Clay & Company » A Texas Commercial Real Estate Blog

By: David Milstead, Special to CNBC.com

Residential real estate in Texas and other central states, which never rose too high or fell too far, is now benefiting from the region’s hot economy.

In some of the states, you could even say residential real estate is a well-oiled machine — energy production in the central U.S. has helped bolster the region, as seen in the states’ low jobless rates.

“The middle of the country, the spine, has done much better than the two coasts,” says Jim Gaines, a research economist at the Real Estate Center at Texas A&M University. “A common thread is energy, from Texas to the Dakotas — there has been a real boom time due to the exploration and drilling activity.”

People in the region, simply, are working.

Nebraska and the Dakotas were the only three states with average 2011 unemployment rates under 5 percent; Texas, Kansas and Oklahoma were all at least a full percentage point below the national average of 8.9 percent.

For a number of these states, job strength is a long-term trend. Data from the Bureau of Labor Statistics show the Dakotas and Texas rank in the top 10 in job growth from 2001 to 2011.

In Texas, here’s how that translates into housing prices. Each of the state’s major metro areas — Houston, Dallas/Fort Worth, Austin and San Antonio — saw minimal declines in the bust and are essentially fully recovered.

Each metro area has its own economic strengths that build on energy’s support, whether it is high-tech and government in Austin or tourism and the military in San Antonio.

“The ability of all markets in Texas to weather the national economic storm was due in significant part to the strength of the energy industry,” says Joe Stewart, an Austin broker who’s also chairman of the Texas Association of Realtors. “However, more important than that is the diversity of the Texas economy, which has helped drive job growth and demand for real estate.”

“Technology companies like Samsung are expanding in Austin, car manufacturers are bolstering the San Antonio market, and there are many other examples, most of which have been helped by incentives offered from Texas cities,” he says.

In Austin, prices in February were up 2.4 percent over year-ago levels and are up 8.5 percent from five years ago. Sales of higher-priced homes — $500,000 or more — have been up slightly in 2012 from the prior year. And there have been more than 60 permit applications for new-home construction, Stewart says, “which

The Real Estate Center, which is funded by the state’s trade group and uses data from the Multiple Listing Service, showed a median sale price in February in Dallas of $157,200, or 0.3 percent above February 2011 levels; the median price in February 2007 was $153,500.

Dallas Realtor Eloise Martin says the number of home sales in the first two months of 2012 has outpaced 2011, with homes in the median price range “selling very well.” There are, she says, “multiple offers on homes that are in excellent condition and priced well.”

In the Houston area, the February median price of $149,300 was 1 percent below the February 2011 level. The February 2007 price was $147,200.

“Houston has always been a steady market, not prone to big swings in price up or down, and this long-term trend bears that out,” says local broker Shad Bogany.

The city’s high-end market “has done extremely well,” pushing average prices up, but a luxury slowdown in February contributed to a small year-over-year decline in median price during the month. Bogany says the city’s hottest market is the $80,000-to-$250,000 range.

New-home construction in Houston “is pretty flat right now,” Bogany says, “because we had overbuilt previously and had a lot of new builders come into Houston, but very few of them are doing spec homes. Most are building to suit.”

San Antonio’s median price so far in 2012 is down about 2 percent from 2011, after a 1 percent gain last year, says Realtor Bob Leonard. “The past five years has been a mixed bag with flat pricing averaging plus or minus 1 to 2 percent,” he says. “San Antonio was fortunate to have had a strong but balanced market prior to the downturn so has not experienced the valleys associated with the peaks of other markets.”

Oklahoma has similarly benefited from the energy boom; as you travel north through Kansas, to Nebraska, however, agriculture plays an increasingly larger role in the mix, with energy a little less so.

Joe Gehrki, the 2012 president of the Nebraska Realtors Association, says Omaha has benefited from a diversified economy with a number of Fortune 500 headquarters, such as ConAgra Foods Inc. [CAG 26.13 -0.13 (-0.5%) ] and railroad company Union Pacific Corp. [UNP 108.71 1.23 (+1.14%) ]

“When one employer’s laying somebody off, there’s somebody else there to scoop them up.”

The number of homes sold in Omaha in February is up 13 percent from 2011 levels, with the average selling price up 3 percent, to $150,346.

The median sale price in February for new residential construction — as distinct from all homes, which includes re-sales — was $249,000, compared with $236,962 in February 2011.

Beyond Omaha, Gehrki says all the local Nebraska realtor board presidents on his group’s February conference call said activity was “really good” to start the year.

“With low interest rates and employment so high in Nebraska, we’re experiencing a full-blown recovery,” he says

The Dakotas have the benefit of both agriculture — many crop prices have been at multi-year highs — and more energy production than in Nebraska. The result has been ultra-low unemployment rates and sustained support for housing prices.

Jill Beck, CEO of the North Dakota Association of Realtors, says pricing and activity in her state closely tracks the energy industry, which is more prevalent in the western portions of the state.

The statewide median house price jumped from $144,000 for all of 2010 to $164,000 in January 2012, a jump of 13.9 percent. (Prices have risen each year since 2005, around the peak of the national market.)

“From Bismarck and Minot, west to Williston and Dickinson, you’ll see a significant increase in sales prices and a shorter time on market,” says Beck.

Architecture Center Houston hosts walking tours on Saturdays in the Spring and Fall showcasing some of Houston’s most distinct areas and highlighting it’s remarkable history and architecture. The tours offer a great way to learn about some of Houston’s most significant and cherished treasures—all within comfortable walking distance of each other.

Walking tours take place Saturday mornings 10 AM to noon and reservations are recommended but not required. See below for the different available tours and click here for dates, meeting places, and more information.

Buffalo Bayou

Explore the city from the waterway that gave Houston life and has been its backbone for 175 years. Architecture Center Houston (ArCH), with the cooperation of Buffalo Bayou Partnership, hosts this walk on Bayou Parkway for an overview of downtown Houston’s history and architecture from its beginnings in 1836 to the efforts to revitalize the central city today.

Quads, Courts, & Axis Rice University

Rice University and Rice School of Architecture both celebrate their Centennial in 2012. A treasure trove of great architecture, the campus features designs by great architects and large scale art works. This tour will look at some of the more unique, hidden, important and historical features of Rice University’s Campus and it will explore the context surrounding each building, the quads, courts and axes, and how these elements work together to shape collegiate space.

Towers and Trees Downtown

“Towers and Trees” is the newest downtown tour. On this tour explore the magnificent architecture between Hermann Square and Discovery Green as well as the changing dynamics of downtown Houston. Take a look at the partially realized civic center plan surrounding Hermann Square, the historic backbone of Main Street, the ambitious 1970 proposal that would become Houston Center, the internationally recognized icons from the skyscraper boom of the 70’s and 80’s, and Discovery Green, the newest catalyst for downtown development in Houston.

Montrose Walking Tour

Montrose is one of the most diverse and interesting neighborhoods in Houston with some of the city’s best architecture including spectacular mansions, charming bungalows, the campus of the University of St. Thomas, Rothko Chapel, and the Menil Collection. ArCH tour guides will present an overview of the architectural and social history of the area.

Museum District Walking Tour

The Houston Museum District is one of the few areas in the country with such a dense population of museums, public art, contemporary architecture, and landscape design. On this walking tour you will explore world class examples of design with ArCH tour guides and trace the chronology of significant cultural shifts from the early twentieth century through today. Spring 2012 we will have the opportunity to view Chinese Artist Ai Weiwei’s Circle of Animals/Zodiac Heads installed in Hermann Park by Houston Arts Alliance.

Texas Medical Center

The Texas Medical Center is the largest medical center in the world. Equivalent to the 12th largest business district in the United States, TMC has 33.8 million square feet of patient care, education, and research space. 160,000 individuals visit the Texas Medical Center each day with 6 million patients treated annually. The 1000+ acres is approximately the size of Chicago inside the “Loop” with 162 buildings on the main campus alone. Join our ArCH docents on this introductory architectural tour of Houston’s own modern marvel of medicine. Sites on our tour will include Baylor College of Medicine, the new Texas Children’s Hospital Maternity Center, MD Anderson Cancer Center, Methodist Research Center, and a short ride on Houston’s Metro Rail.

Watch the below video for a discussion on February 2012 property sales with David Mendel, HAR PR Manager, and HAR Chairman, Wayne Stroman.

Article via Culturemap

The downtown Houston Post Office and Processing Center opened in 1962 with a well-publicized ceremony that included the reading of a letter from President John F. Kennedy.

The Urban Land Institute (ULI), a national non-profit dedicated to promoting responsible development projects, recently selected the downtown USPS lot near the intersection of I-10 and I-45 as the focus of its 10th annual Gerald D. Hines Student Urban Design Competition.

From almost 140 participating groups across the nation, four final teams — from the University of Michigan, University of California–Berkley, Columbia University and a joint team from Harvard and the University of Colorado — were chosen in February.

Each group is required to have at least one non-designer in its mix, leaving room for ideas from students working in fields like real estate, finance and even psychology.

“There are two juries who select the winner,” said ULI communications manager Robert Krueger, noting the first place award of $50,000 and the $10,000 cash prizes for the remaining three finalists. “One looks at the financials and another at the actual design. In the end, we want cities to be able to look at these projects and ideas as possibly viable solutions.”

See below for the finalists. Which one is your favorite?

The Downtown Houston post office built in 1962
“The Post” plan by Columbia University, one of the few teams to repurpose the original post office.

“The Hill” plan by students of the University of Michigan

“Downtown BaYOU,” University of Colorado/Harvard University

“The Grand” by students from the University of California, Berkeley

Source

All renderings are courtesy of ULI/Gerald D. Hines Student Urban Design Competition.

Houston Dynamo’s new BBVA Compass Stadium in Houston’s East End scheduled to open in May

Here is an easy read for your Friday afternoon. Garden & Gun profiles Houston this month with an experienced and heartfelt article on the city.

Through busts or booms, Houston has always looked forward. And today, from food to fine art, the biggest city in Texas is humming

What to See and Do
Meet the Locals
Photos of Houston, Texas

In the spring of 1987, my editors at U.S. News & World Report sent me to Houston to get the reaction of that city’s elite to a recent front-page piece in the Wall Street Journal. The city was still reeling from the oil bust, and the paper painted a grim picture—there was mention of a suicide, I think, as well as a description of a downtown so empty tumbleweeds might any minute be blowing through it.

I’d barely landed when my good friends George and Nancy Peterkin whisked me off to the Contemporary Arts Museum’s annual fund-raising gala. On the plane, I’d studied up by reading a pile of clips from the Houston Chronicle, one of which talked about the effect of the bust on the city’s arts community: “It was the year the city bit the tarmac economically, but…there is no sign that anyone has turned in his track shoes.” The CAMH’s Balinese Ball was definitely a case in point.

There were Balinese dancers, models painted gold, and more orchids than I’d ever seen in my life. The invitation had said something like “sarong optional,” and a great many of the well-toned women of Houston did, in fact, opt—combining artfully arranged bits of brightly colored silk with boatloads of diamonds. One woman whose brand-new ten-carat ring was for “ten years of marriage, honey,” said she’d been so upset by the WSJ article—which she’d read a couple of days earlier on an Aspen ski lift—that she’d skied right off the mountain and flown directly home. It was the tumbleweed thing that had gotten her—lest anyone think the city was actually empty, she was duty bound to come back and add herself to the number of good citizens who were ready to stick around and fight in the face of adversity and, more important, bad press.

I had known my own story would write itself, and I’d also known I would find a populace raring to get back on its feet. Barely two years after my visit, a snarky piece about how the Houstonians had already managed to mythologize the bust, which they “served up larger than life,” appeared in the New York Times. “The latest lore shapes up like this: The bust was a trial for Texans, who showed they could take it when it could have killed folks from a lesser state, and they came out of the experience better and stronger than ever.”

The writer was clearly not from Houston—otherwise she would have known that the “lore” would prove to be pretty much on the money. Today, the city is the fourth largest in the country, but it may well become the third largest on the watch of the new mayor, Annise Parker, a popular former city councilwoman who is the first openly gay mayor of a major American city. Although Houston did indeed lose more than two hundred thousand jobs during the 1980s, it is once again a thriving capital of the oil and gas industry, and its port now ranks first in the nation in international commerce.

The city is also home to NASA’s Johnson Space Center as well as the Texas Medical Center, which contains the world’s largest concentration of research and health-care institutions—forty-nine not-for-profit entities in all, including the MD Anderson Cancer Center, the Baylor College of Medicine, and Texas Children’s Hospital. Established with a 1939 gift from Monroe Dunaway Anderson, who formed a foundation so his estate would not have to pay the taxes he feared would dissolve his cotton company (also, naturally, the world’s largest) after his death, the medical center has been home to the world’s two preeminent cardiac pioneers, Michael DeBakey and Denton Cooley, and its growth continues apace.

In 2005, Texas Children’s announced a campaign for a $1.5-billion expansion that would include the Jan and Dan Duncan Neurological Research Institute, a greatly enhanced program for basic science research, and the new Pavilion for Women. Not only was the money raised, but the new entities are already completed and up and running. “None of it even existed in theory in 2000,” says Charles Fraser, the hospital’s surgeon in chief. “That’s the spirit of Houston. If you can make a good case for something, it will likely come to fruition.”

The same breathtaking largesse is found in the cultural arena. At a time when major museums in other cities are either closing or struggling, Houston’s continue to flourish. DiverseWorks, a contemporary arts center whose mission is to present new visual, performing, and literary art, proclaims itself “distinguished” from similar centers around the country by its “financial stability.” The Museum of Fine Arts has a new director, Houston native and Met veteran Gary Tinterow. One of his first jobs will be overseeing the construction of a new building to house the museum’s collection of twentieth- and twenty-first-century art.

The Museum District, an association of eighteen wildly diverse museums and galleries, attracts around nine million visitors a year, and it doesn’t even include such notable spaces as James and Ann Harithas’s Station Museum, the Orange Show, or the enormous breadth and depth of the city’s commercial gallery scene. “Houston has the sharpest, most vibrant art scene in the country right now,” says the artist John Alexander, who began his career there.

The art scene is by no means the only bright spot on the cultural map. Houston has permanent companies in all the performing arts disciplines, and then there is an entirely different sort of culture in the form of the Houston Livestock Show and Rodeo, a twenty-day annual event straddling February and March that is the largest of its kind anywhere in the world.

It is the juxtapositions of things like, say, the livestock show against the Balinese Ball that defines the place. Houston is what you might get if you took everything that is really, really great and slightly irritating and crazy in a good way about the South and about America and threw it in one of those rock-polishing tumblers for a spin or two before dumping it all out and leaving everything where it lay. Unlike most of Texas, there’s almost as big an African-American population (more than 25 percent) as there is Hispanic. Houston’s location on the Gulf attracted two different waves of Vietnamese immigrants (the first were largely shrimpers), which means there are some great Vietnamese restaurants, and its close proximity to Louisiana means that Cajun- and Creole-influenced cuisine comes close to rivaling Tex-Mex and barbecue. It is entirely Southern in its graciousness, but decidedly un-Southern in that it is almost devoid of the habit of looking back.

Houston is also the only city remotely close to its size in the country that has no zoning. So instead of one mandated central business district, for example, major clusters of commerce are spread all over town, with leafy residential areas, huge parks, and lots of shops and bodegas and art galleries and check-cashing services and whatever else thrown in between. All this means that whatever you need—one of the forty thousand different labels of booze or wine at Spec’s, a spiffy and extraordinarily speedy car wash at Dr. Gleem, or a four-dollar margarita from La Mexicana—is almost immediately at hand. You can see some highly charged political art at the Station Museum or enjoy an afternoon of quiet reflection at the Rothko Chapel; you listen to blues in a gritty club or dress up for a night at the opera.

Whatever you choose to do, people will generally be really nice to you. Houston is all about enthusiasm and service—the traffic might be terrible, but you’ll be happy when you get where you’re going. There’s live music while you grocery shop, after all, white wine while you try on shoes at Tootsies. The fur man at Saks is so persuasive he almost convinced a friend of mine and me to go in halves on a chinchilla stole neither of us could afford. He draped it around us, he gave us champagne, he pronounced fake fur “so unwonderful.”

Which leads us back to the top and my CAMH friend with the ten-carat diamond. Well-heeled Houstonians are not afraid to show off their very real furs and their very large rocks, but when they say bigger is better, they follow through. The city has always been known for its socialites (think Joanne Herring, who funded Charlie Wilson’s War, or Lynn Wyatt, whose sculpted arms are by now a local landmark), but even the silliest among them rally behind the institutions so important to the life of the city.

The night I was there twenty-five years ago, despite the dire assessment of the Wall Street Journal, the CAMH made a lot of money. In my own article, I reported that the bust had not dimmed the spirit of the citizenry and would likely be but a speed bump on the city’s historically forward-looking road. It’s like what an executive told the woman from the Times: “We did get our comeuppance. But we didn’t whine about it, and I think the rest of the country respects that. Other places would have had an ‘oh me’ type of attitude. I never did hear that down here.”

The Houston metropolitan area is now the most ethnically diverse large metropolitan area in the country, with two suburbs – Pearland and Missouri City – leading the region in diversity.

Houston has surpassed the likes of Los Angeles and New York as the most ethnically diverse metropolitan area in the U.S., according to a new report out of Rice University.

The report, from the university’s Kinder Institute of Urban Research and the Hobby Center for the Study of Texas, drew from census data from 1990, 2000 and 2010.

Houston’s population grew substantially between 1990 and 2010. Between 2000 and 2010, the Houston metropolitan area added more people (over 1.2 million) than any other metropolitan area in the United States.

That growth has brought important changes to the region. This report focuses on two such changes—the changes in racial/ethnic diversity and in residential segregation between the four major racial/ethnic groups.

The percentage of Latinos in the region increased dramatically from one fifth of the population (20.8 percent) in 1990 to more than one third (35.5 percent) in 2010. The Anglo population, on the other hand, decreased significantly from 1990, now encompassing 39.7 percent of metropolitan residents.

The Latino population, which follows closely behind the proportion of Anglos, is now the second largest ethic group in the metropolitan area. If the growth of the population continues at its current rate, Latinos will eventually surpass Anglos to take the number one spot in the region, the report estimates.

Michael Emerson, co-author and co-director the Kinder Institute, attributed the region’s increased diversity to a 1965 shift in immigration laws. Whereas before 1965, the immigrant population was primarily composed of Europeans, now, the population is predominantly derived from Africa, Latin America and Asia.

The shift in immigration, along with a decrease in segregation between ethic groups, has contributed significantly to the ethnically diverse composition of the city today.

Among the five most populous metropolitan areas in Texas (Figure 2), Houston stands out for having no racial/ethnic majority and nearly equal percentages of the two largest race/ethnic groups (Latinos and Anglos).

Dallas-Fort Worth and Austin, by contrast, are majority Anglo, though Anglos represent only 50 percent and 55 percent of the residents, respectively. All other groups occupy smaller shares than in Houston. In Dallas, Latinos are 27.5 percent (Houston: 35.3 percent) and African Americans are 15 percent (Houston: 16.8 percent). In Austin, African Americans represent a dramatically smaller share of the population at 7 percent.

The San Antonio and El Paso metropolitan areas, by contrast, are majority Latino and have relatively small African American and Asian populations. El Paso, where more than 80 percent of the residents are Latino, has the highest percentage Latino of the large Texas metropolitan areas.

But not all of the diversity is concentrated in urban sectors of the metropolitan area. The report also found that two suburbs — Pearland and Missouri City — are the most diverse in the region and are statistically less segregated than Houston.

“Houston is one of a handful of what is known as majority-minority cities, where Anglos represent less than 50 percent of the population,” Jenifer Bratter, co-author and director of the Institute’s Race Scholar’s program, said in a statement. “And while Houston is one of the country’s most diverse major cities, Pearland and Missouri City are now on par with Houston as the area’s most ethnically diverse cities.”

Within the five-county area – Brazoria, Fort Bend, Galveston, Harris, and Montgomery – Fort Bend County is the most diverse, according to the report. Montgomery County is the least diverse with Anglos accounting for 71 percent of residents.

In the final analysis, the report concludes that harnessing the burgeoning racial/ethnic diversity is a central challenge for the Houston region. The report suggests future research is needed to investigate the underlying factors contributing to the increased diversity and continual segregation and conclude the best approaches for Houston to be able to lead the nation in the transition to a fully inclusive, unified multiracial/multiethnic region. How Houston handles this transition will go far in shaping the vitality of its future.

Sources
Full Report
Houston Chronicle
The Huffington Post
Kinder Institute of Urban Research
Hobby Center for the Study of Texas



Real Estate Bisnow reports on Houston’s multifamily markets:

For most US markets, the urban core is getting the lion’s share of new multifamily development, but Houston takes it to a new level: there are 32 properties with about 8,700 units under construction. That’s a lot of new carpet and phonebooks.

Those numbers come from Axiometrics VP of research Jay Denton and prez Ron Johnsey who track multifamily data around the country. (We like to think of them like hard-boiled detectives chasing down data, but we probably watch too much film noir.) Jay tells us of the new construction in the works, 15 of these properties (4,300 units) are being built in the Montrose/River Oaks submarket, which is favored by investors. It’s the hottest submarket in Houston with rents increasing at an annual rate of 9.1% in January, up from 6.1% last year, Ron tells us.

In the past year, rents for Class-A and B properties in this submarket have jumped by 8% and 10%, with occupancy rates at 94% and 96%, respectively. Jay says the gap for rents between A and B properties is probably the widest in the country at about 38%, making B properties more affordable for renters who want to live (and walk to the museums) in this high-end submarket.

Source

Via the Alamo City Beat

Some more good news regarding the local housing market — San Antonio is one of only two cities in the U.S. to see home values rise since 2007.

The other city to accomplish this — another Texas metro — is Houston.

These findings are part of the latest residential price index (RPI) put out by Oxford, Miss.-based real estate information technology company FNC Inc.

The RPI is based on information regarding home sales — including public records and real-time appraisals of properties and neighborhoods.

The peak of the housing market, notes FNC, dates back to 2007 — “that golden era when loan originations were at an all-time high,” its report states.

And as of Nov. 30, 2011, only San Antonio and Houston had seen improvement since that golden era — reporting home price increases of 2.7 percent and 4.8 percent, respectively, according to the FNC analysis.

Looking at home prices as of Dec. 31, 2011, the Houston numbers were up 1.7 percent, compared to home prices reported at the end of December in 2010.

As for San Antonio, on a year-to-year basis, home prices were flat — which is still not bad considering that many U.S. cities continue to report price declines.

Indeed, the national numbers are less encouraging. FNC reports that home prices were down 3.5 percent at year-end 2011, compared to home prices reported at the end of December in 2010.

The underlying factor behind the price decline — the distressed market.

Distressed homes, FNC reports, continue to make up a large part of the country’s residential sales. Given that these properties usually go at very deep discounts, this market has succeeded in putting downward pressure on underlying property values for the larger housing sector.

In early February, Jenni’s Noodle House announced a competition: Take a photo of your favorite spot in Houston and tag it with #JNHlovesHou on Instagram. Curators picked 12 finalists for an art show and auction, with the proceeds going to Spacetaker.

Some of the favorites Via Culturemap

And some of our favorites