Houston Home Prices Show Promise for 2011

Last month, I suggested that Houston’s housing market could be one of the strongest in the country in 2011. Recent data regarding Houston home prices reinforces this prediction.

According to Clear Capital (a company that provides real-estate appraisal services to the mortgage industry), Houston was one of the highest performing markets during the last quarter. Their data shows that home prices in Houston rose 1.7%, based on quarter-over-quarter rankings. The yearly price gains were even more significant, with a 5.6% rise over this time last year.

Houston Home Prices 2011

Like most of Texas, Houston avoided the kind of real estate bubble-and-bust cycle that wrecked other housing markets in the country. Thus, Houston home prices were never overheated or overinflated. At the same time, population growth in the city has helped sustain demand for housing. Between 2000 and 2009, Houston ranked #2 in terms of population growth (nationwide).

This combination of realistic home values and steady population growth has had an insular effect on the Houston real estate market, protecting it from the devastation we have seen elsewhere. While other cities saw a plummet in home prices during the bust, Houston experienced more of a “dip.” Now, it would seem that prices are headed north again.

Plenty of “Fuel” for the Housing Market

Cities that attract a higher percentage of young people usually have stronger housing markets — all other things being equal. The reasons for this are fairly obvious. The first-time home buyer demographic is primarily made up of people in their late 20s to early 30s. Attracting this demographic can result in a steady influx of housing demand, which can help sustain (and elevate) home prices. This is what we are seeing in the Houston metro area, as well as several other cities in Texas.

The image below shows the five metro areas that attracted the highest percentage of young people, between 2007 and 2009. Houston was ranked #4 on this list. This trend will likely continue for the near future, and it will help boost Houston home prices in 2011 and beyond.

Houston attracts young people

The data above was compiled by demographics researchers at the Brookings Institution.

Home Price Predictions for 2011

The data shown above is historical in nature. But what about the future of home prices in Houston? According to Clear Capital (the same company that produced the report above), Houston could see some of the largest price gains in 2011. In fact, Houston ranked #2 in terms of home-price predictions for 2011, second only to Washington, D.C. See chart below.

Houston Home Price Forecast

Carlos Bujosa, chairman of the Houston Association of Realtors, likes these positive signs. But he tempers his enthusiasm with a wait-and-see attitude: “We need to carefully watch how the Houston real estate market performs over the next couple of months before being able to truly determine how 2011 might pan out,” Bujosa said.

Disclaimer: This story contains forward-looking statements and predictions about 2011 home prices in the Houston area. These statements are not to be taken as fact. We make no guarantees about the future of Houston’s housing market.