• The slowdown in home starts that began in 2015 will continue into this year.
  • New lot development is predicted to decline in 2017 and 2018.
  • More homebuilders could begin to offer discount for their more luxury product.

Houston should remain the nation’s leading homebuilding metro in 2016 despite a slowdown in single-family home starts.

Scott Davis, director of Metrostudy’s Houston region, recently dubbed 2016 as the “most challenging environment” for Houston homebuilders in the last several years, pointing to affordability as the primary issue.

A recent MetroStudy report showed that the slowdown in starts began this past year.

During the third quarter of 2015, builders broke ground on 931 fewer homes than during the same quarter in 2014. Additionally, during the first nine months of 2015, builders started construction on 1,500 fewer homes than during the same period a year prior.

As starts slow, Davis predicts the market’s inventory of developed vacant lots should increase this year.

However, this increased lot inventory should be gobbled up by builders in 2017 and 2018, as new lot development during those years is expected to decline – a sign equity sources and homebuilders are pulling back.

In some of Houston’s larger submarkets homebuilding will continue in 2016; however, it will be relegated to specific neighborhoods or regions.

The Pearland neighborhoods of The Lakes of Highland Glen and Shadow Creek Ranch should continue to see new home starts, according to Danny Frank of Keller Williams.

Active homebuilders in Katy will focus their attention on the area’s north region. Cane Island represents one ongoing, significant development. Christi Borden, a realtor with Better Homes & Gardens Real Estate Gary Greene, notes builders are running out of space in Katy’s southwest region.

Sugar Land’s south region will be where the majority of new home starts occur moving forward, as the region is home to a number of master-planned communities. However, most of these homes will be higher end, with price tags exceeding $300,000. Shad Bogany, a realtor with Better Homes & Gardens Real Estate Gary Greene, notes builders are offering discounts for $400,000 to $450,000 homes.

In the multifamily arena, Houston should be among the leading metros nationally when it comes to unit deliveries this year; however, similar to the single-family market, project starts should slowdown.

According to a Marcus & Millichap report, in west Houston, softening has begun to occur and developers are offering more concessions in order to lure tenants to recently constructed projects. Multifamily starts should also tamper off in downtown, as only eight projects are slated for groundbreaking during the early months of 2016.

Email Erik Pisor

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