Houston - Property prices

[Sanjay Aluri]

Hi,

I'm a new member to BiggerPockets, joined with the intent to take benefit of collective wisdom and knowledge to build a rentals RE business. Im a beginner to RE investing and would highly appreciate your advice.

Tried reviewing few potential properties in HAR.com and find the steep increase in property appraisals between 2014 and 2015 (almost 26% in most cases for under $150k properties). Is the market overpriced? with the O&G industry under recession should the prices be under strain? Im also seeing the sale prices are also shown as 5-10% discounted too (still very high compared to 2014 appraisal). I'm wondering if the high tax appraisals one of the reasons people are willing to get rid of their rental assets? Im also seeing rental prices/month are also going down.

Would appreciate advice from experts on is this a good time for Houston investment or is it highly speculative right now. My thought is for rentals it is better to go for properties that are more or less stable in prices, isnt it?  

[Jon Burns]

Sanjay - Welcome to BP.

You are absolutely correct.  There has been a steep increase in the tax appraised value of property since 2014.  There has also been a steep increase in rents that have gone up with those increased tax values. 

There have been many discussions in regards to the state of the Houston real estate market on BP.  I suggest you do a search of some of the previous threads, there is a lot of good info in there. 

Prices are under strain in the higher end homes. The market for homes over $500k has been suffering for over a year. Places like Katy and the Woodlands have been more effected than places Sugar Land or Pearland for example. Homes under $250k have still been selling at a good pace. This has more to do with FHA financing requirements being eased and the affordability factor. I have said it before, and will again, you can not have the higher end falling and the lower end rising at the same time for a prolonged period of time.

As to the rents - they are down in the higher end homes for sure.  The lower end homes are still renting at a good pace.  Houston is very diverse and the rents will vary greatly based on what part of town you are in.  If rents are softening in an area you are looking to invest in, then make sure you buy at levels that make sense at the lower rent levels.  If you can still achieve your desired outcome at a lower rent than today's price, then buy.  If it doesn't pass the stress test, wait for the next one.  There will always be a next one, so long as you continue to actively look.

A lot of people look at the market and question prices and values.  There are always homes for sale, and you can buy anything you want, pretty much whenever you want.  On the flip side, you can also always find a reason not to buy, no matter the market cycle.  People will always find a reason to disqualify a deal.  So, the question to you is not what you think of the market right now, but what are you looking to achieve from investing in real estate.  If you create an investing box, and a deal falls into that box, will you have the courage to buy it.  If you create the box, are you willing to wait until a deal meets that criteria, or will you jump in because you are frustrated that nothing seems to fit your criteria at the moment.