Parcels in excellent locations close to downtown Houston or the Texas Medical Center have been in high demand, but the market for acreage for residential developments in the suburbs has been in the doldrums. Overall, the market for Houston area land will be better in 2011, industry experts say.
“I think we will definitely see some improvement,” said land broker Carlos Bujosa, chairman of the Houston Association of Realtors. “It will come back, but it is going to take a while.”
Demand for Inner Loop sites that can be used for mid-rise multi-family development, or small single-family or townhome projects, is fairly strong, Bujosa said. Old commercial buildings or dilapidated apartments are being purchased and demolished to create sites for Inner Loop residential construction.
In the outer suburbs, a lack of financing continues to put a damper on land sales, said Bujosa, a vice president at the Transwestern realty firm.
“There are a lot of home builders that would like to do things, Bujosa said. “But in order to develop a site, it’s going to require financing — and the banks are still holding back.”
Houston’s supply of vacant developed lots is lower than it’s been in five years, according to the CB Richard Ellis firm.
Home building is coming back from the pits. As building rebounds, will there be enough home building lots?
“Builders are already reporting a shortage of lots in the upper ranges of the market,” said a CB Richard Ellis report on Houston land.
However, Houston still has over 50,000 developed vacant lots and analysts predict that the city will have about 20,000 new home starts in 2011.
Some land developers will be acquiring land this year to position themselves for 2012, when Houston is projected to have around 40,000 single-family housing starts.
Veteran land broker Stan Creech said he expects to see more suburban land deals happening this year, as lenders become more active and prepare for the future
” For the strong developers, financing will become more available.” Creech said.
One of the major deals of 2010 was Newland Communities purchase of 492 acres for an expansion of its Cinco Ranch master planned community in Katy.
Newland paid a whopping $37,000 an acre – over $18 million – for the tract, said Bill McDade, a land broker with CB Richard Ellis.
McDade said the land market in far west Houston is strong.
“There’s been a lot of activity for large land parcels (west of Houston) for future single family development and at prices that were higher than they were in 2008,” McDade said at a CB Richard Ellis outlook conference.
Prices for top quality land in the Houston area have remained firm with only slight declines. For example, the average asking price for land in downtown Houston went from $121 per square foot at the end of 2009, down slightly to $119 per square foot at the end of 2010, CB Richard Ellis reported. The study showed land in southwest Houston remained unchanged at an average of $6 per square foot over the last year.
But as the new year gets started, Houston land brokers say the worst appears to be over.
“What I heard from a lot of my friends who have been in the business 30 or 40 years is that 2009 and 2010 were the worst years they ever had,” says Creech. But the moods have taken a positive swing since 2011 began. “Since the first of the year, it’s like somebody turned on a light bulb.”