Harris County Appraisal District
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Harris County Appraisal District 2016 Market Trends Report Harris County Appraisal District 2016 Market Trends Report Residential Property ............................................................................. 1 Inventory Update 2 Sales Volume Update 3 Sales Price Update 4 Townhomes and Condominiums 4 Lease Property Update 5 New Construction 5 The Housing Market and Oil Prices 2016 5 Commercial Property ........................................................................... 7 Looking Forward 7 Jobs 7 Oil & Gas 7 Growth 9 Interest Rates 10 Other economic factors 11 Transportation 13 Real Estate Developments in Harris County 13 Projects outside of Harris County that will affect the greater Houston economy 14 Vacant Land 15 Central Business District 15 Uptown District / Galleria 17 Inner Loop 18 The Outer Loop 21 Baytown 22 The Grand Parkway 23 Highway 290 Expansion 24 Cypress Fairbanks ISD/Waller/Katy 25 Tomball ISD 26 LA Porte 27 Sales 28 Office 31 Inventory Analysis 31 Construction Activity and Deliveries 32 Net Absorption and Leasing Activity 35 Vacancy 36 Rental Rates 37 Sales Activity 37 Capitalization Rates 37 Summary 38 Apartments 38 Rental Rates 39 February 10, 2016 i Harris County Appraisal District 2016 Market Trends Report Market Trends 40 New Construction 42 Summary 45 Retail 47 Net Absorption 47 Market Occupancy 47 Largest Lease Signings 48 Rental Rates 48 Inventory & Construction 48 Greater Houston Retail Market Areas 49 Sales Activity/Capitalization Rates 49 Detail by Property Type 50 Summary 51 Medical 52 The Texas Medical Center 52 Demographics: Driving Demand 55 Medical Office Buildings 55 Hospitals 57 Nursing Homes and Retirement Homes 59 Summary 61 Hotels and Motels 62 Texas Lodging 63 Houston Lodging 63 Developments 63 Summary 65 Warehouses 65 New Construction 65 Leasing Activity and Rents 67 Vacancy/Absorption 68 Sales and Capitalization Rates 69 Summary 70 Industrial Property ............................................................................. 71 Refineries 71 Chemicals 72 Utilities 73 Electric 73 Natural Gas 74 Telecommunications 74 Manufacturing 76 Commercial Personal Property 76 February 10, 2016 ii Harris County Appraisal District 2016 Market Trends Report Residential Property Houston’s economy and residential market have slowed from the hot markets of 2014. This is due in no small part to the fact that for the fifth time in the last four decades the Houston metropolitan area is facing uncertainty due to the collapse of oil prices. By some metrics the current downturn is worse than previous downturns. The fall in the price of a barrel of WTI from $105.79 to $28, a 74% tumble, is the largest percent decrease ever. Additionally, the reduction in rig count to 1,187 rigs, a 61.5% decrease, is the second largest reduction ever. By other metrics this downturn has been less severe than others. With the previous four downturns, Houston experienced total job losses ranging from a relatively small 18,400 lost in the early 1990s to 221,000 lost jobs in the 1980s (Figure 1). By comparison, although Houston lost an estimated 10,200 energy-related jobs, overall Houston had a net gain of 23,200 jobs in 2015. Furthermore the Texas Workforce Commission is forecasting that Houston will add almost 22,000 jobs in 2016 (Figure 2). These statistics support the notion that although the oil industry is still important to the overall economy of Houston, it is no longer the only game in town. Figure 1 U.S. Energy Information Administration February 10, 2016 1 Harris County Appraisal District 2016 Market Trends Report Figure 2 Texas Workforce Commission Houston Job Growth1 Inventory Update According to the Houston Association of Realtors (HAR), the inventory of available homes which hit historic lows at 2.5 months in December 2014 is at 3.2 months as of December 2015. The 3.2 months is still considerably below the national average inventory which stands at 5.1 months of supply as of December 2015. Typically, 6 months of inventory is considered equilibrium. Inventory levels below 6 months indicate a seller’s market. The number of days it took a home to sell (a.k.a. Days on Market) increased slightly from 56 days in December 2014 to 57 days in December 2015. Until the supply of homes moves closer to equilibrium we are likely to continue experiencing a seller’s market and the corresponding increases in sales prices. 1 http://www.houston.org/pdf/research/quickview/Economy_at_a_Glance.pdf February 10, 2016 2 Harris County Appraisal District 2016 Market Trends Report Sales Volume Update According to HAR, sales volume for single family residential properties in 2015 totaled 73,724 units, which is a 2.4 percent decline versus the 75,535 units sold in 2014. There were 6 months in 2015 where sales volume declined versus the same month in 2014. Categories Full-Year 2014 Full-Year 2015 Change Single-family home sales 75,535 73,724 -2.4% Total property sales 91,439 88,764 -2.9% Total dollar volume $23,553,542,859 $23,559,111,514 +1.0% Single-family average sales price $270,182 $280,290 +3.7% Single-family median sales price $199,000 $212,000 +6.5% Courtesy HAR January 13, 20162 2 http://www.har.com/blog_49528_the-houston-real-estate-market-ends-2015-with-the-second-highest-sales- volume-of-all-time February 10, 2016 3 Harris County Appraisal District 2016 Market Trends Report Sales Price Update The chart below shows a five year trend line for both the average home sale price and the median home sale price of single family homes. In a year-over-year comparison the median price for a home in December increased to its highest level ever rising 2.9% to $216,000. In December the average price fell 0.6% to $280,201. The median home sale price has gone from just under $150,000 in 2010 to $216,000 during this period which represents a 44 percent increase. Single Family Average Home Price & Single Family Median Home Price Courtesy HAR January 13, 2016 Townhomes and Condominiums Sales of townhouses and condominiums fell 2.9% in December versus one year earlier. A total of 536 units sold in December 2015 as compared to 552 properties in December 2014. The average price fell 14.3% to $197,904 and the median price increased to $159,900. Inventory reached a 2.9 months supply, which is an increase from the 2.3 months supply a year earlier. February 10, 2016 4 Harris County Appraisal District 2016 Market Trends Report Lease Property Update As the supply of properties for sale continues to remain below equilibrium the demand for lease property naturally increases. As a result, single-family home rentals climbed 2.9 percent compared to December 2014, while year-over-year townhouse/condominium rentals decreased 3.6 percent. The average rent for a single-family home was unchanged at $1,710 and the average rent for a townhouse/condominium fell 3.1 percent to $1,459. New Construction The number of new starts climbed 8.8 percent to 17,459 during 2015 from 16,050 in 2014 despite the continued collapse of the price of oil. The new construction value associated with the new starts increased almost 26 percent from $2.99 billion in 2014 to $3.76 billion in 2015. The increase in new starts is due to a number of factors including low interest rates, a shortage of available inventory, population growth, and relative strength in the non-oil patch segments of Houston’s economy. The Housing Market and Oil Prices 2016 It is clear that the price of oil will stay depressed while the glut of oil inventory works its way out of the global market, but it is unclear how long that will take. Although the price of oil appears to have come off the bottom, there are still too many national and international influences that remain unresolved: How much and how soon will Iranian oil hit the market? February 10, 2016 5 Harris County Appraisal District 2016 Market Trends Report How long will Saudi Arabia and other OPEC countries continue to produce oil at unrestricted levels? Will the demand for the world’s oil-supply continue to grow? If demand for oil continues to grow, how quickly will the excess supply be absorbed by the global economy? Based on the outlook for oil and Harris County’s link to the oil patch, it is difficult to say what will happen with the housing market in 2016. It is likely that the number of sales will continue to slide as they did in November and December of 2015 and that the inventory of homes will move closer to equilibrium. What is harder to predict is what will happen to prices. The longer oil remains in the $30 range, the greater the likelihood that oil-related companies fail and a domino effect may begin: jobs losses, foreclosures, inventory spikes, and a reduction in construction of both residential and commercial property. Conversely, the price of oil could rise to a $40-45 level in 2016 which could stem the tide of job losses, reduce the fears of recession, and allow Harris County’s economy and housing market to continue with its stability and growth. February 10, 2016 6 Harris County Appraisal District 2016 Market Trends Report Commercial Property Looking Forward The price of oil has fallen from its June 2014 high of over $107 per barrel (West Texas Intermediate oil) to about $53/barrel at the start of 2015. By late August, it was $38 per barrel. The price recovered moderately to around $48/barrel by November before ending the year at around $37/barrel. This is causing a considerable amount of concern for the health of Houston’s economy and the real estate market especially for those who recall the recessions of the 1980s and 2008-2009.