Why is there a shortage of housing in Houston? In this video, Brian explains why inventory is low, and how long he expects it to remain that way.
Shortage of Housing in Houston
Alison: Hi, I’m Alison from Big State Home Buyers and this is Brian Spitz, our president. And today I’m asking him: why the inventory of Houston is so low.
Brian: Yes, thanks, Alison. There is a huge shortage of inventory in the single family real estate market right now in Houston, and it’s due to several things.
Debt to Income Ratio Makes It Harder to Buy Houses in Houston
One of the biggest reasons that people may not know is that there have been a lot of changes in the mortgage industry and that the percentage of debt-to-income ratio that has been a little bit flexible in the past for applicants has gotten a lot tighter.
So people who may make enough money and they have great credit scores, if their debt-to-income ratio is kind of on the border, then lenders no longer have the option to kind of decide whether or not to let it go. So fewer people are going to be able to qualify for mortgages, and therefore, people who have loans on homes that they own currently, that couldn’t qualify for a new home, are less likely to sell.
So there’s a huge demand and people even that want to buy, even if they want out of their existing home, but they’re not going to be able to qualify for any loan so that turnover that would otherwise happen, is not happening on the market right now.
Alison: Okay. Are there any other reasons why the inventory’s low?
Influx of Job in the Houston Area
Brian: Also, There’s a huge influx of jobs into the Houston area, a lot to the Downtown and Midtown energy corridor. If you’ll notice over there, there are tons of really high-end luxury apartment developments all over the place. So the rental market is really strong as well as the market for people relocating and buying houses.
And so there’s a shortage of inventory and this great haste to buy property quickly, because when people relocate from another state or another city through the company, the companies provide a lot of incentives for them to make that move. They pay closing costs, they secure loans for them, they do all of this stuff. So people travel to Houston ahead of their official move and they just pick a house, buy, close, full price offer. So there’s a huge bidding frenzy because there’s so much momentum for jobs. So that’s a big source as well.
How Long will the Housing Shortage in Houston Last?
Alison: And how long do you think the shortage will last?
Brian: I think that development inside the Loop, you know, they’re developing townhomes and homes and properties and even parts of outlying areas just outside the Loop are developing even more. But there’s a real limit to how much development can happen and so there’s a huge influx of price constantly. If you’ve noticed in the Heights or Forrest or Midtown in the last two years, prices just jumped, jumped, jumped.
And so I’m not sure how much longer that price situation can last. I think prices are pretty well inflated and so if you’re buying in those neighborhoods right now, you’re paying top dollar. I think that a lot of new developments out towards Katy and even further out, areas like Willis and areas further out towards Galveston, these areas are really starting to develop because there’s just nowhere else to go.
So I think it’ll take years, to answer your question, for development to catch up with the population growth in Texas and it may never catch up if the economy remains so attractive for new jobs. We’ll constantly be building new inventory to meet those needs. And that’s a good thing for our economy here, because it makes our prices really stable.
Alison: Great. Well, If you guys have any questions, then leave them in the Comments and we’ll do another video. If you like this video, give it a thumbs up or share it. And we’ll see you next time. Thanks, Brian!
Brian: You’re welcome. And if you have any interest in getting a no-obligation offer on your house, if you are thinking about selling, or if you’re looking to buy property, please give us a call.