COMMENT OF THE DAY: WE’RE NOWHERE NEAR PEAK MONTROSE 
“I don’t think we’re anywhere close to the peak of property values in Montrose. You can still get an older 1,500 square foot townhome in the area for under $250,000. The average price for a bigger (~2,500sf) recent construction townhome is probably around $600,000. Those prices would be laughably low in comparable neighborhoods in most cities. Gentrification doesn’t really stop halfway like that barring a major economic downturn — once the ball starts rolling like this it just keeps going until the whole neighborhood is gleaming and wealthy. If you think Montrose has reached that point yet, you’re wrong. A fully gentrified urban neighborhood doesn’t have horrible apartment complexes like Takara So or vacant lots and skeazy strip centers on its main commercial street. Gentrification isn’t going to stop in Montrose until you can’t get a new townhome for less than a million or an apartment for less than $1,400.” [Christian, commenting on Gibbs Boats on West Gray and Montrose Is Selling Everything Now] Illustration: Lulu
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Houston isn’t SF, NYC, or DC, it isn’t even LA. There is a reason prices are so high in those cities. They’re very small and compact, thus land is truly at a premium, Houston is very spread out, a typical Sun Belt city. I don’t see townhomes in Montrose averaging 1 million any time soon, it’s not Chelsea. Compare Houston to Dallas or Atlanta for an idea of future housing costs, that will give you a good picture. To compare Houston to cities like Boston to say how cheap Houston is is really missing the picture and not understanding real estate inflation in say Houston compared to DC.
If WTI tanks and oil hits $35 per barrel the Midtown bubble pop will have commenced, and everyone will be upside down in their mortgages. In the early 1980s no one thought oil would ever bottom out, but it did. Stay off of the sidewalks and keep an eye on the ticker. Save your cash for fire sales.
@Shannon: I don’t think we’ll ever get to NYC/San Francisco/DC level prices, no. But there is still room for significant growth before we get to the price levels of a city like Chicago for example. For example, NO WAY are you going to get a whole 1,200sf townhome in a neighborhood like Lincoln Park for $200k. And the rarity of dense walkability in Houston will also drive price growth compared to most cities which have a far larger stock of walkable neighborhoods. If you want to be able to walk to a lot of things, you’ve really got only two or three Houston neighborhoods to choose from, with Montrose being the only one that’s fully “there” at this point.
I’m not in the oil industry, but I think that if WTI or Brent fell below $50 bbl, suddenly the fracking in the Eagle Ford and Bakken Shale would become unprofitable to drill, and that supply would exit the market. Then prices would rebound somewhat as supply was taken off the table. At the other end of the equation, all you need for prices to go up again is a supply disruption like a hurricane on the Gulf Coast ( remember Katrina), or, more likely, a disruption from the Middle East due to terrorist activity.
Old School said it best, that the trajectory of inner loop housing prices is upward, through there have been downward bumps in recessions. The one thing they’re not making any more of is land, and so land close to the center of a major US city will hold it’s value in the long term. Even though prices in LA and Miami sunk in 2009-2011, they have rebounded nicely in the past couple of years. Both are markets that attract immigrants and their money. Houston also sees immigrants buying up property. If you hold for the long term, you will be fine. Those looking to profit in the short term may have to deal with setbacks.
Of course property in River Oaks et.al will increase and be stable and would be a good investment short or Iong term. What I’m saying in relation to this C of D is that Inner Loop Houston is not Chelsea in the 90’s or buying Bel Air or Holmby Hills in the 70’s, Houston real estate even in RO will not surge like those neighborhoods. If you have 5 million, buy a house in RO or Southampton, you’ll see a great return in 10 years, but crappy parts of the Heights, Eastwood, or crappy parts of Montrose, who knows how much you’ll get since you’ll be buying on the upswing now and those areas have pockets of blight that could stall in gentrification if the economy takes a hit and they hardly have the eternal cashe of RO. RO is bullet proof.
$35 a barrel?, $50 a barrel? We’ll start seeing petro projects canceled long before it gets that low. Houston will slow quite a bit if it gets as low as $80 a barrel.
Also, if Tesla can really make electric cars competitive with gasoline cars Houston will be in big trouble. This town will dry up and blow away. That gigafactory is not good news for us. It remains to be seen if he can really pull it off though. And if he can it’s still probably a long way off.
Here come those “what if oil crashes again” comments. It’s a good hypothetical discussion but borderline fantasy.
“You can still get an older 1,500 square foot townhome in the area for under $250,000. ”
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Uhm…..no, you can’t.
@ ShadyHeightster: The price of oil is a very important factor, but everybody overlooks the cost of extraction because obviously its not a metric that one can reference easily or from a single source or even an index. A disruption in fracking companies’ abilities to finance their next project (or in some cases to pay for the debts of the last project by undertaking the next project) could cause the effective cost of extraction to become extremely high; and in that instance there would also likely be a concurrent demand-driven downward shock to the oil price because that sort of event, a new financial crisis, would not be limited in scope to the energy industry.
Clearly yes, this is a bump in the road. However, it should not be minimized as such because the bump may be rather small or it might be very large. Moreover, the demography of America and of other regions globally does not portend well for longer-term rates of overall economic growth, even if salaries and wages do finally start to rise.
@MrEction, yes, you can, actually.
77098, North Blvd near Kirby, walk score 88, $215K:
http://search.har.com/engine/2626-North-Blvd-18-Houston-TX-77098_HAR25375474.htm
77006, Fairview just west of Montrose, walk score 86, pending at 185K:
http://www.nuhabitat.com/homes/us-tx/houston-77006/fairview/1-2018231
77006, Montrose at Kipling, walk score 85, $229K (is a condo rather than a townhouse):
http://search.har.com/engine/3614-Montrose-Blv-1006-Houston-TX-77006_HAR6272542.htm
77006, Roseland at Sul Ross, walk score 83, $210K
http://search.har.com/engine/3914-Roseland-St-Houston-TX-77006_HAR47214339.htm
So yeah, they’re out there.
Google master: to be fair, those are all under 1500. Most closer to 1000. (And holy hipster, that condo listing / agent)
Yeah, 1500 sq ft is just not going to happen for that price. The Montrose one you linked has a monthly maintenance cost of 1100$ btw. I will admit that the Roseland unit surprised me though.
Oops, you’re right, I forgot to limit my search by square footage. When I plugged in 1500 sf and $250K, I got zero results for 77006, 77019, 77098. I relaxed to 1000 sf and found two at 1400+, one on McDuffie north of W. Gray with 1417 sf for $243K, and one on Stanford at Harold with 1400 sf for $250K, both option pending or pending continue to show.
I used to live in a 1920s four-plex a couple blocks south of that row of 1970s townhouses on Roseland. We would walk by them all the time on the way to Walgreen’s and Griff’s. Now there’s a four-story parking garage on the lot where I lived.
@jgriff The Tesla plan is a grand one but even if it succeeds faster and bigger than our dreams, those cars still need energy. That energy is going to be natural gas. Also dont forget that 1/3rd of oil goes to industrial uses and not transportation. The world needs energy and nothing packs energy like organic matter that’s pressure cooked over millions of years.