Record-low housing inventory and interest rates, combined with a widespread shortage of building materials, have created a local real estate market unlike any that has come before, local real estate experts said.
Over the past two years, the number of listings in the Houston-The Woodlands-Sugar Land area has been slashed by more than half, according to data from the Texas A&M University Texas Real Estate Center. Simultaneously, home sales increased by over 10% from May 2019 to May 2021—a trend industry experts attributed to low mortgage interest rates, which dropped to 2.65% in January.
As a result, the Greater Houston area sat at 1.4 months of housing inventory in April and May—the area’s lowest inventory since the center began tracking data in 1990. Months of inventory indicates the number of months it would take to sell all properties currently for sale at the average monthly sales price.
“It’s kind of the perfect storm,” said Walter Draughn, a Highland Homes sales counselor for The Groves. “It’s never all come together like this—one or two things at a time, yes—but not all at once.”
Locally, home sales increased in all seven Lake Houston-area ZIP codes from June 2020-May 2021 compared to the year prior, according to Houston Association of Realtors data. Additionally, the average home sold for $20,000-$30,000 more over the past year than it did the year prior, and the average time spent on the market was shortened by 20 days.
“There’s no question it’s a seller’s market; you can’t spin it any other way,” said Deborah Rose Miller, a broker/agent with Rose Realty and HAR’s 2021 Lake Houston-area networking meeting chair.
Further fueling the fire, Draughn said about one-third of all relocations in the U.S. are coming to Texas. As a result, builders are trying to keep up with a growing demand for inventory amid material shortages that bog down the process.
Supply and demand
Due to a rise in demand for construction materials, 84% of contractors nationwide have faced supply shortages, and 94% said cost fluctuations have affected their businesses, according to the U.S. Chamber of Commerce’s quarterly Commercial Construction Index report released June 17.
“People had nothing better to do [during COVID-19] than stay home and decide they want to buy a new house or remodel,” said Mike Dishberger, CEO of Houston-based Sandcastle Homes and former Greater Houston Builders Association president. “So demand has exceeded supply, and when that happens, prices rise.”
For example, Dishberger said plywood cost $7 per sheet in April 2020 and was up to $50 per sheet this June. A recent copper shortage increased the price of his electrical materials by 25%, he added.
Similarly, Draughn said brick that Highland Homes used to buy for $2,000 now costs upward of $6,000. He said construction on one of his inventory homes in The Groves, a 993-acre community under development in Humble, has been delayed by two months due to tile unavailability.
