Homebuyer Migration to Houston Affected by Energy Industry

Houston city residents tend to buy larger and newer suburban homes, on net

By Archana Pradhan Consumer Behavior, Real Estate

The Houston metro has been challenged by natural disasters (three major floods including hurricane Harvey) and an oil price bust during the last few years. Despite these challenges, Houston experienced a home price increase of 3.7 percent over the year ending April 2018.[1] However, there has been a declining inflow of potential homebuyers from out-of-state the last two years. More homebuyers were moving into the Houston metro area from other parts of the country than homebuyers moving out of Houston before 2016.  But that changed in 2016 with a net outflow of potential homebuyers as the jobs related to oil and gas started to disappear.[2] As a case in point, this blog focuses on homebuyer mobility in the Houston metro area.[3]

In/Out Ratio for Home-Purchase Mortgage Loan

During 2017 through April 2018, the Houston Core Based Statistical Area (CBSA), which is comprised of nine Texas counties, experienced a slight net loss in mortgage applications from out-of-state: for every 100 mortgage applications submitted by Houston residents who were buying out-of-state, the CBSA received 97 mortgage applications from out-of-state residents looking to buy a home in the Houston area. While migration to and from other states will affect home sales, about 92 percent of home-purchase mortgage applications in Houston were made by current Houston residents. The Houston metro started to experience a net loss of applications in 2016. Figure 1 shows as the gasoline price dropped drastically in 2015, by the following year there were more Houston residents submitting loan applications to buy homes outside the CBSA than there were homebuyers from outside of the CBSA submitting applications to buy within the Houston metro area (i.e., IN/OUT ratio for home-purchase mortgage loan applications was less than 1 in 2016 and 2017). With the oil price rebound the inflow-to-outflow ratio has started to rise in 2018.

Consistent with the overall Houston metro area, Harris County experienced an overall net loss of potential applicants.[4] Among Harris County residents who applied for mortgage loans during 2017 through April 2018, about 29 out of 100 households were looking to buy outside of the county. Figure 2 summarizes the net flow of Harris County applicants during this time period.[5] Harris County, on net, lost 15 percent of its residents who wanted to buy a home. More than two-thirds of the net outflow, representing about 11 percent of current Harris County residents who wanted to buy a home, were looking to buy in the suburban counties of Houston metro (mostly in Fort Bend and Montgomery followed by Brazoria and Galveston). Median home sales price for the properties sold during 2017 through April 2018 in both Fort Bend and Montgomery were higher than in Harris County.[6] In general, the houses sold in both Fort Bend and Montgomery were newer and bigger than the houses in Harris County.

Harris County Net Inflows and Outflows

Overall, the loan application data show that Harris County residents were buying homes in neighboring suburban counties with additional amenities, such as newer and bigger homes. The data also show that most Millennial and Generation X homebuyers from Harris County were moving to Fort Bend, Montgomery and Brazoria counties whereas most baby boomer and silent generation homebuyers were moving out of Texas, mostly to Florida and Colorado, followed by Montgomery County.

[1] See CoreLogic HPI April 2018 Update (https://www.corelogic.com/insights-download/corelogic-home-price-insights.aspx)

[2] Houston metro region lost more than 81,000 oil and gas jobs during 2015 and 2016 (https://www.dallasnews.com/business/energy/2017/03/14/crude-awakening-houston-lost-lot-oil-gas-jobs-initial-data-indicated)

[3] The analysis in this blog is based on home-purchase mortgage loan application data.  All applications, whether approved or not, were included in the analysis. Mortgage applications submitted by investors and second-home buyers were excluded in the analysis.

[4] Harris County is at the core of the Houston metro and comprises the city of Houston. 

[5] The Figure 2 net flow percentage is calculated relative to the total number of Harris County residents that submitted a mortgage application. A positive (or negative) value indicates net inflow (or outflow) of homebuyers to Harris County. For example, “-5” means that the net loss of homebuyers to another county (measured as the number of buyers from outside of Harris County buying in Harris less the number of Harris households buying in Harris county) equaled 5 percent of the number of Harris County residents that applied for a home-purchase loan.

[6] Based on MLS Database                     

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