Home > Market Updates, multifamily, Uncategorized > Economist says rents outpaced single-family home price spike in recent years

Economist says rents outpaced single-family home price spike in recent years

A recent drop in oil prices may  was the primary the focus of a semi-annual forecast from a prominent local economist  Thursday. But Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston, also put a spotlight on Houston’s residential, multifamily and commercial real estate markets, which he noted were caught in the  frenzy of the last few years.

 

The following charts show  how Houston’s land values have shot up in recent years, a staggering 271 percent. This has affected the rise in prices for single-family homes. Gilmer predicted that the single-family home market will not be hurt by the lower oil prices, as there is a shortage of homes and many families still seeking homes. With the low inventory, the price increases have made Houston less affordable than previously compared to other markets nationally.

 

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Gilmer said there may be some correction ahead for lot and housing prices, but it may take less off the value of the home than might be hoped.

 

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Gilmer said the multifamily  sector  in Houston has been one of the strongest markets in the US for several years and has perhaps been the strongest market in the city. The sector was helped along by strong job growth, particularly from the energy industry hiring young engineers and other professionals to replace aging Baby Boomers. Demand for an  “urban lifestyle” made Montrose/River Oaks ground zero for this push. Some suburban markets near job centers, including the Woodlands and the Energy Corridor, have shown life, he said.

 

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Multi-family has also gained from the shortage of single-family properties and rising home prices, Gilmer said. Despite the higher single-family prices, the cost of renting a primary residence grew faster. And as lot supply constraints ease, both preferences and cost advantages should start to pull people out of apartments and into single-family, which will return as a strong competitor.

 

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Gilmer said this year should be the peak year for multifamily construction.  For 2014,  Gilmer said the city  should permit 22,000 units, and we have by  third quarter data showing that more than that number is already permitted with 9,000 more to come.   He said that is the first clear signal that the market is getting ahead of itself.

Reprint from Chron.com   

 

 

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