Comment of the Day: Houston Real Estate Problems, with or Without Cheap Oil

COMMENT OF THE DAY: HOUSTON REAL ESTATE PROBLEMS, WITH OR WITHOUT CHEAP OIL Oil Prices Illustration“The Houston market had a few easily identifiable problems even before the drop in oil prices. 1) Older homeowners with paid off or mostly paid off homes are asking unrealistically high prices for fixer uppers or tear downs. That’s slowing down new home purchases and new builds. That was a problem at $100 oil. Well priced homes moved and unrealistically high priced homes sat. People wanting $300K for a total fixer upper inside Beltway 8 or $400K for a lot near the 610 loop are just completely slowing down the revitalization process as those houses/lots sit for months on end while everyone thinks the sky is falling. 2) Near loop new construction is priced exclusively for people making $200K and up. A family of two earners making $50K (teachers, cops, firefighters, non O&G professionals) can only afford to live out west in the burbs, but many are choosing to rent rather than go west. There’s no attempt at affordable housing inside the beltway. When oil goes down, the engineers stop buying in Houston. The aforementioned buyers would be happy with smaller houses they could afford to get into but the developers are chasing the biggest gains possible on each new build. The real estate market will ultimately be fine for people who didn’t overpay but it would be nice to see changes that reflect reality now that oil is not at $100.” [Houstonian, commenting on Tanking Oil Prices Place Houston Second on Fitch’s Overvalued Housing Market List] Illustration: Lulu

41 Comment

  • I would also add that the majority of oil and gas companies are just fine. Most companies did not buy leases at 70k an acre and can happily keep drilling away at current prices. The ones that did may have to sell their overpriced assets to stay afloat. That means 2015 will be a year of many transactions. Transactions = jobs. Sky = not falling. Houston will be just fine.

  • There are plenty of nice homes in nice neighborhoods, inside the beltway and inside the loop, for households making “only” $100k/yr; North, South, and East of downtown. The obsession (by developers and River Oaks/West U wannabes) with the West side, from Montrose all the way to Katy, is why you think that there is no affordable housing inside the beltway. It’s a big city, 650 sq, miles, and there are nice affordable places to live in just about every part of it. You need to get out (of the west side) more.

  • Jon M for another comment of the day. I couldn’t agree more!

  • The reason for the Westside obsession is that home prices are forever increasing and it’s a safe area, compared to other parts of the city that are sketchy with horrible schools and crime off the charts. If you have children it’s especially scary to live in many parts of the city. I think of ZAW saying he’ll soon move to the outer suburbs for their schools and better environment for raising children. He’s a responsible parent, if I had children and couldn’t afford to live on the Westside, I’d move to Katy or The Woodlands in a heartbeat.

  • You lost me when you said “there is no attempt at affordable housing inside the Beltway. Most of Houston’s affordable housing is inside the Beltway, but outside Loop 610. As long as I can drive around the City and pass superblock after superblock of big, old, run down apartment complexes, I will not believe that we have a shortage of affordable housing in this City.
    Now let me qualify that. We do have a shortage of safe, decent affordable housing in this town. (Those slums aren’t safe or decent). And we do have a growing shortage of affordable housing inside Loop 610: the result of older garden apartment complexes being demolished to make way for luxury mid and high rises. It can be said that there isn’t much effort to address either of these issues. But from what I can see, it’s wrong to imply that Houston has a shortage of affordable housing.

  • Agreed, this analysis is hyper-focused on the west side. Its true that there has been more job creation and asset price improvement there than anywhere else, but its also true that there are a wide diversity of housing options at varying price points. (Its only a major problem for bigots that are set on living among their own kind and for people who conflate homeownership with moral virtue.)

    To the extent that housing affordability has become a problem, one of the underlying causes has been that lot prices have risen a great deal due to a constraint on new supply that occurred for several years and that ended only a couple of years ago, followed by exceptional demand. However, due to tighter lending standards and limited wealth accumulation among younger households, there exists more limited demand for entry-level single-family housing than there had been in the past. What is actually getting built is tending to reflect the qualities of housing that can be afforded by people who can buy new homes. (The corollary is that what is getting built in multifamily reflects the other side of the trend.)

  • The other reason you see the constant focus on the Westside is that the weighted center of Houston office jobs is somewhere west of the Galleria, but the freeways are all designed for downtown traffic. Afternoon travel times between the West Loop and Downtown are actually worse for the eastbound reverse commuters than the westbound “regular” commuters.

  • @Purple City – Your comment made my head hurt. Living on the East End, counterflow traffic is one of the main reasons I chose the location. And as far as affordability, there are still housing opportunities for young teachers, firefighters, police… etc on the east end. I agree though it would be tough to move in if you have kids, the only place i would let them go in that area is Lantrip Elementary.

  • @Shannon, what makes you think crime is off the charts in the “sketchy” parts of town? Have you done a study of HPD statistics, or are you just pulling crap out of thin air? I would suspect property crime is actually higher on your vaunted West side, since there’s more to steal there. I have in laws that live in several sketchy parts of town, and I never feel unsafe there, nor do they. Get off you white bread high horse and look at reality some time.

  • Wow, another CoTD from someone who doesn’t know what they are talking about. Apparently the only neighborhood inside the Beltway is West U, who knew?

  • You can buy a half acre of land with a decent house for under 200k in/near acres homes, then fortify it to feel “safe”. Or you could buy in glenbrook valley, or eastwood, lindale park would probably be within reach of a couple making “only” 100k.

  • @Ross: You attack Shannon for not citing crime stats and then claim crime is worse on the west side because there is more to steal and because you feel safer in sketchy parts of town. That’s some sweet interweb arguin’.

    Houston’s inner city housing market is just finally growing up. Sprawl has come home to roost with very significant sacrifices in quality of life trying to commute between the burbs and downtown. We are really just standing where places like DC, Boston and Seattle were in the 1990s. Scruffy old neighborhoods that saw flight to the burbs in the 60s and 70s are now hot due to their proximity to employment centers, cultural institutions, good restaurants and retail and revitalized schools. I remember when people in Boston were freaking out when people were flipping houses in Somerville and getting $400-500k for them in the 90s. Now, people are dropping $1mil+ without batting an eyelash in this once very, very blue collar neighborhood. It is not over valued. It is not a bubble. It is transformation.

  • We have some pretty nice apts in the $500-$700/month range (1-3 bed) that are right off Almeda, a few blocks from W. Alabama near Southmore/288. That’s still a “good” area IMO and walkable to midtown/montrose, light rail, etc. And near those complexes are several good homes on large lots for cheap. We’re not talking about 100 miles from other ‘well off’ areas… we’re talking about mere miles (or sometimes, mere blocks) from where you’d buy a $1m townhome.
    So yeah. Like a broken record I’ll say inner loop is NOT expensive. There are some VERY expensive areas for sure, but as a whole you can buy “near” those very expensive areas for super cheap.

  • Yes, it was West Houston centric. But, many of the same issues persist across the city. Most free standing homes in West Houston that are reasonably up to date and with good schools and low crime are certainly not “affordable” but may be “attainable” for the avg professional couple which I guess means spending 30% plus of income on housing. Even decent condos are tough to get into. Lindale Park and EaDo or the other areas mentioned here are not that attainable and it isn’t reasonable to expect the average person to buy an overpriced, undersized dump and fix it up in a transitioning area. The problem of neighborhoods not transitioning quickly enough will persist until developers think outside the box and learn how to make money catering to average professionals.

  • Jon M is spot on!

    also, i feel much safer in the East End than I did in the trose. not to mention the holiday crimes in Southside, West U and Bellaire recently..scary over there!! ;)

  • Who on Earth would feel safer in Third Ward or Fifth Ward than Memorial? All those affluent cited like West U and The Memorial Villages have their own police force, plus RO, Tanglewood, and Southampton have their own security. I thought it would be pretty obvious what areas of Houston were the safest, obviously not.

  • @Old School, I said “I suspect”, which implies it’s my opinion, and that I haven’t done any research yet. Shannon flat out claimed crime was off the charts in areas that aren’t the Westside. There’s a difference.

  • Outer suburbs, Shannon? Hell no! We’re moving just far enough to reach the top rated public schools and houses we can afford. No further! Right now we’re evaluating Meadows Place.

  • Houstonian…whats wrong with fixing up a undersized dump in a transition area? Every area I know of in Houston that has transitioned into the “luxury” of vertical trailer parks for the $200+ minority was first fixed up by less affluent buyers who made the neighborhood more appealing to the fearful suburbanites you so closely identify with.

  • OK, I have to come to Houstonians’s defense a bit here. He didn’t say there was no affordable housing inside the Beltway. Re-read the comment. He said that developers were not building affordable NEW construction homes inside the Beltway. He’s right, there’s very little new home construction in the Eastwood, South Park, Acres Homes, etc. You guys correctly point out that you can buy a home in these areas for below $250k, but those would be existing properties that were probably built 30-50 years ago. If you want NEW in those areas, it’s few and far between.

  • @sjh there’s nothing wrong with fixing up a run down place and improving the neighborhood. It just isn’t a viable plan for the masses to solve houston’s inaffordability problem. We need to get the millennials out of the texas donuts and into neighborhoods but they aren’t going to buy all the shacks and run down old houses in the loop and turn them into revitalized neighborhoods. That’s unrealistic.

  • @ZAW, perhaps I was a little overzealous paraphrasing your quote, but I stand by the premise of bad schools driving out professionals that are not rich and 21.

  • Ross, if you think sketchy areas all over town are safer than Memorial, then I really don’t know what to say. We’ll agree to disagree and move on.

  • ZAW you suck, you’re all pro Sharpstown but you left the neighborhood and became exactly what you were against. Maybe if you actually did your research you would realize that getting into the HISD magnet programs as a Sharpstown resident is extremely easy.

    As for the rest of people who claim to not find affordable housing, absolute bullocks! Tons of safe and affordable housing around the city but people want to live like 40k millionaires in their mcmansions so they look to the suburbs to get it, oh and the good “schools”. Even if I had a kid I would raise them in the hood because I know with me being a part of their education, they will succeed. Don’t blame the schools, blame the parents.

  • There is still affordable NEW housing built inside the Beltway. Look on the south side – CityPark, Summerlyn (OK not new anymore but less than 5 years old), etc. Well under $175K. Also quite a bit just outside the Beltway on the north side. Plus, north Spring Branch, Alief / Sharpstown, Inwood, etc. where houses are older but sometimes high quality. Pasadena is very inexpensive (and you’re not living next to refineries). Northshore on the east side. People need to quit being ignorant. Just suck it up and move to a neighborhood where that doesn’t have college-educated households moving to it (or any Anglos). That or quit complaining.

  • @Shannon, you said Westside, not Memorial. The Villages likely have lower crime stats, but they are patrolled differently than Houston, have more police officers, more private security, etc. Westside covers a lot of ground.

  • Until the recent realignments to HISD’s magnet programs, you might have been right, Robertrulez. And, not to sound racist, but a big part of why we wrote off HISD’s magnets is that we’re white. I mean honestly, they don’t come much blonder than my son. My research into HISD’s magnets suggests that makes it very difficult to get into the top magnet programs. And yes, I am aware of how bad that sounds.
    I wish I had enough energy to dive in and fight like hell to improve HISD’s schools in Sharpstown the way I fought like hell, when I was a Super Neighborhood President, to address urban blight and safety issues. But just trying to get something done about two apartment complexes was exhausting. Trying to push against the weight of an entire school district – well, I’m not a Ruth Hurst who can just keep going and going (God rest her soul).
    Believe me, I don’t want to ditch Sharpstown like this. But I just don’t have a choice.

  • Amen, Local Planner. Amen!
    Say what you want about New Yorkers, they were the first ones to learn that finding (comparatively) affordable housing sometimes means being urban pioneers. Neighborhood after neighborhood that used to be a slum, in the Big Apple, is now viewed as an option by upwardly mobile, middle class people. Bed Stuy in Brooklyn. Long Island City in Queens. Mott Haven in the South Bronx (!). DUMBO, the list goes on. It’s time for people to bring the same sensibilities to Houston.
    And, my wife and I are starting to discover, there ARE safe places with well priced homes, and top notch public schools – that don’t require moving to the newly built per suburbs. They’re harder to find, but they’re there.

  • HISD magnets are mostly purely lottery. Fine arts has auditions. Siblings get preference. Vanguard has testing, but is still a lottery if you chose a vanguard magnet outside your school zone. There is no consideration made for geography or race. I got my kid into a magnet and he is very much a product of the time when the Anglos met the Saxons. We also live in the Heights. His class is mostly magnet, mostly white and mostly inner loop/GOOF residents. Only two out of 22 were minorities from disadvantaged areas. Unfortunately, I think the interest in magnet schools is very low in the poorer parts of town, especially compared with people inside the loop who are zoned to inferior schools. The mere mention of vanguard and magnets at a play group in the Heights will cause at least one mommy to grab a brown paper bag to prevent hyperventilation.

    I would either pay for private school or skip out to the burbs than go to my zoned school, which still has a lot of the hood in it. Sadly, the fact of the matter is that kids from the lower socioeconomic strata often show up to kindergarten with no early childhood education and are just starting ABCs and numbers. As heroic as HISD teachers are, they have to make sure kids do not fall behind before they can challenge kids to get ahead.

  • Memorial IS the Westside! Are you even from Hpuston? Oh, neverrrr mind.

  • I appreciate the honesty from Old School and ZAW, I mean when it comes right down to it, you do what you think is best for your kids, period. I got a great education at Kinkaid and loved every minute of my time there, sure it was expensive, but thankfully my parents could afford it and cared enough about my education and well being to send me there. I certainly resize that Kinkaid or St John’s are not an option for everyone and Vanguard’s, Magnate’s etc have there own issues in terms of preference, quota’s or whatever, but when it comes to your kids you do whoever it takes to get them the best education.

  • Shannon, Memorial is only a part of the West side, and the part of the area that’s in Houston has about as much overall crime as the area around UH, according to HPD statistics.

    I’ve been in Houston since 1976, probably longer than you can remember

  • @Zaw, Not to be racist but yes you are being racist. It’s your child and your life. You can do whatever you want. I went to Sutton as a child, was automatically accepted at Pin Oak (people in sharpstown section 1 have the option to attend Pin Oak instead of Jane Long), ended up at Sharpstown high, then graduated UT with an A average and have just been accepted to many top 20 law schools with some being full rides. Many of my AP class taking colleagues from Sharpstown are enjoying success as well. Granted I’m smarter than most people, so I’ve been a big fish in a pool of little fish my whole life, and that could have been the case for your child. Unfortunately, you’re putting your child in a pond of big fish. Good luck getting your kid into a good university — that top 10% rule is a real bitch.

  • Ross, when people say the Westside, they mean, River Oaks, Tanglewood, Bayou Woods, Memorial Villages They mean all along Memorial Dr from River Oaks to Highway 6, encompassing all the affluent, predominantly Anglo enclaves, they certainly don’t mean Montrose or 1st Ward/Washington Ave. I assure you. I’m perplexed that you’ve lived here since the Carter Administration and yet you seem to have no idea what Houstonians mean by the Westside. Ask any realtor, they’ll explain or better yet any one within earshot that’s lived in Houston more than a week.

  • Yeah, you can call me whatever you want, Robertrulez. First sucky. Then me racist. Got any more?
    I’ve done more to help Sharpstown than you have, in many ways. Look at the redevelopment along Bissonnet and around the High school. As President of the Braeburn Super Neighborhood Inoushed really hard for that. It’s a great place to live if you’re not a parent, and I still think it has incredible potential to be an amazing place to raise kids. It’s going that way. If we were having this discussion ten years from now, I wouldn’t be leaving to find better public schools.
    So go ahead. Call me whatever you want. It’s actually kind of amusing.

  • Zaw, you’ve done more than I have because you’re arguing with someone who’s just graduated from college. I guarantee to you I’ll be using my legal education to spur change in the neighborhood. Moreover, if your child turns out to be average, good luck getting them into a good college. I hear Texas Tech is nice these days. Cheers.

  • Best of luck, Robertrulez. I mean that. Pick up where I left off. By all means.
    And by the way, I have a Masters degree. So does my Wife. (I went to a liberal arts college back east, and then Rice). We have all the faith in the world that our Son will at least match us.

  • How did this devolve into another absurd ‘schools’ thread?

  • And all roads seemingly lead to the greater Sharpstown area

  • Niche, it’s always about schools. Without an educated population you have nothing.

  • If the purpose of an education is to convey knowledge then that’s one thing and very few schools are very good at it; and they aren’t the ones that are considered “good” for the purposes of real estate investment. Those schools are fairly exclusive, sometimes expensive, and are for naught after all if the home environment is unsupportive (for instance because the parents are too busy working in order to pay for a school to have time to spend with their kids).

    For the vast majority of households, this is not attainable. It is neither attainable in the American system or in most other countries, even those that approach education very differently and score more highly on standardized tests. Herein we can observe a problem that is insidious and endemic to human civilization…

    IF the purpose of education is to convey credentials in order to reward thoughtless and uninspired instruction-following, then that is a man-made poverty trap; and actually, you’re probably better off sending your kid to a school that isn’t considered “good” so that expectations of them are higher than for their peers and so that it is easier for them to rank highly and matriculate to an institution that employers and other institutions consider reputable. If you desire that your child should have an avenue to accumulate money or to wield power, then this is a reasonable avenue. Moreover, the money you save from living in a “bad” school district rather than paying a premium to live in a “good” district and that they earn from scholarships that they wouldn’t otherwise have been eligible for can be used to pay their expenses through college so that they don’t have to work their way through or accumulate student debt.

    I can anticipate the standard structure of a response:

    “But you know…then they’d have to be around [insert divisive socioeconomic epithet of your choice here]. Those people are just impossible. They’re uncivilized, not like us, no sir-ee. And I know all about those people because I watch the news and crime dramas. I am qualified to render an opinion. Thank goodness that my parents had to the good sense to raise me up among my own kind; I wouldn’t be the good and successful person I am today, otherwise.”

    ^ But that response is built on the presumption that this person is civilized, educated, informed, and good and successful. (Shannon needs to go and look himself in the mirror, closely.) It doesn’t matter that they think they are; it matters if they actually are AND that their reasoning about causality is sound. However, we are biased to defend ourselves and our own backgrounds and our own worldviews, and this is called the Dunning Kruger Effect.

    Unsound reasoning and fear are what motivate us to seek out “good schools” in the context of our real estate investment. Although it is important that we understand and consider these consumer behaviors, we must also recognize that the logic is fundamentally flawed. We can benefit from this knowledge individually and in so doing help to right a persistent social wrong: the curse of low expectations.