Houston-area housing market to cool off, not collapse

HOUSTON – Houston’s red-hot real estate market will most likely cool off a bit in 2015 but not crash with the price of oil as inventory remains extremely low, mortgage rates are favorable and major home builders report no letup in demand for new homes, according to real estate experts.

Dr. Mark Dotzour, chief economist and director of research for the Real Estate Center at Texas A&M, told a sold-out crowd that Houston-area builders will tap the brakes on new home construction in 2015 after several years of increases.

Dotzour expects builders to start construction on between 20,000 and 30,000 homes in 2015.

Home builders started 30,100 homes last year, according to an estimate from housing research firm Metrostudy. That was up 7 percent from 2013.

Dotzour, who dedicated much of his talk to global politics and the reason oil prices will rebound, stayed away from dire predictions about the local housing market. Despite a possible construction slowdown, home prices will continue to rise as inventory remains at extremely low levels, Dotzour said.

One threat to the market is a psychological one, as some would-be homebuyers may decide not to purchase a house this year after seeing headlines and hearing news about plunging oil prices and corporate cutbacks.

A drilling boom, which has increased the supply of oil and helped fuel economic growth in Texas, is beginning to slow, Dotzour said. That, combined with an eventual tapering off of production on wells already drilled, should help lift oil prices, he added.

Some of the positive aspects that could show up this year include an increase in sales of entry-level homes, as new lending programs make homebuying more accessible to a wider range of buyers, Dozer noted.

And a long-lasting labor shortage may also loosen up as construction workers leave oil-related jobs and move into the residential sector. Mortgage rates, too, are expected to remain low.

Even if home sales were to fall this year, overall prices should rise, based on the diminished housing supply, Dotzour said. "There’s no chance you’re going to see a generalized price decline with houses in Houston even if home sales fall off 50 percent," he said.

Still, Dotzour cautioned the crowd to be cautious this year. "There’s a lot of risk, but it’s not the end of the world," he said. "Try to avoid getting too heavy in debt."

tags: Houston housing, Houston data