Metrostudy released an analysis of the first quarter of 2014 for the Houston housing market, which found that housing continued to surge in Q1, with prices rising for both new and resale homes. New home construction was started on roughly 7,100 homes, representing the fastest pace since the third quarter of last year.
"These numbers represent a year-over-year gain of 9 percent," said David Jarvis, regional director of Metrostudy's Houston market. "Houston hasn't seen this many new homes started in the first quarter of the year since 2007."
On an annualized basis, housing starts were roughly 29,000 for Q1, a 14 percent boost from the first quarter of 2013. The quarter's numbers represent the strongest rolling four quarters since Q3 2008. Lot supply constraints continue to limit Houston builders.
"During the expansion phase of a housing recovery we expect to continue to see closings lag behind starts activity given the timeline of home construction and sales," Jarvis said. "The current annualized rate of new home closings is the largest since the first quarter of 2009 when builders were still liquidating their inventory as quickly as possible. Needless to say, the sales occurring today are of a much healthier nature."
Closings have increased steadily as well, noting gains for the last eleven quarters. Area builders closed on 6,553 new homes, bringing the annualized total to 26,463. Closings have increased by 2.8 percent from the previous quarter, and are up 15 percent from the previous year.
The group found that job growth continues to push housing numbers upward from an increase in demand. New home demand is also inflated from the extremely tight inventory of resale homes available in the area.
The company projects that new home construction will still struggle from a lack of available lots. "Due to builder demand for more lots, most, if not all, lots being brought to market have a buyer before they're completed. Therefore, a number of publicly-traded builders and large, privately-owned builders have begun aggressively accumulating land and developing lots for their own use as a defensive posture," the company said.
The increase in demand is fueling an increase in price appreciation, as well as pushing construction materials higher as well. These market conditions have created a bottleneck, limiting growth in starts and extending delivery times.
"The result of all these factors is strong appreciation in home values, which Houston has already been observing as median closing prices for resales in Houston are up over 17 percent since last year and new sales are up 13 percent," Jarvis said.