Locally, construction started on 8,274 new homes annually in Lamar Consolidated and Katy ISDs, per second quarter 2024 data from demographics firm Zonda. The districts rank first and third among Houston-area districts for most housing starts.
Despite this, single-family housing prices are rising and inventory remains low, creating a shortage of affordable housing, said Lawrence Dean, president and CEO of Community Builders Advisory Services, a housing market research firm.
“It’s not so much that we’re seeing ... an overall shortage of housing units,” he said. “It’s that it’s really more focused on the affordability side of the equation.”
Two-minute impact
A June 2023 report from the Chamber of Commerce, a product research company, showed the Houston metro had the most new residential home permits issued in 2023 among the largest metros in the U.S. Despite this, the metro’s housing inventory hasn’t recovered from past economic challenges, RE/MAX Signature Realtor Charlie Russo said.
Russo said he believes fewer homeowners are moving than they were prior to the COVID-19 pandemic, keeping resale inventory low. He said many are refinancing their mortgages to pay off other higher-interest debts.
The housing inventory, the time it would take to sell all homes on the market, in three Katy submarkets averaged three months in August—rising to the area’s pre-pandemic average of 3.43 in August 2019, according to data from the Texas Real Estate Research Center at Texas A&M University.
“We’re increasing [inventory], but we’re still not at pre-pandemic levels. If you go back to 2019, it's a whole different animal,” he said. “But the most significant thing is the price point difference—homes are way more expensive now than they were then.”
Digging deeper
Median home prices in the Katy area rose as much as 55.52% between August 2019-August 2024, surpassing Texas’ and the Houston region’s growth in that time, according to Texas Real Estate Research Center data. Dean said incomes haven’t risen at the same rate, creating the affordability gap.
In the third quarter of 2024, the Houston housing market experienced a positive shift in housing affordability for the first time since 2020, rising year over year from 35% of households being able to afford a median-priced home to 38%, according to a news release from the Houston Association of Realtors.
However, compared to the Houston region, a smaller percentage of households in Katy, Fulshear and Cinco Ranch can afford to purchase a median-priced, single-family home, per HAR data.
Providing “attainable” homes is a focus in the 215-acre La Segarra community north of Katy, said Alex Kamkar, managing partner of Bold Fox Development. Homes will come online in 2025, with prices starting in the $250,000-$300,000 range.
“Families who are starting out, we need to be able to give them a product that they can actually get in their 20s or 30s,” he said.
Kamkar said he believes building affordable housing closer to Houston can be challenging due to high land costs and evolving regulatory structures and flood plain restrictions. This can push more developers west into the Katy area.
“Katy is doing a really good job. They have found a balance in how they are managing flood plain drainage issues along with creating areas where people can actually afford to buy a home or try to at least,” he said.
Zooming out
The State Comptroller’s Office reported Texas’ population growth has outpaced homebuilding since 2020, resulting in a widespread housing shortage, Community Impact reported. The Houston-Pasadena-The Woodlands region’s population grew 360,649 between 2020-23.
Meanwhile, Up For Growth, a national housing policy organization, reported in 2023 that Texas needs about 306,000 more homes to meet demand. In the Houston area, 61,971 is needed to meet demand.
“[Texas is] issuing more building permits for single-family homes than any other state,” Will Counihan, who leads the comptroller’s data analysis and transparency department, said at an Aug. 27 event. “So it’s not that people aren’t trying to build [houses]. I think one of the big issues that we’ve found is that they're perhaps not building the right types of houses, specifically housing for low- and middle-income Texans.”
Texas could make it easier to build homes in commercial areas and reduce the minimum lot size for single-family residences, said Nicole Nosek, the founder of Texans for Reasonable Solutions, an organization that aims to solve the housing shortage.
Similarly, Kamkar said he would like to see zoning and building regulations reformed to balance developer and homeowner interests.
Lt. Gov. Dan Patrick, who oversees the Senate, and House Speaker Dade Phelan directed lawmakers to look into potential zoning changes for the 89th Legislature, Community Impact reported.
Meanwhile, the Federal Reserve has cut its federal funds rate, the amount it charges banks, .75 percentage points since September.
Dean said this could encourage more home construction, as builders and developers can finance projects for less. It could also influence lower mortgage rates, which would push more homebuyers into the market.
However, homebuilders adding more new inventory is the most significant way to address home affordability, he said.
Contributions by Hannah Norton.
