. VDL months-of-supply is calculated by dividing the number of developed lots by the current annual starts pace, and then multiplying by twelve.

“Housing markets in the northwest and far north sectors of the city remain strongest,” says Davis. “Job growth from projects like Exxon at Springwoods and the opening of the Grand Parkway are really driving home development in those two submarkets.”

“With respect to buiders, Lennar remains the overall market leader, with DR Horton and Perry coming in close behind. Brighton Homes and KB Home are having a lot of success as well.” Meritage, Village, LGI Homes, Ryland and Taylor Morrsion round out the top ten.

Housing Inventory is slightly above normal at 10.1 MOS. VDL inventory declined 5.8% quarter-over-quarter to 36,128, a 15.0-month supply. There were 6,375 lot deliveries in the quarter, and future lot inventory declined 1.1%, to 73,548.

Learn more about markets featured in this article: Houston, TX.