New home lot supply drops to cycle lows
Aug 23, 2019
Housing Trends
Houston, a market often disconnected with national trends thanks to the oil industry, is going through a density and attainability revolution just like other top metros.
Houston used to be a place where blue-collar and white-collar workers alike would enjoy homes priced under $200,000. It was common to hear that a family making a six-figure salary would buy a home at just twice their income. In fact, nearly 70% of the annual closings in 2006 were under $200,000. Today, 9% of closings fall in that bucket. That’s not to say Houston doesn’t still offer value to residents:
It is to say, however, that builders, faced with the same cost challenges as other cities, are testing the market with different product offerings.
Homes on 50-foot lots have been Houston’s bread and butter for years, followed by 60-wide. 50-69′ lots still represent 60% of the market, but a new size is moving up in the pipeline: 40′. The smaller homes historically represented roughly 2% of annual housing starts. The last twelve months of data through 2Q19 shows an increase to 6%, according to our Metrostudy statistics. Our data from Zonda reveals:
To explore this product, look no further than Bridgeland, the top master plan in the market by observed annual starts. The Howard Hughes development in Cypress, 30 miles northwest of downtown, offers a mix of product in an “A” submarket with great schools. Demand for 40′ and 45′ lots is strong, but builders are actually using incentives in the face of other new home competition.
Meyers Research market tour of 40′ product in the Bridgeland master plan. From the left to right: Highland Homes, David Weekley Homes, and Beazer Homes.
Homes on 40′ wide lots are in a unique position in that they face steep competition from the resale market as well.
“Buyers overwhelmingly want new homes and are excited that local builders are pivoting,” explains Lawrence Dean, our Regional Director in Houston. “The product isn’t for everyone, though. There are some suburban new home shoppers who will still prefer the ‘conventional’ feel of a larger and wider resale property at a similar price.”
Product is changing across the country and our team is constantly meeting with builders and developers to strategize the right move.