HOUSTON – (By Ralph Bivins, Realty News Report) – The first quarter is winding down. Although it feels like New Year’s Day was just yesterday, the first quarter of 2019 will be gone in about two weeks.
With that in mind, here are several predictions for the rest of the year.
PREDICTION ONE: 2019 will be the Year of the Townhome. Identify an infill parcel and buy it now. If you can build four or more townhomes on it, you may have a strong investment. The National Association of Home Builders forecasts a 24 percent increase in townhome starts this year. Townhomes offer a more affordable path to homeownership, and affordability remains a major challenge. Expect demand for townhomes to be strong in suburban markets as well.
PREDICTION TWO: Office vacancy will continue to rise this year. Houston’s office market has shown signs of recovery after a difficult stretch, but citywide vacancy remains near 21 percent, according to NAI Partners. The Woodlands market is healthy and the Energy Corridor has improved, yet roughly 8 million square feet of sublease space exists and more of it becomes officially vacant every month. New buildings are under construction and tenant relocations create additional empty space. Job growth is positive, but not rapid enough to absorb the excess supply quickly. The market won’t correct overnight.
PREDICTION THREE: Industrial development may be getting ahead of demand. Construction activity is elevated, with about 15 million square feet under construction in Houston — near record levels. A February NAI report showed vacancy rising to 6 percent after several years in the 5 percent range. Industry veterans like Avison Young’s Bob Berry have questioned whether Houston can absorb industrial space at this pace. E-commerce and port-related activity have driven strong warehouse demand, so this isn’t a crisis; rather, expect the industrial sector to settle into a more normalized growth pattern.
PREDICTION FOUR: Single-family home sales will remain strong in 2019. Houston Realtors posted an all-time best February, and most commentary since late 2018 has focused on minor fluctuations rather than fundamental weakness. Houston’s housing market is healthy. The 30-year mortgage averaged about 4.3 percent last week — the lowest in over a year, according to Freddie Mac — and the Federal Reserve has eased its push for higher interest rates while inflation remains low.
PREDICTION FIVE: Energy exports will boost the Texas economy. The Gulf Coast will increasingly ship oil, natural gas, liquefied natural gas and petrochemicals. After the 2014 OPEC decisions shook the U.S. energy industry and contributed to layoffs and elevated office vacancy in Houston, the Permian Basin has recovered its momentum. Growing energy exports should help support demand for real estate across the state and could help absorb some of the office overhang that has weighed on Houston in recent years.
PREDICTION SIX: March Madness will deliver drama. I predict Duke will win the NCAA basketball championship, and the University of Houston will reach the Elite Eight. Congratulations to the Cougars for a standout season.
PREDICTION SEVEN: The Houston Astros will return to the World Series this fall. Whether they make the roster and strategic moves needed to win it all remains to be seen.
Commentary by Realty News Report Editor Ralph Bivins, Gold Award Winner for Best Column from the National Association of Real Estate Editors.