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Land rush is on in Houston suburbs as home builders race to meet demand
A full-scale land rush is underway in the suburbs of Houston.
Land developers and home builders are buying up land as fast as they can because Houston’s home construction industry has been surging.
“There’s been a flurry of land acquisition,” says developer Lisa Chahin of Genesis Collaborative.
In dozens of deals, more than 30,000 acres have been purchased or put under contract to be purchased for residential development in Houston’s suburbs. It’s enough to keep home builders supplied with single-family lots for years.
The land acquisition binge has been clustered around Katy and the northwest part of the Houston metropolitan area, along the route of the new Grand Parkway expansion. The land-buying spree was the focus of a recent panel discussion organized by theHouston Chapter of the Urban Land Institute.
The recent uptick in mortgage interest rates has put a slight damper on the runaway pace on home buying in Houston late this summer, but the market is still strong, says home building analyst David Jarvis of Metrostudy.
Metrostudy is projecting Houston will have about 26,000 single-family home construction starts in 2013, up from a low of 18,000 starts in 2011 in the wake of the recession.
Home sales have been booming because the Houston economy has added about 100,000 new jobs over the last year.
Houstonian David Weekley, founder of David Weekley Homes, one of the largest home builders in the nation, says any talk of a collapse in the local housing market is unfounded.
“I can attest to the fact that Houston is not bubble-ish,” Weekley says. “We are not in a bubble.”
Mortgage interest rates took a sharp and sudden jump in late June. But mortgages are still available at less than 5 percent, which is low when compared to the last four decades.
“We’re still at historical, extraordinary low interest rates,” Weekley says.
“My kids’ vision is not to go out to live in suburbia,” says David Weekley, who sold $860 million worth of new homes last year.
Weekley believes future lot prices are going up in the suburbs. But then, again, life in the outlying suburbs is not everyone’s cup of tea, particularly among the younger generation, which tends to be exciting about living in the urban core.
Tim Welbes, president of The Woodlands Development Co., says the appeal of urban living often becomes dimmer as people mature and move into the next life cycle.
“The urbanity affinity is compelling, until the children show up,” Welbes says.
Another thing supporting the future popularity of suburban development has been the urbanization of suburban clusters like The Woodlands, Welbes contends. A lot of suburban office space has been constructed recently and places like The Woodlands have grown with lifestyle and cultural amenities and restaurants.
Builders double as developers
As the Houston home building market has strengthened, there have been an increasing number of home builders buying their own land and developing residential communities. Some veterans of the Houston real estate market believe out-of-state builders may have paid too high a price for Houston area land, but it remains to be seen if those builders did over-extend.
One of the biggest builder-driven deals was recently announced by Toll Brothers, a major national builder based in Horsham, Pa.
Toll Brothers purchased 600 acres off north of Houston near FM 2978, just southwest of The Woodlands. The site is not far from the new Exxon Mobil campus and future route of the Grand Parkway. Toll Brothers will develop the land and build 900 homes there.
“This acquisition reflects the thriving economic growth of the Houston market with the migration of large energy companies to the area, and the expansion of the Grand Parkway,” says Karl Mistry, head of the Houston operations for Toll Brothers.