Buying a home in Houston! (The smart-way!) - Part II

In my last blog post, I talked somewhat about the city and how it's past has impacted the present development of the city along with some very helpful information on how the city is laid out. I now want to dig deeper and discuss more of the opportunities in this market.

Growing up as a child in the shadows of downtown Houston, in the then notorious 5th Ward, I used to sit on top of my house looking at the skyline! After the oil bust in the 80's Houston's downtown development came to a screeching halt and over the next several years the surrounding communities began to suffer as the oil companies floundered while new businesses began to establish themselves in the outskirts of town in areas like Clear Lake, Sugarland and the Woodlands among others!

There are communities built in the early to mid 80's like Quail Valley in Sugarland, Memorial Northwest and others that were built during this era and oddly enough, the price you paid for a 4 bedroom 2.5 bath home back in the 80's is about the same price you would pay for a home today! On the flip side, there are houses in the inner city that as recent as say 3 years ago you could have purchased for $100k and they are now worth $200k!

Take the above photo... it's not perfectly clear but there are (3) little ole' shotgun houses on that lot and there is a vacant lot behind them. A little over a year ago you could have purchased this property for a little over $100k with existing tenants paying in excess of $1300 a month, which means you have roughly $300 after paying your mortgage, taxes & insurance! Not too shabby...


At this time, obviously the townhomes you see in the photo were not built nor were they even under construction yet, in fact, that lot where you see the townhomes was simply a vacant lot with tall weeds! But shortly after these units were sold a large local developer began building these units; since that time the shotgun houses have been sold again and they are presently on the market with several other properties in this area and they asking price for the entire package of land is somewhere in the $700's!


What does this say... several things: for starters, inner city Houston as a whole looks nothing today like it will in the next 3-5 years so know that what you see today in most areas, the vacant lots, old crack-houses and closed liquor stores and cafes will in short order be tomorrows contemporary 3 story townhome with granite countertops and hardwood floors!


Let's dig deeper...


Houston leads the nation in average commute time to work, unlike most major metropolitan cities we have long-fought the advancement of our mass transit system until recently so YOU MUST HAVE A CAR IN HOUSTON! This is not a city where you can ride the public transit and get to where you want to go because of how stretched out the city is. Presently the buzz phrase is urban friendly development, which speaks to being able to live in a setting where you can walk or ride your bike to the park, store and entertainment venues you frequent. This national trend will greatly impact Houston especially as we see higher gas prices. More people are moving closer to the inner city than ever before and developers are clamoring to prepare and purchase as much land as possible.

Secondly, because Houston is 15% less expensive than the 10 largest cities in the nation and 30% less expensive to live in than the top 5, one can only imagine that overall our home prices can only go upward from here especially seeing as how our market has been a turtle of sorts over the last several years only garnering average appreciation rates of 2-4% a year! (While most metro areas were seeing numbers like 10-15% gains!) Now quiet as kept, there are pockets of opportunity all around the city where over the last few years, local Houstonians have been mirroring the appreciation increases only enjoyed by those on the east & west coasts! (see the above photo)

Depending on whose poll you believe, the average home in Houston hovers around $170k which buys a lot! For those wanting to live in inner city Houston, you will be hard-pressed to find any new construction less than $230k with most of the other properties predominantly being old bungalows or shotgun rental housing that you would buy, hold and develop somewhere in the near to distant future.


$350k in Houston will buy you a nice tri-level townhome with great downtown views, granite counters, hardwood floors, Travertine showers and backsplash and plenty of parks, shopping and dog trails all within walking distance of your home. Most inner city construction is 2 or 3 floor townhomes, all with the same basic floorplan which consists of a garage and bedroom on the 1st floor, the kitchen and Master Bedroom on the 2nd and additional bedrooms and/or media room on th 3rd level with a possible observation deck depending on the view!

For those wanting a more conventional home and not a townhome, in areas like the Heights you can purchase a more traditional 2 story home most with Victorian architecture and/or themes with some Mediterranean (stucco) and Art-Deco styles. In my opinion there isn't enough diversity in the design of many of these properties as most developers are content with copying each other instead of catering more closely to wants and needs of the buyers!

Most townhomes are designed to minimize the footprint of the unit to insure that the developers get as many units on the parcel of land as possible so in the end profitability prevails over function and good design! That is my biggest gripe with most new construction but therein lies a tremendous opportunity for investors and developers to build a product more in line with the needs of the market.

Hopefully this in-depth view at the Houston real estate market educates and empowers you so that you can accurately determine how you want to proceed with your real estate purchase in Houston, whether buying your first home or buying an investment property!

In our next installment I will discuss some of the hottest areas to look for in the Houston market. There are several hot areas in Houston whether you are looking to be in the inner city or suburbs, so we will discuss some of those areas!

Please feel free to comment, give feedback or suggestions! Thanks

Tyron C. McDaniel, Real Estate Expert
tyron@tyronknowsrealestate.com