2017 Real Estate Projections. Hot Trends. Hot Deals.

The housing market in Houston and throughout most of the state of Texas ended with a bang in 2016 and is carrying that momentum into 2017.

Homebuyer demand is up with sale prices continuing to increase, according to a 2016 year-end real estate market report. The Houston housing market took off in 2017 with single-family home sales and pricing both on the rise in January, according to the Houston Association of Realtors.

What’s next for the Texas housing market? Check out these analysis and trends from economists and real estate experts.

Houston Housing Market To See It’s Best Years Yet

Mark Dotzour, former chief economist for the Real Estate Center at Texas A&M, predicts the Houston real estate industry faces its best years yet.

The Houston housing market has remained surprisingly resilient as the state faced tough economic times due to slumps in the energy market. Dotzour called it “stunning, astonishing, astounding,” reported the Houston Business Journal.  

Dotzour predicts a bull market for housing locally and nationally during the next five to 10 years as home construction continues to recover from the Great Recession and Millennials flood the housing market.

Texas Home Sale Prices Rise Steadily from 2011 to 2016

Overall, home sale prices have risen steadily throughout Texas since 2011. The average sale price in Houston, Dallas and Austin grew more than 5% seasonally adjusted year-over-year, according to the 2016 Texas Housing Insight summary report by the Real Estate Center at Texas A&M.

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Housing Supply and Demand Trends in Texas

High demand for single-family homes in Texas has been fueled recently by the shale oil boom and recovery from the Great Recession. However, home builders have been unable to keep pace with this demand due to labor shortages.

While homes in the lower price points have been constrained by the tightening supply, the state has seen nice growth in homes priced $300,000-$399,000. Growth at the higher end of the housing market has taken off.

In 2011, 68 percent of homes sold in Texas were under $200,000; by 2016, they represented only 48 percent of the market, according to research in Game of Homes: The Supply Demand Struggle.

price distribution table

Discount Rates Are an Important Indicator in Housing Market

Research finds list price discount rates are an important indicator of general housing market conditions and liquidity of local markets. The total discount rate of a listed home is the difference between the original list price and sale price as a percentage of the original list price.

Smaller discounts in the housing market mean more liquidity and higher demand relative to supply, thus, the seller has stronger bargaining power. Larger discounts result in the opposite.

Lower discount rates in Texas show a growing strength of demand for residential properties and increasing liquidity. The Texas list price discount rate fell from 8.3% in January 2012 to 4.1% in December 2016, according to the Real Estate Center at Texas A&M.

More jobs, growing incomes and lower mortgage rates lead to the increase in demand, while supply lowered as the pace of foreclosed home slowed after the Great Recession.

List price discount rates

Income Outpaces Housing Prices in Texas

Texas has benefited in the past from Personal Income Per Capita (PIPC) growth that has exceeded housing price growth, preventing major disruptions and keeping real estate relatively affordable.

A 2016 report shows Texas ranks 17th for PIPC growth and 29th for housing price appreciation in the U.S., with all major Texas metros having a PIPC growth exceeding housing price growth.

Since 1975, the overall trend has been PIPC growth greater than housing price growth. However, in recent years, Texas housing prices increased faster than PIPC after housing bottomed out in 2012. Home demand continues to outpace supply, pushing prices higher.

This trend will likely continue. If housing prices continue to appreciate ahead of income growth as trends suggest, the advantage of greater housing affordability in Texas may narrow or even disappear in the future.

Texas Economic Outlook

Jobs throughout the state increased in 2016, along with the energy sector improving with sustained production and increased rig operations. Statewide housing sales surged compared to the prior year, as did sales in the major metros.

“Overall, the economy appears solid and expectations are for continued improvement into 2017,” reported economist Luis Torres.

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