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Top 5 predictions for Houston real estate in 2013: Home prices, rents and mortages will rise; more supermarkets, too

February 18, 2013 Leave a comment Go to comments

News_NEW HEAD SHOT_Ralph Bivins

By Ralph Bivins
 
Top 5 predictions for Houston real estate in 2013: Home prices, rents and mortages will rise; more supermarkets, too

Houston’s real estate markets – both commercial and residential – have just finished an exceptionally strong year and conditions remain positive as we sail into 2013. The inventory of homes for sale is at a 12-year low and local home builders say there’s a shortage of lots to build on.

No matter who’s doing the leasing, rental rates are way up — in office towers, in apartments, warehouses and even for people who are leasing single-family homes.

Construction cranes are everywhere as new apartment towers and office buildings are erected in the most desirable parts of town. And what makes this construction boom different is that it all seems to be justified. Unlike years past, today’s developers aren’t just building new projects to get a tax write-off or to churn activity at a friendly S&L. What’s being built, is being leased. These are real deals, backed with solid fundamentals.

What makes this construction boom different is that it all seems to be justified. What’s being built, is being leased. These are real deals, backed with solid fundamentals.

Job growth is huge with corporations like Exxon Mobil and Chevron moving tons of people to Houston. Trulia, a major national real estate listing company, just ranked Houston as the healthiest realty market in the country. Investors from around the world are focused on the city, which has forever solidified its nickname of Energy Capital of the World.

Can the good times last forever? No. Nothing does. But how long can the good times roll? One year? As we roll into 2013, here are the top five predictions for real estate in the year ahead.

1. Houston home prices will rise as much as 5 percent in 2013

That’s according to the long-time guru of local home price stats, Evert Crawford of the University of Houston’s Institute for Regional Forecasting. Houston has a tiny four-month supply of homes for sale, the lowest since December 2000, the Houston Association of Realtors says.

It’s basic economics: supply is low and demand is high. Fasten your seat belt, home prices are taking off.

2. Food is foremost

In shopping center realty, grocery stores will dominate local retail construction in 2013, according to retail center developer Ed Wulfe. Aldi, a discount grocer with smaller stores and shelves full of Aldi-branded products, is entering the Houston market with 15 stores, Wulfe & Co. reports.

Other grocery outlets being built in Houston in 2013: two new HEB stores, two Kroger’s, one Whole Foods, one Trader Joe’s, four Fresh Markets and four Sprouts. For hoarder-types and big families, there’s more good news – two new Costcos and two Sam’s Club will be opening in 2013.

3. Mortgage rates will rise, but not much

At year-end, the 30-year fixed-rate mortgage averaged a low 3.35 percent, according to Freddie Mac. Mortgage interest rates are forecast to gradually rise and to average 4.0 percent in 2013, and 4.6 percent in 2014, the National Association of Realtors predicts.

Mortgage rates were at record lows in 2012. The 2012 annual average of 3.66 percent was the lowest annual average in at least 65 years, Freddie Mac reports. By comparison, the annual average mortgage rate was 4.45 percent in 2011 and —when inflation was at its worst — the average was 16.63 percent in 1981.

4. Apartments surge

The National Association of Realtors is forecasting a 4.6 percent gain in the nation’s rental rates in 2013 and Houston apartment renters should expect to face even higher rent increases. Construction is robust in the Inner Loop.

The multifamily market is being lifted partly by a fundamental change in the consumer mindset – the recent housing crash showed that home buying is not always a winning investment, says Mark Obrinsky, chief economist of the National Multi Housing Council. But it’s job growth that’s really fueling the apartment market and Houston is leading the nation in job creation.

5. Empty office space will get harder to find

Rental rates are going to go up “fairly dramatically” in 2013, having already surpassed $30 per square foot in the better buildings, according to Stream Realty. Vacancy rates are below 5 percent (all-time lows) in prime buildings in some of the hot areas like the Energy Corridor, Westchase and The Woodlands, Stream reports.

Office leasing expert Sanford Criner of the CBRE realty firm puts it this way: “Where will we be at the end of 2013? We will be the envy of virtually every city in the country and most of the rest of the world.”

Reprint from Culturemap Houston

Ralph Bivins, former president of the National Association of Real Estate Editors, is founding editor of RealtyNewsReport.

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