But as state lawmakers push for more construction to meet demand, a closer look at the new homes hitting the market raises key questions: How affordable are they? How big are they? And where are they being built?
To build on the 2024 State of Housing in Harris County and Houston report and to answer these questions, I examined Houston Association of Realtors data on local home sales from 2011 to 2023, which is available on the Kinder Institute’s Urban Data Platform and the State of Housing Data Dashboard.
Here’s what I found.
Smaller price premium, but few ‘affordable’ neighborhoods
There is a cost premium on new homes: The median new home price in Harris County in 2023 was roughly $357,365, almost 20% higher than the median price of an existing home ($300,000). But the “new home premium” appears to have shrunk: All homes are expensive now, not only the new ones. In 2011, the median existing home sold for $130,000, compared to the median new home sales price of $199,900, meaning there was a 54% price premium for new homes.
Of course, prices vary widely by neighborhood.
There were also, notably, still places in the county where median new single-family home prices were below $300,000 — and thus affordable to a household earning around $113,000 per year per our calculations. In 2023, there were 14 such neighborhoods (note that only neighborhoods with more than 30 new home sales that year qualified for inclusion, which excludes neighborhoods where a small sample size may lead to a median that may not reflect market conditions).
All of these neighborhoods are beyond Loop 610 and most are past Beltway 8. They are also, with little exception, in the eastern half of the county.
Homes are getting smaller
Alongside the decrease in the new home premium, the median new home sold in Harris County is actually smaller than the median existing home, albeit only slightly (2,029 square feet, compared to 2,040).
The median square footage of new homes sold peaked in 2016 in Harris County, and has decreased every year since. Even in the largest suburban areas of Fort Bend and Montgomery counties, new home sizes have decreased from their peaks roughly a decade ago.
One of the national trends that may be affecting Houston area builders’ choices to economize on size are materials and labor cost increases. As highlighted in the 2021 State of Housing report, COVID-19 sent shocks through the markets for building materials like lumber and scrambled labor markets, leading to consumers bearing the cost.
The size of new homes varies widely by neighborhood. In 2023, the 10 neighborhoods with the largest new single-family homes included two inner-loop areas (West University/Southside Place and Montrose) where the median new home sold was over 3,000 square feet. (Single family homes were compared because they comprise over 98% of new homes, and removing condominiums and townhomes from the analysis allows a better like-to-like comparison.)
Harris County’s suburbs are selling the most new homes
As we documented in the State of Housing, new home sales have substantially increased in all three of the biggest counties in the Houston metro area: Harris, Fort Bend and Montgomery. Comparing the single years of 2011 and 2023, the number of new homes sold increased almost 50% in Fort Bend (from 2,474 to 3,685), more than doubled in Harris (from 4,720 to 9,733), and increased almost sixfold in Montgomery (1,046 to 6,076).
Zooming in to Harris County, a majority of new homes are going into suburban areas. In 2023, almost 1 in 5 new homes in the entire county were sold in just one neighborhood (Cypress South), located in far northwest Harris County.
When looking from January 2019 through December 2023, 63% of new home sales occurred beyond Beltway 8. When examining the top 10 neighborhoods for new home sales, while there is some infill in established neighborhoods like the Heights and Acres Homes, all other areas are beyond Beltway 8.
On the other hand, there are 37 neighborhoods (of 143) that recorded 10 or fewer homes sales over those same five years. Some of these are places with little suitable land for new home construction (like the Medical Center or one area almost entirely within the Addicks Reservoir), yet it also includes areas such as Park Place and Gulfgate Riverview/Pine Valley that have ample developable land.
A diverse, evolving market
There are neighborhoods in Harris County where a new home is likely to be more than 3,000 square feet and cost more than $1 million. And there are neighborhoods in Harris County a homebuyer can get a brand-new home for less than $300,000, which a two-teacher household could afford, though their choices may be limited to the east and to the suburbs.
While there are countywide trends — median home size is shrinking, as is the price premium between new and existing homes — given Harris County’s size and diversity there are going to be outlying submarkets with distinct, trend-bucking market conditions. An inexpensive, smaller infill home can go up in Trinity/Houston Gardens while, in Bellaire, a bungalow is demolished to build a new 7-figure mansion.
The challenge may not only be increasing new home supply in Harris County, but increasing affordable supply in central areas. If the only affordable homes are on the county’s edges, or in Chambers, Waller or Liberty counties, then moderate-income homeowners are pushed into long commutes and stress the county’s infrastructure. That two-teacher household is more vulnerable to rising transportation costs.
While there is evidence of significant infill housing in Acres Homes and the Heights, more research can help identify neighborhoods seeing an increase in new, affordable, centrally located homes and how builders in these places are making the numbers work.
