High Prices Meet High Demand In Houston, ‘The Most Interesting Condo Market In The Country’

Houston condo and townhome sales are coming off their worst year in over a decade, construction costs remain stubbornly above pre-pandemic levels and high interest rates are deterring homebuyers.

When it comes to kicking off new condo projects, economic indicators in the Bayou City would appear to point toward no go. But for those building the highest-end, vertically stacked condos with price points approaching $1K per SF, all signs are flashing yes. 

Those developers and other market watchers say well-off empty nesters are fueling significant demand for luxury, single-floor condominiums in Houston. Meanwhile, affluent younger entrants are entering the fray, heightening competition to secure the best floor plans in pricey new projects before costs rise further. 

Despite a dramatic increase in sale prices, Houston has fewer than 100 new high-rise luxury condominium units available — about a third of the typical availability even in much smaller cities, said Randall Davis, founder and owner of high-rise developer Randall Davis Co.

“It is probably the most interesting condo market in the country,” Davis said. 

“Less than 100 is pretty insane for the fourth-largest city [by population] in the United States,” he added. 

Houston had 1,182 total active condo listings in March, according to Redfin, more aligned with much smaller cities like Nashville, which had 1,069 condo listings in March. Chicago, with a comparable population, had 4,874. 

Luxury condos are even harder to come by and new stock is low despite numerous ongoing high-end projects, including Davis’ London House, a 23-unit mid-rise in River Oaks that broke ground in early 2023, and The Chaucer, a 29-residence condominium building in Rice Village that is planned to break ground this year.

In what experts say is an important indicator for the future of Houston’s luxury condo market, branded residential is also making an entrance.

That includes the 111-unit Ritz-Carlton Residences coming to The Woodlands, the 35-story St. Regis Residences coming to River Oaks and an Auberge Resorts Collection hotel that will have 44 condo units within The RO mixed-use development. 

Howard Hughes Holdings has not disclosed prices for its Ritz-Carlton Residences but said that it broke records, with $250M worth of sales and more than 50% of residences under contract in its first week. 

“There wasn’t a single market study that we could have done that would have told us that we could pull off this project,” said Jim Carman, president of the Houston region for Howard Hughes.

The luxury vertical living market is still new to Houston, compared to more established markets like New York and Miami. Houston is 665 square miles and the entire metro area is bigger than New Jersey, making single-family homes the natural choice for development. 

Mid- and high-rise condos made up less than 1% of Greater Houston’s market last year. The single-family home is still king, with 83,989 homes selling last year, according to data from the Houston Association of Realtors. That’s down from the low-interest-rate-fueled boost in sales in 2021 and 2022, but well up from the 73,266 sold in 2013. 

Only 6,112 condo and townhouse units sold in the Houston area last year, according to HAR data. That’s down slightly from 2013, when 6,637 units sold, and down significantly from the 8,785 and 7,823 units sold in 2021 and 2022, respectively, according to the data.

But those numbers, with their inclusion of multi-story townhomes, don’t reflect the niche that luxury condo developers are quite familiar with, they say. Empty nesters in Houston are getting tired of taking care of huge houses, demanding simplified, secure lifestyle homes without stairs. And they have the resources to pay for it.

“They may have a larger home in Houston, and they’re done with it,” Davis said. “They’re living in three rooms: the living room, a bedroom and wherever they watch TV.”

Houston condo buyers generally use the condo as their primary residence, but they may have a vacation home in Colorado or Arizona, for instance, he said. They want to be able to lock and leave, Davis said.

That lifestyle is also starting to appeal to younger generations, shifting the demographic. 

Young affluent people who like the apartment lifestyle but are ready to own are interested in DC Partners’ projects like Residences at The Allen, Chief Operating Officer Acho Azuike said. The Allen is a 35-story high-rise with a 171-key Thompson Hotel and 99 luxury condominium units. Its amenities include a helipad on the roof. 

The building was completed last year and has 16 units left available for sale, DC Partners Co-President Roberto Contreras IV said. 

Douglas Elliman handles sales for luxury condos, including The Ritz-Carlton Residences and The Hawthorne, a 17-story luxury building in Tanglewood that was over 60% sold when it opened in March. More second-time homebuyers and younger people are entering the Houston luxury condo market, Douglas Elliman President of New Development, Texas Catherine Lee said. 

Some are moving from places like Los Angeles and New York City and are used to not having a big house and a yard, Lee said.

“A lot of it has to do with the relocation of people, employees, from other markets into Houston and already being used to living in a condo … They feel that that’s very normal,” Lee said.

But most younger people are priced out of that sector of the Houston condo market, said Kyle Mikulenka, director of sales for Ember Real Estate Investment & Development. The cost of land and construction of commercial-grade buildings is so high that there is no market for one- to two-bedroom condos that would cost $1,000 per SF, he said.

Therefore, the only development that makes sense is larger condos, which fit the demographic of wealthy empty nesters, Mikulenka said.

“This is what it costs,” he said. “There’s a market of people that have made a lot of money in town, and if you’re going to make a change from a big house, they need something really, really nice.”

Land prices being high enough to justify luxury vertical development is still relatively new to Houston, with such building kicking off in the early 2000s, Pelican Builders President Derek Darnell said. Pelican and Ember are collaborating on The Hawthorne, where units start at $1.4M.

But Pelican’s founder Robert Bland has seen the vision since the 1970s, when he built The Woodway, Houston’s third-ever high-rise condo building, without any presales.

“It was a big mystery,” Bland told the Houston Business Journal in 2018. “People would say ‘Hey, a condo in Houston. Is it going to sell?’”

Even a decade ago, construction lenders in Houston considered condominium a bad word, DC Partners’ Azuike said. But projects like DC Partners’ Astoria, a 29-floor high-rise with 73 of its 74 units sold more than a year before its 2016 opening, helped shift that opinion, he said.

Today, there is a perception that there are a plethora of condos available in Houston due to ongoing construction, but that is a misconception, Lee said.

“When we announce buildings, people think ‘Oh my goodness, it’s so many homes,’” she said. “In reality, it’s not that many … We don’t have a single condo project in Houston that exceeds 150 units.” 

Douglas Elliman is already running into regret from buyers who didn’t secure their units at the Ritz-Carlton Residences when they were first approached, Lee said.

Branded residential units sell at a 20% premium over other condos, she said, and prices are only set to rise as supply goes down while demand remains high and diversifies to include second-time homebuyers.

“They’re starting out, maybe having children,” Lee said. “They’re in a different space than the previous buyers we had experienced in Houston … It’s good for the market.”