Houston homebuilders enter challenging times, but are still optimistic

Home starts expected to slow, inventory of developed vacant lots to increase
  • 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.

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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 ...