Improved economy leads to fewer available homes

Over the past year, buyers looking to purchase homes in The Woodlands have found a short supply of available properties as low mortgage rates and an improving economy drive up demand. With little available inventory of homes and a flood of homebuyers on the market, buyers are often being forced to take what they can get at higher prices than are typical in a market with fewer available homes, real estate experts say.

"[The real estate market] really is a result of the economy that in general has improved, which has elevated the general consumer confidence as it relates to real estate," said Ken Brand, sales manager for Better Homes and Gardens Gary Greene Realtors in The Woodlands and Magnolia.

A seller's market

Real estate experts define a seller's market as one in which there is less than a six-month supply of available homes. Home supply is determined by the number of homes listed in Multiple Listing Services compared to the annual rate of home sales.

Over the past year in The Woodlands, there has been less than a two-month supply. According to Heritage Texas Properties, 2,415 homes were sold between May 2012 and April 2013 in the five ZIP codes that encompass The Woodlands. Those homes spent an average of 57 days on the market before they were sold.

In The Woodlands in 2012, 1,007 homes were sold, ranking the community third in the U.S. among master-planned communities in new home sales.

"It's not that homes aren't coming on the market," Brand said. "It's just when [sellers] put their home up for sale [the home] doesn't make it to [MLS supply]."

Brand said 927 homes have been sold in The Woodlands area since Jan. 1. Of those, 377 spent less than 10 days on the market, while 117 spent less than two days on the market.

"It's not a matter of people not selling, it's whatever goes to the market gets sold fast," he said.

Susan Vreeland-Wendt, director of marketing for The Woodlands Development Company, said The Woodlands plans to develop about 790 lots this year, with total home sales reaching about 875.

Real estate experts point to several factors for the change in the market in The Woodlands, including an improved economy and low mortgage rates.

The rate for a 15-year loan is about 2.6 percent, while a 30-year loan carries a rate of about 3.3 percent.

"My assumption is there is consciousness about how long those mortgage rates may stay this low," said Tim Welbes, co-president of The Woodlands Development Company. "Apparently thousands of people decided at the beginning of 2013 they had better buy something."

In addition, the strong job market in The Woodlands has led homebuyers to seek out the community. According to data published by The Woodlands Area Economic Development Partnership, there were 83,309 jobs in The Woodlands in 2012. The unemployment rate in The Woodlands was 2.9 percent, compared to Houston's 6.1 percent.

"Given the low unemployment rate in South Montgomery County, that tends to keep everyone on their property," Welbes said. "Therefore, there is a lack of supply that is due to high employment. You keep people in their homes due to a high rate of employment."

Increased demand

Over the past few years, there has been a an average demand of about 32,000 new homes in the Greater Houston area per year, while builders have been building only about 25,000 new homes per year, Welbes said. This trend has led to about 8,000 potential buyers per year who have subsequently turned to the leasing market.

Those buyers who turned to leasing represent demand for more new homes, Welbes said.

"In 2011 and 2012, 40,000 homes went from owner-occupied to renter-occupied because there wasn't a new home to buy," he said.

Following the 2007 housing market crash homebuilders have struggled to keep up with demand while facing increased costs, Brand said.

"Because there was no money available for builders, many were unable to buy lots or fund construction," he said. "Now there is new land development and builders are building. But inventory is behind, construction costs are going up and labor costs are going up. I don't know if [builders] are really going to catch the demand."

Also on the horizon is the impending opening of the ExxonMobil campus, just south of The Woodlands, where about 12,000 employees will begin working in 2015.

Welbes said he expects potential ExxonMobil employees, who will be relocating from the Greater Houston area and from Fairfax, Va., to visit The Woodlands area next spring during their vacations to being looking for new homes.

"[The Woodlands] will have a couple thousand more lots to go, so we'll have some inventory," he said.

Amy Smythe Harris, broker/owner of Urban Provision Realtors in Houston and member of the Houston Association of Realtors board of directors, said she believes the lure of ExxonMobil has changed the market.

"I think [the ExxonMobil move] has skyrocketed the process," she said. "We're not seeing an insurgence of ExxonMobil [employees], but we're seeing a huge amount [of interest] from support companies to ExxonMobil."

Harris also said she believes the ExxonMobil announcement created a false sense of demand in the real estate market.

Advice to buyers

Buyers in today's market are facing fewer options when it comes to available homes while also being forced to pay prices that are often above list prices. Although homebuyers were previously able to view about 10 to 15 homes in their price range before buying, Brand said Realtors are now able to only show clients three or four.

"We want to explain to [buyers] that in the previous market you were looking for a good deal, less than list price," he said. "But now a good deal is you are the one who is actually able to buy the property. A good deal is there were four offers and yours won."

Buyers who are able to pay a higher down payment on a home, and those who have fewer financing contingencies, have a better chance of having their offer on a home selected.

"People who put more down have a better chance," Brand said. "At least 10 percent of sales are over list price, and probably 25 percent are at list price. You might want to come in a little bit higher."