Low inventories, labor shortages contribute to rising home prices

Fort Bend County home prices, inventoryThe Sugar Land and Missouri City area experienced a record number of home sales in 2014. However, population growth in the area paired with various construction woes has led to a low home inventory, causing a rise in home prices and a dip in sales since January.


Since 2012 Sugar Land and Missouri City real estate agents have classified the area’s housing market as a seller’s market due to the decreasing inventory of available homes and climbing home costs. As a result, many of Fort Bend County’s master-planned communities are struggling to keep up with the demand brought on by the influx in population in the region.


“We have more customers than we have houses to sell, and we are getting multiple offers on houses,” said Shad Bogany, a real estate agent with Better Homes and Gardens Real Estate in Sugar Land and Missouri City. “We do not have a lot of houses to sell, [and] we have the builders, who have been the biggest pushers of home sales in Fort Bend [County], behind in construction.”


Major construction projects in the Greater Houston area have also led to the increase in home prices due to labor shortages and an overall increase in construction costs. Home developers like Johnson Development Corp. are competing with major mobility and development projects and are struggling to meet homebuyer demands, Bogany said.


“The fact [that] there are so many buyers looking to move in general, either to Fort Bend County or to surrounding areas, we just cannot keep up with the demand,” said Trey Reichert, vice president and general manager for Riverstone—the Missouri City master-planned community being developed by Johnson Development.



Price increase


Home sales in the Sugar Land and Missouri City area rebounded in March after seeing a decline for the first time in 36 months in February, according to the Houston Association of Realtors Multiple Listing Service. The slight uptick in sales seen in March has further depleted the inventory of available homes, with some communities experiencing a monthly inventory as low as 1.8 months.


According to HAR, a monthly inventory of six months is considered a balanced market. The average monthly inventory of homes in the Sugar Land and Missouri City area is 2.7 months.


With inventory levels dwindling each month, home prices in Sugar Land and Missouri City have increased by as much as 19 percent between 2014 and 2015, according to the Greater Fort Bend Economic Development Council.


“If you look over the last 10 years, our [home prices] are pushing the threshold of the upper end,” GFBEDC President Jeff Wiley said.


Since 2004 average home prices in Fort Bend County have steadily increased from approximately $180,000 per home to $300,000 per home in 2014, according to
the GFBEDC.


“Fort Bend has always been attractive and it is close to downtown [Houston],” Bogany said. “A lot of pressure is being put on the builders because they have not caught up [to the demand].”


Bogany said he expects to see the current market condition to continue into 2016. However, with summer approaching, he said additional houses are projected to come on the market to help raise inventory levels.


“I think you are going to see more houses on the market this year versus last year,” he said.



Cost of construction


Home developers and cities are competing with projects in the Greater Houston area, such as the construction of the new Exxon Mobil campus in Spring and the continued construction of the Grand Parkway. These major projects have contributed to the lag in home construction as there are fewer skilled laborers available.


“That is exactly why we cannot keep up with building homes fast enough,” Reichert said. “There are just not enough workers out there to build homes [and] builders struggle on a daily basis to find workers.”


The shortage in laborers and influx of construction projects has also led to an increase in the price of construction materials, which has directly caused housing prices to increase, Reichert said. Since 2011 material costs have increased by 11.7 percent and are expected to climb through June 2016, according to the national construction management company Turner Construction Company’s price index.


“We have seen prices flatten out a little bit this year, but [prices are still]
significantly more than what we saw two years ago,” Reichert said.



Future growth


Fort Bend County has become one of the nation’s fastest-growing counties and is expected to add an additional 350,000 residents in the next 20 years, according to a 2014 Fort Bend County community report.


Wiley said the booming population and the growing demand for homes in Fort Bend County stems from the popularity of Fort Bend ISD and the growing number of master-planned communities in Sugar Land and Missouri City.


Wiley said the county averages approximately 21,000 new residents each year with 7,000 new households annually. To address the growing population, many new master-planned communities in Sugar Land and Missouri City are actively being developed, including Imperial Sugar Land and Sienna South.


“It is really because of our master-planned communities and our schools,” Wiley said. “Those two magnets have attracted a workforce and families to our communities that have helped us sustain the excellence in Fort Bend County. “The quality of our schools is important to our growth quality.”


However, as Riverstone and other similar communities near build-out, developers like Johnson Development are seeking additional ways to expand to accommodate the growth.


Reichert said Riverstone has approximately 1,900 homes left to construct before total build-out. Moving forward, developers are beginning to look to purchase additional land to expand, similar to what Johnson Development did with its 3,700-acre Sienna South extension in Sienna Plantation, he said. “We are selling [buyers] the lifestyle and we are selling the amenities.” Reichert said. “[Buyers] want the community, and they want their friends to move in as well.”





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