Houston housing starts increased 6% during the 4th Qtr of 2009 compared to the same quarter of 2008, according to data released on Wednesday by Houston’s Metrostudy.
6.323 new homes were closed by Houston area builders during the 4th Quarter. 4,576 new homes were started during the quarter.
During December, 2009 there were 12,164 new homes under construction or completed in the Houston area.
”Houston’s housing market’s in far better shape than most other major US cities as the data continues to show steady improvement” according to Steve Silver, President of Silver Mortgage Funding, LLC and founder of The Real Estate Club of Texas.
”With 4,000 more homes closed than were built during the 4th Quarter, prices and inventory will soon reflect this tightening” notes Steve Silver.
With an ample 42 month supply of lots at the current inventory of 65,925 vacant lots available in the Houston area, builders won’t have to absorb any land development risk as they acquire these lots. Normal inventory is 20-24 months, so this imbalance should create some pressure on land prices until the supply reaches normal levels. Until then, builders benefit because they’re not exposed to land development risks.
Lower construction costs as a result of the national recession are benefiting local builders because they can lower their sales prices without affecting their profit margins. The lower prices are attracting more buyers and inventory’s dropping as a result.
”Construction financing availability is the biggest hurdle for most builders right now” says Silver. Often the best source for construction financing are the banks with the largest inventories of foreclosed lots. Banks sometimes will lend to builders that agree to build on those lots, though often the builder must agree to acquire the lots at above-market pricing. However, because of the scarcity of financing, builders eagerly agree to these terms.
During 2010, Houston-area builders are calculated to build and sell 18,000 to 20,000 new homes. Supply and demand are gaining a healthy balance in Houston.
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