Houston used to be a place where blue-collar and white-collar workers alike would enjoy homes priced under $200,000. It was common to hear that a family making a six-figure salary would buy a home at just twice their income. In fact, nearly 70% of the annual closings in 2006 were under $200,000. Today, 9% of closings fall in that bucket. That’s not to say Houston doesn’t still offer value to residents:
New closings between $200,000 to $300,000
Median household income
$10,000 higher than the national average
Households that can afford the median-priced home
Based on local incomes, home prices, and mortgage rates
It is to say, however, that builders, faced with the same cost challenges as other cities, are testing the market with different product offerings.
A (Relative) Spike In Smaller Product
Homes on 50-foot lots have been Houston’s bread and butter for years, followed by 60-wide. 50-69′ lots still represent 60% of the market, but a new size is moving up in the pipeline: 40′. The smaller homes historically represented roughly 2% of annual housing starts. The last twelve months of data through 2Q19 shows an increase to 6%, according to our Metrostudy statistics. Our data from Zonda reveals:
Builders providing 40′ lots
Led by Highland Homes, David Weekley Homes, KB Home and Lennar
Sales per month on 40′ lots over the past three months
Market as a whole saw 2.0 sales per month, 50′ lots saw 2.3 sales per month
Average base price for 40′ lot
compared to $280,000 for 50′ lot
To explore this product, look no further than Bridgeland, the top master plan in the market by observed annual starts. The Howard Hughes development in Cypress, 30 miles northwest of downtown, offers a mix of product in an “A” submarket with great schools. Demand for 40′ and 45′ lots is strong, but builders are actually using incentives in the face of other new home competition.
Meyers Research market tour of 40′ product in the Bridgeland master plan. From the left to right: Highland Homes, David Weekley Homes, and Beazer Homes.