Houston Homebuyers Spreading Farther Out; Opening Date for Westheimer Whole Foods


Photo of MK Luxury Homes & Condos at Post Oak Blvd.: elnina via Swamplot Flickr Pool


14 Comment

  • @Redfin,
    Am I the only one who finds their methodology completely dumb? The suburbs will always rapidly expand due to constant new housing builds and endless empty space. The city is built out and anything vertical is typically a rental. By their methodology, the only way the city would be expanding with sales is if we started knocking down homes and building 100 story condo towers on each block. This report only proves that the city is the most desirable place to live, yet pricing and endless land further out is forcing people to live further and further from the action. It’s not like they really want to… it’s just what is available.

  • Brian is spot on. Other than one brief statement about property scarcity in the Redfin piece there seems to be no accounting for the necessary exponential increase in housing further from the urban core in a growing city, absent a massive push to vertical living.

  • RE: Homebuyers Spreading Farther Out
    I can only hope that, when they get far enough, they will be drawn to the gravitational pull of San Antonio or Conroe and then they can stay in that zone – thus easing overcrowding inside the Loop.
    I’d wager that Inner Loopers are an extreme: either wealthy enough to afford the high tax valuations or pricey rent OR poor and trapped in wherever they live (mostly east and NE of downtown). Suburban residents would seem to have a more homogeneous economic profile since the land is all cheaper out there.

  • I’d never live outside the loop. I’d never buy/invest outside the loop. There are so many ‘cheap’ areas to live inside the loop — many are literately 5 miles from $$$ areas. Yeah, they’re “dirty” or whatever but I trust them to get better and my values to improve more than if I buy 1000 miles away in some burb.

  • My wife, son, and I were taking a road trip, and we were on 36 south of Rosenberg. We passed a new subdivision. I kid you not. We immediately scratched our heads, “why would anyone move out here??” Then we saw the prices: from the $140k’s. .
    That’s part of why. But it’s not all of why. You can find houses for $140k a lot closer in than outer Rosenberg. But many of those houses have other problems. They’re older homes: so expensive maintenance and repairs are to be expected. They’re zoned to schools that aren’t great. There might be a slum apartment complex or a junk yard at the entrance to the subdivision…. Or even barring those problems, the house could be just plain too small for a family. (Tiny houses and micro apartments are not the right answer for everyone, but they are widely seen as the only answer to affordability in expensive, close-in areas).
    I’ve said before and I’ll say again: It’s not just prices that are driving people ever further out. I wish more people would realize this, and start the hard work of improving inner neighborhoods so young families, who aren’t rich, can move back.

  • Many millennials I know don’t like to commute and therefore live accordingly. Some rent in the city because they can’t afford to buy and they want to be close to Midtown/Washington Ave. When jobs move north (e.g., ExxonMobil/Anadarko), many of the millennials also moved north — not because they love Spring or The Woodlands, but rather because they want to be 5-15 mins from work. Some are torn; still not married or perhaps married without children and a spouse and the spouse/significant other works in the opposite direction. They tend to compromise and live in the Heights.
    Cody’s response seems to imply “I want to live close to work” in addition to his love of the loop. I love the loop too, but do not love commuting; hence, I will be embarking in the burbs at some point.
    Millennials still prefer experiences to homes, but once they start having children, they’re like past generations that want a yard and good schools.

  • Hooray for the bees!

  • @ Major Market: Tax valuations may be high in the desirable parts of the City of Houston, but its getting where tax rates are low by comparison with new suburban subdivisions. Its not uncommon to see overlapping tax rates in excess of 3.5%, compared to about 2.5% in much of the City of Houston. That difference may not seem like much, but (keeping the math really simple), figure that each $100k in valuation results in a $2,500 and $3,500 liability per year. The NPVs for perpetuities of $2,500/yr and $3,500/yr at a 5% discount rate are $50,000 and $70,000 respectively. (Choosing an appropriate discount rate is a little arbitrary, but ask yourself basically how much of a risk-free return you would need in order to justify saving/investing money rather than spending it in the near term. For most people there is a mismatch between government/central banks/blue chips and their own household. It should be higher if only because you’re mortal and they aren’t, but probably for other good reasons.) So if you bought a new $500k townhome in central Houston, the NPV of your property tax liability is about $250,000. If you instead bought a $350k home in a new subdivision, your tax liability could be $245,000 (or significantly lower or higher depending on which set of jurisdictions you’re in).
    Note that I haven’t accounted for the effects of property tax exemptions, income tax effects from deductions, HOA dues or special assessments, or so many other variables that are particular to one’s situation. The lesson from this is certainly NOT to buy housing inside the City of Houston; its to JUST PAY ATTENTION TO YOUR TAX RATE. It is also still possible to build on residential lots in unincorporated/unrestricted areas where you can have well water and septic, where values remain reasonable, where tax rates are very very low, and where the same exemptions and deductions will apply.. If you’re looking for financial optimization, that’s where you’ll find it. Just never mind the mobile homes, meth labs, the roosters, or other externalities.

    @ ZAW: If you had looked more closely then you would’ve seen signs for several communities out there just off of State Highway 36. The demand-side answer certainly has to do with price, product, and few externalities, but also there do exist jobs in the suburbs. Lots of them. If you already work in Rosenberg or Richmond or Sugar Land then a nearly congestion-free commute from Needville is hardly extreme.
    The supply-side answer is that land plays don’t fall like dominoes in a nice orderly pattern, one after the other. The land markets are not perfectly efficient, especially over long time horizons, and so there are instances when a developer’s acquisition and/or entitlements carry a particularly low basis and makes a project viable that isn’t viable next door. They could wait and maybe the project would be even better, but maybe for whatever personal or business reason, they don’t want to wait. There are lots of moving parts to this analysis and in thin markets it can be especially difficult to infer what’s really happening.

  • The #1 thing that moves people out of the city is schools. There are lots of good investment opportunities for houses inside the loop that many people can afford. But none of them are anywhere near good schools. Houses and neighborhoods get better far before schools, and the only decent schools you can get inside the loop are associated with some of the most expensive neighborhoods in Texas. The only way you can get your kid into a decent public school is to live in the burbs.

  • Here’s my story which is probably not unique at all:
    As an older millennial, I had the “I’ll never live in the suburbs” mantra for most of my twenties.
    I lived in a townhouse, had a 20 min. commute, and was within walking distance to restaurants / parks. I was paid well but didn’t make enough to not be house-poor if I bought a townhouse in a desirable area (rice military or real heights or montorse, etc). Then as I and my significant other really started to increase in salary, houses prices really started to increase as well. Houses prices seemed to either stay in lock step with my increases or exceed them. So, I had to move out to the ‘burbs to get anything comparable with the same quality of life it seemed. Plus, I was now married and we were talking kids …. and schools.
    The commute sucks, yes. However, there are some suburbs that aren’t as suburban as others….. and are more convenient for certain places of work (Sugar Land to medical center is a better commute than Oak Forest to medical center FWIW). Just as there are more urban places within the loop, there are more urban suburbs. As much crap as Houston gets (and I give it a lot), there is a huge diversity in living situations that people can choose from. It’s not ideal and you don’t get everything you want (which is hard for millennials to grasp), but for dual upper middle class earners there are few criticisms that you can levy that don’t just sound like “First world problems”.

  • Regarding moving for schools, it’s even more extreme than the comments here imply. It’s basically at the point where the areas zoned to well-regarded public schools in the “Anglo arrow” (west half of the urban core and the narrow corridor west toward Katy) have been far too expensive for even most upper middle class home buyers, unless they’re willing to consider townhomes or older condos. The big issue is that nearly all of the inner and middle suburbs, pretty much most of the region inside of the SH 6 / FM 1960 semi-ring, are now considered undesirable by home buyers who are sensitive to school reputations (which seems to be the vast majority of home buyers who are college-educated). So they will only consider the outer suburbs, often 25 miles or more from the urban core, when they could pay much lower prices for suburban homes with ample yards much closer in. Often the undesirable areas go even further out; we all know that educated home buyers now avoid all of Spring ISD on the north side, which goes all the way to Spring Creek. All of Alief ISD is also avoided, as are much of Cy-Fair and Fort Bend ISDs. Suburban home buyers have proven themselves quite willing to pay vastly more for their homes, and in commute time / vehicle fuel and mileage, in order to live within a “preferred” school zone. Watch for Montgomery ISD – yes, Montgomery – to explode in the next few years because its schools have a strong reputation (mainly because of their affluent demographics), plus it’s not too far from northern employment centers.

  • Not only good schools for the kids, but the actual presence of other kids in the neighborhood. I heard this cited by some acquaintances as a reason for moving out of the Montrose area to somewhere less trendy.

  • RE: Schools–with HISD schools it can be a chicken or egg situation as well. A particular school can be poor performing for years, but after the area is gentrified, the school slowly improves as the now more affluent residents send their children there and take part in PTA and other community activities. But there is an often significant lag time between when demographics change and when the school becomes acceptable. And parents have to decide how much lag time they are willing to accept before putting a down payment on a house in the neighborhood. I can tell you that 15 years ago Harvard Elementary wasn’t ‘all that’, yet now all the Moms and Dads want to send their child there. Frank Black Middle School was grim in the ’90’s but with all the tear downs in Oak Forest, it’s on the verge of becoming acceptable if not outright desirable.

  • We’ve got to stop subsidizing new developments 30 miles out. They get free roads, free utility set-ups, roads widened, fire dept, constables, etc etc. We also need to stop electing liberal politicians who are destroying the quality of life inside the city. All of our tax dollars go to paying for the mismanaged bureaucracy. God forbid a neighborhood gets new sidewalks.