land development INTERVIEW
Houston’s ‘Path to Progress’ With over 25 years of experience in the sale, marketing, management and development of residential real estate, David Jarvis is known for his real-world experience as well as the extensive primary research he brings to the table. Utilizing Metrostudy’s data base and conducting extensive research targeted to the specific needs of home builders, developers, and lenders, David assists clients in the development and implementation of marketing and sales management strategies and model home development and merchandising. David’s core business is described as a membership model. It includes a proprietary and ongoing survey of the housing market that is updated on a daily basis. His model includes factors such as absorption rate, and the demands for homes and lots by size, by price range, and by geography. redNews spoke with David about Houston’s ‘path to progress’ in today’s market. David sees most of the development continuing to move toward the western part of the city, roughly along a line from I-45 to downtown, to Highway 288. He sees development and his business moving solely in that direction because of available land, as well as access to highways, thoroughfares, retail and other amenities needed by today’s buyer. The Grand Parkway extending from I-10 to Highway 90, around I-45, and on to 59, is gernerating increasing amounts of land being opened for development. David says that an old joke about asking a developer where he buys land is still applicable today -‘at the end of the road’. David has been in Houston since 1988 and has seen some of the vicissitudes of the Houston residential market. What he likes about today’s market is that homes are being started for the right reason and they’re being sold to people who can qualify for mortgages; therefore, today’s market has significant sustainability. Financing today’s residential developments presents more of a challenge as well. Banks are no longer in the construction lending and development lending business. Developers have plenty of money to build houses; however, coming up with the money to develop land for the houses continues to be a challenge. Currently, the developer is only able to borrow 50 or 60 cents on the dollar to develop land, so getting a development launched is expensive.
12 redNEWS.com
Banks got stung badly with losses in real estate during the last downturn, but have become more involved of late, but still cautious with the residential development industry. Home builders are beginning to come in and do their own developments. But we can’t move fast enough yet. Overall, we delivered 20,000 lots in the last 12 months, and we could use 26,000. We quit developing lots in the recession and we can’t ramp up fast enough to catch up. We are moving in the right direction, but it’s unlikely that we’ll catch up this year or the year after. Given that estimates of population growth within a twenty-year span indicate that the Houston area will increase by about 50% (from 6 million to 9 million), there’s no way that this can be anything but positive for all areas of real estate. Today’s all time low interest rates are another significant factor in today’s positive market. Rates will go back up at some point. When that happens, the net cost of houses will increase, and people will simply buy houses with smaller square footages rather than drop out of the market. Prices won’t go up though. Regarding consumer demand for energy efficiency and ‘green’ houses, David sees an increasing interest in this type of home, but notes that today’s buyer isn’t interested enough in this type of dwelling to pay a lot more money for it. If oil and gas prices were to increase significantly, then that might be a game changer as to what people would pay for more energy efficient dwellings; however, given the current energy status in Texas, it appears more likely that Texas and eventually the United States will become a net exporter, rather than importer, of oil and gas, so it seems unlikely that energy costs will soar significantly.