HOUSTON – (Realty News Report) – Demand for land in the Houston region is surging. Large parcels are moving quickly and prices have climbed sharply.
Since the onset of the COVID-19 pandemic, roughly 17,000 acres of land have sold in the greater Houston area. Another 19,000 acres of large suburban tracts are currently under contract and are expected to close by year-end, according to land broker Kirk Laguarta of Land Advisors Organization.
A Feeding Frenzy
“What we are seeing is the great land rush,” Laguarta told an audience of roughly 200 developers, home builders and investors during a recent forecast presentation at the Westin Memorial City. “We’ve never seen anything this hot. It’s running white hot. It’s a feeding frenzy.”
Residential developers and home builders are working to replenish lot inventories after homebuying reached record levels locally and nationally. With mortgage rates dropping below 3 percent last year, buyer demand surged. Builders couldn’t keep pace, and many paused taking contracts for speculative homes because of rising material costs and concerns about long completion times for buyers. Labor shortages, lumber constraints and a shortage of available lots all slowed production.
Land Prices Double (Or More) Over Last Year
Land values have climbed dramatically — in many cases more than doubling in the past year, Laguarta said. He cited at least one major transaction reaching $9 per square foot, an unusually high price for acreage in outer suburban markets.
Residential developers are pushing farther into exurban areas, a shift made easier by widespread work-from-home policies that reduce daily commuting needs for many homeowners.
The building boom shows signs of persistence. Research firm Zonda projects Houston will see between 39,500 and 41,500 single-family starts in 2021, followed by 35,000 to 40,000 starts in 2022. Those figures would keep Houston, along with Dallas, at the top of the nation’s homebuilding markets by a wide margin. Demand for new rental apartments is also accelerating.
The Great Texas Land Rush – Competing for Tracts
Residential projects now face growing competition from commercial and industrial developers, said Duane Heckmann of Land Advisors. E-commerce growth has driven industrial developers to seek large suburban tracts for warehouses and distribution centers. Because big logistics facilities — including 1 million-square-foot warehouses — can generate substantial income, industrial buyers are able to pay far higher acquisition prices than residential firms, Heckmann explained.
“They can pay five times what you can pay,” Heckmann told the audience, highlighting the competitive pressure on land availability and pricing.
Oct. 4, 2021 Realty News Report Copyright 2021
For more about Texas real estate, see the book Houston 2020: America’s Boom Town – An Extreme Close Up by Ralph Bivins. Available on Amazon.
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Photo: Kirk Laguarta (left) and Duane Heckmann of Land Advisors Organization speak at a land forecast event at the Westin Memorial City hotel on Sept. 30, 2021.
Photo credit: By Ralph Bivins, Realty News Report Copyright 2021
File: Great Texas Land Rush. Land Advisors Organization. Kirk Laguarta. Duane Heckmann