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Howard had stated publicly that no decision had been made on his player option, but the eight-time NBA All-Star informed Houston of his choice on Tuesday, sources said.
Howard is coming off season averages of 13.7 points, 11.8 rebounds and 1.6 blocks in 71 games for the Rockets. Howard should anchor a significant market in free agency as a 6-foot-11 center who remains a high-level defensive player.
The Rockets had a 41-41 record for the eighth seed in the Western Conference before being eliminated in the first round against Golden State.
Howard, 30, has worked diligently this summer coming off his 12th NBA season. He has worked with renowned trainer Mike Clark in Atlanta, regaining strength after a strenuous season.
This summer's free-agent market will include resourceful big men in Howard, Miami's Hassan Whiteside, Chicago's Joakim Noah, Toronto's Bismack Biyombo, Cleveland's Timofey Mozgov and Charlotte's Al Jefferson. Howard's résumé in the NBA includes five All-NBA first-team appearances, three Defensive Player of the Year awards and a trip to the Finals in 2009.
Howard has averaged 17.8 points and 12.7 rebounds in his pro career with the Orlando Magic, Los Angeles Lakers and Rockets. His tenure with Orlando included deep postseason appearances and individual success, with four 20-plus point, 10-plus rebound seasons between 2007-12.
Howard was the No. 1 pick in the 2004 NBA draft.