Great Texas Land Rush

In Houston, Demand for land is high. Acreage is selling fast in the Houston area and prices are skyrocketing.

Some 17,000 acres of land have sold in the Houston area since Covid hit last year. Another 19,000 acres of large suburban tracts are under contract and are slated to close by the end of the year, said land broker Kirk Laguarta of the Land Advisors Organization.

A Feeding Frenzy

“What we are seeing is the great land rush,” Laguarta told an audience of 200 developers, home builders and investors at a forecast presentation last week at a packed hotel ballroom at 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 trying to re-load on lot supply after home buying escalated to record levels in Houston and around the country. With mortgage rates falling below 3 percent, home buyers came out in droves. Builders were unable to keep up with demand and some quit putting to-be-built houses under contract because of rising costs of building materials and their fear of alienating customers by making them wait too long for houses to be completed. Labor, lumber and lot shortages slowed down building, too.

Land Prices Double (Or More) Over Last Year

Land prices have been rising sharply, more than double over the last year in many cases, said Laguarta, who said one major deal has hit $9 per sq ft, an unheard of acreage price in outer suburbia.

Residential developers are moving farther into the suburbs, which is becoming acceptable to homeowners who don’t have to commute into the office every day because of work-from-home policies.

The home building surge is not going to vanish anytime soon. The Zonda group is projecting Houston will have 39,500 to 41,500 single-family home starts in 2021, followed by 35,000 to 40,000 starts in 2022. That’s enough to keep Houston alongside Dallas as the top two home building markets in the nation, with a large lead over other cities.

And demand for new apartments is skyrocketing, as well.

In The Great Texas Land Rush, Competing for Tracts

Today, residential development is having to compete with commercial developers for sites, said Duane Heckmann of Land Advisors.

With e-commerce accelerating, industrial developers are seeking large suburban tracts for warehouses and distribution facilities. And with a plan to build large-scale 1 million-SF warehouses that generate high income, the industrial developers can pay bigger purchase prices than residential developers, Heckmann said.

“They can pay five times what you can pay,” Heckmann told the audience.