Ebb and Flow A Geographic Look at 's Stormy History

Joshua G. Roberson Publication 2196 March 6, 2018

eographically, the Houston-The Woodlands- Sugar Land Metropolitan Statistical Area is one The Takeaway Gof the largest metropolitan areas in the nation. While it’s still too early to determine Hurricane Despite fluctuations in the oil market, it is also one of Harvey’s long-term impact on Houston’s hous- the most densely populated metros with steady house- ing market, the city’s history of flooding provides hold growth. When Hurricane Harvey hit the Gulf clues on what to expect. Neighborhoods near bay- Coast in late August and unleashed unprecedented levels ous and waterways suffered severe flood damage, of rain in a short time, Houston received the bulk of but, overall, the housing market emerged from the property damage due to its size. Total damage estimates storm in relatively good shape. are anticipated to rival other catastrophic hurricanes such as Sandy and Katrina. Short- and long-term economic losses could be severe. and one particular area that has been hit hard numerous How will this storm and its torrential flooding affect times by recent floods. The goal was to help model pos- area home sales? While it is still too early to judge the sible outcomes for similar markets impacted by Harvey. storm’s total long-term impact, Houston has a long his- The Houston metro comprises Austin, Brazoria, Cham- tory of storms and floods to guide expectations. bers, Fort Bend, Galveston, Harris, Liberty, Montgom- ery, and Waller Counties. Using the Data Relevance Project (a research agreement with the Texas Association of Realtors), the Real Estate Before the Storm Center took a top-down geographic approach to Har- vey’s impact on Houston’s housing market. The Center By August Houston home sales were on track to exceed analyzed housing sales throughout the metro and indi- 2016, which already was an impressive year compared vidual counties, neighborhoods near major waterways, with the prior one. Second-quarter year-to-date (YTD)

1 sales totaled 41,287 in 2017 versus 38,753 in 2016. July the Trinity River and Galveston Bay is to the southeast. was another good month for sales with 7,695 homes The region includes a vast array of bayous, giving sold, a 2.6 percent year-over-year (YOY) increase Houston the nickname “Bayou City.” (Figure 1). Many of the bayous and waterways—including Brays iure 1 Houston etro Q3 onthly Home Bayou, , Spring Creek, Willow Creek, and Sales and YOY Percentae Chane White Oak Bayou—are adjacent to the region’s most densely populated areas. Unfortunately, many homes in 3.4 8.0 8,000 these areas fell victim to Harvey’s massive flooding. –10.4 2.6 –2.4 3.5 While flooding along Houston’s bayous wasn’t unheard 3.1 –1.6 7,000 of before the storm, Harvey’s record-setting rainfall 24.6 greatly magnified the reach and magnitude of flooding 6,000 into neighboring residential areas. Home sales in neigh- borhoods near major bayous and creeks were impacted 5,000 the heaviest in terms of sales volume. The metro dipped 4,000 around 7 percent in third-quarter sales, but areas within July August September one mile of these waterways fell between 16 and 22 2015 2016 2017 percent (see table). Sources: Texas Realtor Data Relevance Project and Real Estate Center at Texas A&M University Case Study: A Closer Look at Meyerland The region’s sales momentum halted in August, drop- ping 24.6 percent. Even though Harvey hit Houston in Flooding has become more problematic for Houston as late August, overall sales volume fell drastically com- commercial and residential development has expanded pared with both July 2017 and August 2016. The sales and drainage areas have diminished. In recent years, drop permeated the region as the city’s attention shifted catastrophic flooding has almost become the new norm. to disaster response. Among the hardest-hit counties Meyerland, southwest of and near were Fort Bend, Galveston, and Harris—three of the one of the city’s major bayous, has had more than its metro’s most populated counties, and those closest to the share of flooding in recent years. The 2015 Memorial coast (see table). Day flood was followed Rather than continue Au- Houston-Area Year-Over-Year Third-Quarter by the April 2016 Tax Day gust’s sales plummet, Sep- Home Sales flood and, in 2017, Hur- tember home sales actually 2016 2017 YOY ricane Harvey. The Center Q3 Q3 (Percent) improved, ending the month analyzed the short- and 3.5 percent ahead YOY Counties long-term impact repeat flooding had on sales vol- with 7,209 sales. However, Austin 50 54 8.0 ume, price per square foot because title companies and Brazoria 967 921 –4.8 (PSF), and days on market local banks had to cease Chambers 156 164 5.1 since the start of the decade operations at the end of Au- Fort Bend 3,196 2,903 –9.2 in the general Meyerland gust, holdover August sales Galveston 1,728 1,581 –8.5 area. As a reference point, carried forward into Septem- Harris 13,665 12,412 –9.2 Harris County was used to ber, possibly contributing to Liberty 113 127 12.4 compare the study area with the bounce back. Montgomery 2,756 2,819 2.3 the overall market trend. Waller 99 116 17.2 Overall, third-quarter sales Bayous/Waterways fell to 21,154, down more Note that larger markets than 7 percent from 22,777 569 462 –18.8 with more activity tend to in 2016. Buffalo Bayou 475 367 –22.7 have less month-to-month Cedar Bayou 98 80 –18.4 variation than smaller Down on the Bayou Spring Creek/Willow Creek 594 494 –16.8 markets, making trends trickier to identify in smaller Houston is near numerous White Oak Bayou 727 586 –19.4 markets. The blue lines in bodies of water. Lake Hous- Sources: Texas Realtor Data Relevance Project and Real Estate Center at Texas A&M University the figures illustrate these ton is to the northeast and trends.

2 At the start of the decade, Har- INTERSTATE start off the summer. Both mar- 45 INTERSTATE ris County home sales were 10 kets had a considerable drop on the rise largely because of about five to six months after INTERSTATE rising oil prices, but growth 610 the Memorial Day flood before began to stall in 2014 shortly INTERSTATE almost immediately bouncing 45 INTERSTATE after oil prices fell (Figure 2). 69 back. In Meyerland, sales volume be- BRAYS BAYOU INTERSTATE gan declining in 2014 and was 610 In the months that followed the still declining when the Memo- Tax Day floods almost a year rial Day flooding hit in May MEYERLAND 288 later, home sales increased. 2015. Meyerland had a decent Just like in May 2015, the two May, with sales volume match- to three months after the flood ing that of May 2014, but then sales dipped in June. Har- showed little, if any, decline in sales. This time Mey- ris County had a few months of positive sales growth to erland had another delayed shock to sales while Harris County did not. iure 2 Sinle-amily Home Sales olume Hurricane Harvey had a more (Seasonally Adjusted) drastic immediate impact on sales eyerland Harris County in both Meyerland and Houston. Memorial Day Flood 4,500 Tax Day Flood By December, Meyerland sales Hurricane Harvey soared with their highest volume 110 since 2013. Harris County also 4,000 bounced back to continue its gradual positive trend. 90 3,500 Like sales, price PSF in Harris County began to rise exponen- tially with the rise in oil prices. 70 3,000 Home prices continued to rise Memorial Day Flood after 2014 but at a slower pace. Tax Day Flood In Meyerland, median price PSF Hurricane Harvey started to peak in 2014 (Figure 3). 50 2,500 2012 2014 2016 2018 2012 2014 2016 2018 Shortly after the Memorial Day ote: Black lines represent actual monthly levels. Blue lines represent the trend. Sources: Texas Realtor Data Relevance Project and Real Estate Center at Texas A&M University flood, a noticeable shock in prices occurred, but prices bounced iure 3 Sinle-amily Home edian Price PS back before the Tax Day flood. (Seasonally Adjusted) eyerland Harris County The immediate price drop may Hurricane Harvey be explained by sellers who $100 Tax Day Flood simply wanted out of the area Memorial Day Flood $175 and were willing to accept a price discount. A similar trend oc- $90 curred in Meyerland shortly after . Accord- $150 ing to Meyerland resident and $80 Beth Wolff Realtors President Ed Wolff, “Many of those initial sellers were long-time residents $125 who had built enough equity over $70 Tax Day Flood time to then accept lower offers.” Hurricane Harvey Memorial Day Flood Wolff said prices increased 2012 2014 2016 2018 2012 2014 2016 2018 sharply several months later as ote: Black lines represent actual monthly levels. Blue lines represent the trend. Sources: Texas Realtor Data Relevance Project and Real Estate Center at Texas A&M University

3 properties with major post-flood iure Sinle-amily Home ays on aret renovations came online and (Seasonally Adjusted) boosted prices. After April 2016, eyerland Harris County there was no obvious shock to 70 Memorial Day Flood 70 Memorial Day Flood prices like the year before, but Hurricane Harvey Hurricane Harvey Tax Day Flood Tax Day Flood price PSF began to fall. Price 60 drops accelerated following Hur- 60 ricane Harvey, at least in the short 50 run. 50 Because Meyerland and Harris 40 County are different markets, 40 home price behavior varies 30 between the two. At the time of 30 publication, homes in Meyerland 20 averaged $150 PSF while Harris 20 County averaged slightly above 10 $100 PSF. The price differences 2012 2014 2016 2018 2012 2014 2016 2018 could help explain why Meyer- ote: Black lines represent actual monthly levels. Blue lines represent the trend. Sources: Texas Realtor Data Relevance Project and Real Estate Center at Texas A&M University land price levels flattened, possi- bly at a natural price ceiling, while Harris County levels difference at the local market level is the magnitude of continued rising. short-term shocks. Finally, the Center looked at days on market to compare Houston Still Strong the total home marketing period between Harris County and Meyerland. As expected with rapid rising home Factors such as relative location, broader supply-and- sales, days on market quickly diminished before 2014 demand trends, and the regional economy can have (Figure 4). Days on market in Harris County climbed at overriding effects on local market conditons. This may a moderate pace. Meyerland displayed a similar pattern have helped keep Meyerland’s housing market relatively except there was a noticeable rise a few months after on track with the county trend. Some of the storm’s the Memorial Day flood. In April 2016, when the Tax effects will take several months to materialize. Some Day flood occurred, the upward trend began to stabilize. markets may have a longer recovery period than in the In the months immediately following Harvey, days on past because of the greater magnitude of damage. Even market fell to their lowest levels since 2015. so, Houston’s housing market still looks strong. While both the Memorial Day and Tax Day floods were For more on this story, listen to episode 381 of the Real devastating to Meyerland, those floods had a mixed Estate Red Zone podcast at http://txrec.io/Podcast381. impact on overall housing in Harris County. Ultimately, For a general year-end summary of Houston housing, with the exception of price PSF, Meyerland shared the read “Houston Housing: Weathering a Challenging same overall trends as the county over the long term. Year” at recenter.tamu.edu. Median price PSF in Meyerland started to diverge from ______the county in May 2015 after the first major flooding Roberson ([email protected]) is a senior data ana- event. Sales and days on market for Meyerland, on lyst with the Real Estate Center at Texas A&M University. the other hand, rose and fell with the county. The big

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