Houston, TX, October 25--While the local housing boom has helped sustain Houston's economy, could a national slowdown mean the luster will soon start to wear in our own backyard?
The U.S. Commerce Department said last week that national housing starts in September dropped 6 percent, the first decline since June, according to the Houston Chronicle.
The numbers for Houston aren't out yet, and most experts say there won't be a drop.
But if things are so rosy, then why are some homebuilders offering concessions and discounts to many of their buyers?
"The industry is doing some things that are sucking some more people in the market," housing analyst Mike Inselmann of Metrostudy said. "Those things go on all the time, but it appears to me a little more aggressive than it has in the past."
Builders are being more flexible in their negotiations and offering more features and upgrades to their homes at no additional cost, said Inselmann.
While few are slashing prices, many homebuilders that cater to first-time buyers are offering free landscaping or lighting packages that typically come at a premium.
"They're not necessarily lowering their price, but you can get more for your money," he said.
Ashton Woods Homes is offering half off on upgrades up to $20,000. That includes any options available in the builder's new home design center, including nicer countertops, appliances or flooring, said Terry Krenek of Ashton Woods.
For example, a $5,000 granite countertop package would be reduced to $2,500.
Kyle Davison, division president for KB Home in Houston, said it's not unusual for builders to offer discounts at the end of the year.
That's because as the fiscal year ends for these companies — many of which are publicly held — they need to unload a certain number of homes that are already built.
That's good news for buyers.
"There are significantly more homes available today than there were a year ago," Will Holder of Trendmaker Homes said.
While demand for housing hasn't lost steam, some think the market is overstocked. In cookie-cutter communities where one house looks like the next, that's probably true.
And builders continue putting up thousands of moderately priced homes — typically less than $150,000 — to satiate a huge demand from new buyers.
"The market is tilted to oversupply in communities that don't have a lot of unique characteristics," Holder said.
D.R. Horton, Lennar, Pulte and Richmond American are filling suburban areas all over the city with housing developments that go after first-time buyers.
Even Trendmaker, which builds higher-end homes, is making deals on some of its properties in more generic neighborhoods.
"We don't have a $20,000-off-a-home sort of thing," Holder said. "But we have homes in sections that aren't in special locations where buyers can make a deal."
But it's not critical, he said, because the overrun is small enough to correct itself within a two-month period.
Holder said the company is not as affected by the current oversupply.
"I'm still finding lots of demand," he said. "We're ahead of last year."
Indeed, the homebuilding business here continues to chug along. Inselmann expects builders to construct 42,000 homes in Houston this year, a 10 percent jump from 2003. "This is another record-setting year we're in," he said.
As far as the rest of the country, a slight correction was expected. And a monthly drop in national housing starts can sometimes be misleading because they are often based on unforeseen events — such as the hurricanes in Florida.
After the storms, builders were frozen in time, unable to start homes, close homes or even get to their housing communities in coastal Florida.
Also, in some of the highest-priced markets on the West and East Coasts, ongoing development barriers like land availability and city approvals can hold back housing starts.
