Houston projects a decline in building, say it aint so Virginia:
Jan. 8, 2002, 11:31PM
Hard act to follow
Home sales may back off; decline expected to be relatively slight after a robust 2001
By RALPH BIVINS
Copyright 2002 Houston Chronicle
Houston-area home builders, after a phenomenal run in 2001, are expected to stumble a bit in 2002.
The decline will not be deadly, but new-home sales likely will fall short of last year's total, said housing analyst Mike Inselmann of American Metro Study. Even though sales will slide, most builders will end up with some respectable totals by year-end.
"You are going to have another solid year," Inselmann said in his annual outlook speech to members of the Greater Houston Builders Association and the Houston Association of Realtors.
Home building will slow as the local economy sputters in the months ahead.
Withering job growth will cause the dip. Houston is projected to add only 15,000 jobs in 2002, down from about 35,000 in 2001, Inselmann said.
Lately the city has been hit by layoffs at firms such as Enron and Continental Airlines. Softness in the energy industry and the national economy have contributed, too. While some analysts expect the national downturn to end this year, the energy business isn't likely to provide the boost it did during the first half of last year.
The decline in local job creation typically translates into erosion in the home-building market.
But while other parts of the economy have been sickly, the Houston housing market has been quite healthy recently.
"We've been blessed in the home building business to be the pillar of strength in the economy," Inselmann said.
The Houston area has just finished one of the strongest years ever in home building, with 29,436 new-home starts, a 12 percent gain from the previous year. The 2001 total is second to only 1982, when the city registered 30,057 starts, Inselmann said.
If the economy performs surprisingly well in 2002, builders may be able to match last year's total, although that is not likely, Inselmann said.
If the economy takes a hard tumble, local housing starts may drop as much as 15 percent in 2002, in the worst-case scenario, Inselmann said.
With a 15 percent decline, Houston would end next year with about 25,000 starts. That would still make it the second-biggest year for starts since 1983.
The housing market has been soaring partly because of low mortgage interest rates. Thirty-year fixed-rate mortgages have been widely available at less than 7 percent.
The low rates have generated a lot of sales in the inexpensive starter home market, said Shad Bogany, chairman of the Houston Association of Realtors.
More than 56,000 homes were sold in the Houston resale market last year, the best ever for used-home sales here, Bogany said.
"The Houston Association of Realtors is not participating in the recession," Bogany said.
The strong resale market for used homes tightens the market for new homes as well.
Builders are reporting that 2002 is starting with good activity.
"Right after Christmas, people started coming out," Brian Binash of Emerald Homes said.
Ryland Homes, which will be operating in several new communities this year, is projecting a strong year in Houston, according to Jim Lemming, head of the Houston division of Ryland.
Ryland, which sold more than 1,000 houses in Houston last year, had an average sales price in Houston of about $150,000.
Moderately priced homes -- for less than $200,000 -- will be the best sellers of the local housing market in 2002, Joe Stunja of Friendswood Development said.
But there is significant optimism among upper-end custom home builders.
Custom builder Jim Frankel said he has a half-dozen spec homes under construction priced between $750,000 to $2 million.
"What I see is continued strong growth in Houston," said Frankel, past president of the local builders association.
Home prices have been rising steadily in the area. The average price of a new home in Houston last year was $217,600, up 5 percent from the previous year, Inselmann said.
Overall, last year's home market was consistently strong. The exception was September, when the terrorist attacks hurt sales. Houston-area sales were off 17 percent that month, according to CDS Market Research.
But once the market stabilized and consumers regained confidence, home sales took off again in October.
The terrorist attacks took away sales momentum in The Woodlands, said Tim Welbes, vice president of residential development for The Woodlands.
New-home sales in The Woodlands had been on a record-setting pace before the Sept. 11 events. The Woodlands ended the year with 1,601 new-home sales, a 5 percent decline from 2000.
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