Houston continues to recalibrate. Annual starts decreased again in 2023, but, at 31,900, volume is still higher than the 28,000 to 30,000 annual starts that typically define a good year for Houston builders.
Quarterly starts jumped 44% between the first and second quarters to more than 10,000 starts. Six communities started more than 200 homes this year, including 400 starts at Sunterra in Katy. Houston is the only Texas market with fewer than 20 months of vacant developed lots, and lot deliveries decreased the past two quarters.
If these trends in quarterly starts and deliveries continue, lot supply will likely pull back again. There are, however, some big new communities coming soon.
Strengths
The average monthly new-home sales rate is higher than 2019, and resale listings are 40% below 2019 levels. Houston boasts a resilient economy and strong demographic trends. Among major metros, it ranked second for the number of residents added in 2022 (natural increase plus net migration).
Weaknesses
Quarterly and annual closings have trended lower this year in Houston, which was an outlier for the Texas markets. There's a heavy dependence on the oil and gas industry (though the local economy has diversified). In addition, the market faces tropical storm and climate risk, and it is known for bad traffic with limited public transportation.
Supply
Quarterly housing starts decreased 12.6% from a year ago, while the number of available vacant developed lots sits at 52,387, up 35.6% over the same quarter last year. In terms of supply/demand balance, the market area is 3.35% oversupplied.
Sales
New-home sales in the Houston-The Woodlands-Sugar Land metropolitan area decreased 4.1% year over year to an annualized rate of 31,651 units in July. Existing-home closings for the 12 months ending in July posted a year-over-year decline of 31.1% to an annualized rate of 110,018 units.
Economy
TotaI nonfarm employment in the metropolitan statistical area increased 3.5% from the same period last year to 3,345,100 payrolls in June, with approximately 2,900 fewer jobs compared with the previous month. The local unemployment rate remained flat at 4.4% in June compared with the previous month. June's jobless rate is higher than it was this time last year when it stood at 4.1%. Zonda forecasts the region's unemployment rate will finish the year at 4.6%.
Community
The current population for the metro area is approximately 7,516,640 people and is projected to increase by 1.4% this year. There are approximately 2,720,450 households in the region, which is up 1.5% year over year. Forecasts show that current household formation is expected to increase by an annual growth rate of 4.1% for 2028. Incomes increased by 5.2% from the previous year to $76,591.
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