Houston Housing Market in 2015: Limited Supply Will Drive Prices Up

The Houston real estate market is strong, and it will likely stay strong through 2015. Economic conditions are favorable, home prices are rising, and the unemployment rate is among the lowest in the nation for a large metro area.

What else can we expect from the Houston housing market in 2015? Here’s an updated look at conditions for this metro area.

Houston Real Estate Forecast for 2015

The Houston real estate market escaped the national housing crisis largely unscathed. The same can be said for the entire state of Texas. Home prices in the Lone Star State rose gradually (read “realistically”) in the early 2000s, while they were booming elsewhere across the country. As a result, Texas real estate markets experienced only mild depreciation when the market tanked.

The major metros of Houston, Austin and Dallas have solid fundamentals in common. They have good job markets, affordable housing, steady population growth, and strong demand for housing. Houston, in particular, could be one of the strongest real estate markets in 2015, in terms of buyer demand and home-price gains.

In October, the Urban Land Institute released its “Emerging Trends in Real Estate” report, with a look ahead to 2015 conditions and trends. In their ranking of the top 51 “Markets to Watch” in 2015, the city was ranked #2. According to the authors, a “strong local economy is also driving expectations in more affordable markets such as Dallas/Fort Worth, Houston, and Austin.”

Home prices in the Houston metro area have risen rapidly over the last year or so. Prices rose by 7.4% in the third quarter of 2014, according to Real Estate Center at Texas A&M University. It’s a supply and demand story, as always. Limited supply and strong demand are driving house values up. Buyers are facing stiff competition, especially for desirable homes in popular areas.

Local home prices are rising so sharply, in fact, that some people are starting to use the dreaded ‘B’ word. Bubble. In October, the real estate information company Trulia included Houston in its “Bubble Watch” report, a list of the top 10 metro areas where home prices are most overvalued.

Jim Gaines, an economist at the Texas A&M Real Estate Center, told the Houston Business Journal that the rapid gains are indeed troubling. “Prices [in the metro area] have gone up markedly more than income levels and earnings. That is beginning to become an issue.”

Biggest List-Price Increase Out of 146 Metro Areas

Each month, Realtor.com publishes a housing summary with information for 146 metropolitan statistical areas (MSAs) in the United States. Their most recent report contained data through the end of September 2014.

Out of those 146 MSAs, the Houston real estate market experienced the largest annual increase in its median list price. According to Realtor.com’s data, the median listing price for this market rose 23.1% from September 2013 to September 2014. The total number of listings, meanwhile, dropped by 25% during the same 12-month period. Translation: limited inventory is enabling sellers to ask more for their homes.

We expect to see additional gains through the end of 2015, due to the strong fundamentals mentioned earlier. While we might not see home-price gains as steep as the current year, they will likely continue to rise through 2015.

The question is, will they rise too fast, in bubble fashion? Time will tell.

Disclaimers: This story contains forward-looking statements (predictions, forecasts) regarding the Houston real estate market in 2015. Such statements are matters of opinion and should not be considered facts. This story also includes third-party data that is deemed reliable but not guaranteed. We make no claims or guarantees about future housing conditions in this or any other city / metro area in the U.S.