Houston, a city long recognized for its real estate potential, is once again in the spotlight as a prime market for real estate investment. According to a recent report titled “The Flip Side 2.0: An Outlook for Residential Real Estate Investing in 2023” by real estate brokerage New Western, Houston is experiencing robust growth in residential real estate investment this year.
The report reveals a substantial 46% increase in real estate investment in Houston from the first to the second quarter of the year. Among major U.S. cities, Houston trails only Boston (88%), Washington, D.C. (50%), Charlotte, North Carolina (49%), and Jacksonville, Florida (48%) in investment growth during this period.
These findings are based on a survey conducted by New Western in June, involving 1,358 real estate investors who have made property purchases through the company's marketplace.
Sara Friede, the general manager of New Western's Houston and The Woodlands offices, attributes Houston's strong ranking to its remarkable population growth. She states, “People are moving here, and they need places to live. And that's where we come into play.”
Interestingly, this surge in real estate investment coincides with a decline in year-over-year home sales. Greater Houston experienced its 14th consecutive month of declining home sales in May, with a 10.4% drop compared to May 2022, as reported by the Houston Association of Realtors.
Although housing inventory is gradually improving, it remains low at a 2.8-month supply, signifying the time it would take to sell all homes currently on the market at the current sales pace. A balanced market typically maintains a 4- to 6-month supply.
Despite the challenges posed by high interest rates, real estate investors are finding opportunities within this slower and tight market. Friede notes, “Investors are looking at this market as an opportunity to create more affordable homes for the market since we are kind of in this shortage.”
Investors are seizing vacant or foreclosed properties, renovating them, and returning them to the market, which can benefit middle-income buyers. According to New Western, the median home price for flipped homes in Houston is $180,113, in contrast to the $340,095 median price for all homes sold by Realtors in the region in May.
In response to increased competition, some local investors are diversifying beyond Houston, exploring opportunities in nearby regions like San Antonio. However, Friede remains optimistic about the Houston market, highlighting that New Western's investors are identifying between 70 and 80 distressed homes in Houston each month.
She concludes, “Is it competitive? Yes. But you're going to find that in any market, and there are plenty of homes available that we're bringing in every month. There's an opportunity for everybody here.”
Looking ahead, Friede anticipates continued growth in real estate investment and flipping, driven by low housing inventory and the ongoing struggle of homebuilders to meet demand.
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