Future Property Values in Sugar Land (Houston, Katy: leasing, house prices, neighborhoods)

[Htown2013]

What all is driving the recent demand and subsequent appreciation in property values? I know people trying to buy in Sugar Land and they recently got in contact after losing more than 10 bidding wars over two months.

Where is this demand coming from, and is it sustainable? I know the strength of the inner loop is here to stay, but what do you think the market will do in a desirable suburb, such as central Sugar Land, over the next 2-4 years? What happens when interest rates inevitably go up another 1,2, or even 3%?

Over the next 2-4 years, do you think we'll still have bidding wars above list price for central Sugar Land properties and substantial appreciation, or will appreciation settle down not much higher than now, or do you think we are entering bubble territory due to low supply and high demand, and prices will slightly decrease due to combination of more supply being built into the market and higher interest rates?

These questions are critical to me, as I may need to make a decision that can have substantial and lasting consequences, either positive or negative, for me and my family, depending on how the Sugar Land housing market performs over the next 4 years.

[NTexas2010]

A few things drive and sustain demand for homes in Sugar Land:
- The fact Sugar Land is a city and not an unincorporated hodge-podge of Houston's ETJ
- Fort Bend ISD is a highly sought after school district
- Several large businesses have moved to Sugar Land or have offices there
- A good mix of retail/restaurants

Also, unlike all the growth along I-10 and 290, Sugar Land has a finite amount of room to grow. This will also prevent a glut of housing stock that exceeds demand. If anything, the capped supply of homes will further improve price sustainability of Sugar Land homes.

I doubt we'll see any type of bubble-bursting in Sugar Land in the foreseeable future - there is real value in this city versus large swathes of housing stock and/or speculative areas. Case in point: Drive north on 6 toward Westpark and see how those areas, Houston ETJ neighborhoods, have fared in the last 20 years --> the more affluent growth has moved west outside of the Grand Parkway. Sugar Land, on the other hand, is east of the GP and is doing better than ever.

Price escalation may cool off in the next few years, but I doubt we'll see depreciation to the area as a whole. I think the values, at worst, will maintain their current levels.

[gwarnecke]

From my limited experience, I'd say that price appreciation in Sugar Land has been moderate compared with, say, near Katy or West Houston. Likely due to the aforementioned areas' proximity to the Energy Corridor. Sugar Land has a reasonable proximity to downtown (especially compared with far-west Katy), along with a few large companies in its own backyard (Fluor comes to mind), but doesn't have the same concentration of high-paying large companies as the Energy Corridor submarket.

I'd expect you to do well for your money in Sugar Land. If you work downtown, look at one of the closer-in, older areas with paid-off MUDs. You can still find nice homes on huge lots with good schools and a relatively short downtown commute for well under $300k.

[Htown2013]

Thanks for the insight. Let me reframe my situation. My situation is not bad, but requires thorough analysis to make a well-informed decision. I already own a nice property in Sugar Land. We chose Sugar Land for exactly the same reasons listed above and would not want to live anywhere else in the Houston area.

I am trying to decide if I should sell my Sugar Land property now or rent it out for 4 years. I am being relocated away from the Houston area for 4 years. I bought at such a time where I could now list 20% higher than what we paid and will likely still get multiple offers above list price. Furthermore, my company will pay all closing costs & commissions.

That being said, we really like the area and will be devastated if we are priced out of the market in 4 years. I also have a 3.3% interest rate on a 30 yr fixed.

I need to decide to sell property or rent it out.

[cheryjohns]

I would rent it. The chance of getting an interest rate like that in 4 years are slim. The house prices will be a lot higher in 4 years. Expect to see aggressive hikes for the next 3 years - then steady growth.

[gwarnecke]

Very tough decision. My wife and I are actually facing a similar situation regarding our home in the Energy Corridor area.

I can't think of a reason why SL would be any more susceptible to a city-wide (or state-wide, US-wide) depression in prices than any other part of the city (at least, as long as you're in a built-out area with good schools). If anything, you'd probably be less susceptible to an energy price crash than Katy or West Houston, since lots of Sugar Landers commute to the med center.

[NTexas2010]

I second that notion - I'd hang onto the property and let the rental income pay the mortgage/property taxes. There will be plenty of demand to rent in Sugar Land. My parents moved out of almost Greatwood 2 years ago but still own their house as a rental property, and it's been occupied 100% since listing it as a lease in November 2012.

Not to mention you can't beat that interest rate. Get a good realtor to take care of the leasing.

[Schumacher713]

Energy price crash? There will be no energy price crash. Oil prices will never crash to low levels like it once did. Live where you want to live not where you think houses will crash in value. Sugar Land is one of the nicest suburbs. If you wan to buy a home that is an investment then buy in the city.

[Htown2013]

Originally Posted by cheryjohns

I would rent it. The chance of getting an interest rate like that in 4 years are slim. The house prices will be a lot higher in 4 years. Expect to see aggressive hikes for the next 3 years - then steady growth.

What is the rationale for these statements? Even if interest rates are 1-2% higher, do you still expect aggressive price appreciation in the Sugar Land area over that time frame?

I am leaning towards renting it out, but will have to hire a property manager due to distance, so cash flow won't be anything to brag about, but it should at least pay for all expenses, including the equity building part of the mortgage.

I will kick myself if prices drop in 4 years, but I will kick myself even harder if I have to pay 25% more than today's prices at 6%+ interest.

What do you think?

[Failed Engineer]

Absolutely rent the house. It's a no brainer if you want to return to Sugar Land and are concerned you may not be able to buy back in.