Houston Residential is Rinse and Repeat of 2018

HOUSTON—Harvey tested the Houston model of urbanism. Coupled with a downturn in the energy industry leaving stagnant job growth, Harvey’s aftermath questioned whether the region’s growth period had come to an end.

More than a year later, the economy and energy industry are rebounding, and job growth is on a positive trajectory again. This has resulted in Houston returning to the leading edge of population and housing growth.

In this exclusive, Joe Mandola, president of Trendmaker Homes in Houston, recently discussed what’s in store for Houston’s housing market this year, how will interest rates and tariffs be contributing factors, and the challenges that buyers are facing.

GlobeSt.com: What are your predictions for the Houston housing market in 2019?

Mandola: Here in Houston, 2019 will be a rinse and repeat of last year. At last glance, Metrostudy sees our market with a 3% increase in new home closings at 29,500 for 2019. The forecast calls for employment growth of 60,000 to 70,000 net new jobs—not huge numbers—but a positive for the Houston economy.

Labor will continue to be an issue and we are dealing with labor pressures by renegotiating, value-engineering our product for increased efficiencies, and sourcing additional trades to reduce the impact of higher labor costs. Overall, 2019 bodes well for our market.

GlobeSt.com: Do you think interest rate hikes will be a factor? What about tariffs?

Mandola: Rising interest rates will continue to affect our market as buying power is reduced as interest rates increase. The reality is that interest rates are just now approaching the low end of a historical range. Regardless, the rate increase is an adjustment for people buying their first homes or coming out of refinanced existing homes. Interest rates are a headwind we deal with just like labor and land costs.

As for tariffs and trade policy, tariffs have affected us directly in lumber, steel and some imported materials. Overall trade policy issues can also affect the greater Houston economy since we are tied to oil and gas-related imports/exports through the Port of Houston.

GlobeSt.com: What other challenges will homebuilders in Houston face?

Mandola: Not surprisingly, land is still expensive in the Houston market. We are dealing with patient land owners, typically family-owned land parcels, who have equity in the land and are in no hurry to make a deal at a price other than what they think their land is worth.

We are looking to deliver more product at attainable price points. The trend toward smaller lots with more affordable prices in Houston is underway, and we are answering that with our Discovery Collection in Balmoral, a master-planned community in Northeast Houston, and also LakeHouse, a 225-acre gated community development in Katy, TX located in West Houston. We have models underway in both locations and have planned openings for the spring selling season with prices starting in the $200s. We plan to deliver over 325 homes at LakeHouse. There are over 55 acres of lakes throughout the community, with almost half the lots on the water, and oversized lots with deep backyards.

The community itself has no MUD tax, which is huge in terms of what that means for a buyer’s purchasing power. Having no MUD tax equates to savings of hundreds of dollars every month, or thousands of dollars per year. It also means buyers can afford much more house for the same payment of a much smaller house in a community with a MUD tax. It’s something unique that this community offers compared to other communities in Katy.