Forecast: Houston Housing Market Affected by Population, Inventory Growth

Home-price growth appears to be slowing in Houston, and most forecasts for that housing market predict smaller gains in 2019 than what we saw last year.

Even so, home values within the Houston real estate market will likely continue to climb for the foreseeable future, largely due to population growth. In fact, the Houston metro area was singled out last year for being the second-fastest-growing metropolitan area in the country.

Here are the latest trends, statistics and forecasts for the Houston housing market in 2019.

Houston Housing Market Forecast: Smaller Gains in 2019

This month, the real estate research team at Zillow predicted that home prices in Houston would keep rising through 2019 and into 2020.

The group stated: “Houston home values have gone up 7.2% over the past year and Zillow predicts they will rise 3.4% within the next year.” (This housing market forecast was issued in March 2019 and extends into the same month of 2020.)

By their estimation, house prices in the Houston area will rise more slowly over the coming year, when compared to the gains of 2017 and 2018.

Zillow’s outlook for the Houston real estate market matches those being issued for many cities across the country — and for the nation as a whole. The general consensus among analysts appears to be that prices will rise more slowly in 2019 than last year.

This is part of an ongoing “normalization” within the housing market. After years of above-average growth, real estate markets all across the country are finally beginning to cool down. And that’s probably a good thing. It certainly comes as no surprise.

Bill Gilmer, an economist with the Bauer Institute for Regional Forecasting, told the Houston Chronicle that he’s not at all surprised by the cooling and “softening” taking place within that real estate market.

“There is nothing dramatic here,” Gilmer said. “Nothing that should not have been seen coming.”

Trend Watch: More Homes Coming onto the Market

Like many major cities in the U.S., Houston’s housing market has suffered from depressed inventory levels over the past few years. There just weren’t enough homes on the market to meet the demand from buyers. This is partly why prices have risen so much over the past few years.

But that’s beginning to change.

According to the Houston Association of REALTORSĀ®, single-family homes were up to a 3.7-month supply as of January 2019. That’s an increase from the 3.2 months of supply recorded a year earlier. Condo and townhomes were even more plentiful, with a 4-month supply measured in January.

Granted, that’s less than the 5- to 6-month supply level that economists consider to be a “balanced” real estate market. But it’s still an improvement from a home buyer’s perspective. If inventory continues to grow, it could ease competition among buyers and give them more options to choose from.

As we’ve seen, some forecasts for the Houston housing market predict smaller home-price gains over the next year or so. And inventory has a lot to do with that. In this scenario, inventory growth would help to create a better balance between supply and demand — and likely lead to smaller price growth down the road.

Houston Was One of the Fastest-Growing Metros Last Year

Population growth is another major trend affecting the Houston-area real estate market (and influencing forecasts for 2019 and 2020).

A 2018 report from the U.S. Census Bureau showed that the Houston-Sugar Land metropolitan area was the second-fastest-growing metro in the United States from 2016 to 2017. (That’s based on numerical growth, rather than percentage increases.)

The Houston metro area gained more than 94,000 new residents during that one-year period alone, making it one of the “largest gaining” metros in the country. As of 2019, Houston is the fifth-most-populous metropolitan area in the United States (after New York City, L.A., Chicago and Dallas).

Steady population growth tends to increase demand for housing, on both the rental and purchase side. It also puts upward pressure on home prices.

Disclaimer: This article contains forecasts / predictions for the Houston, Texas real estate market through 2019 and into 2020. Those forward-looking views were provided by third parties not associated with the Home Buying Institute. Housing forecasts are the equivalent of an educated guess.