New Communities

Hello,

Welcome back to the one and only blog dedicated to the new home construction industry in Houston, Texas!

Today, we are going to talk about one of the four different types of communities that are built and developed in today's environment: (These are my definitions.  Don't like them? Then come up with your own!)

1. Master Planned Communities (MPC)
2. Mini-Master Planned Communities (mini-MPC)
3. Builder Community
4. Fourth Tier Communities

The point of this specific blog post is that I plan to spend a great deal of time discussing the different Areas, Submarkets, Communities, Builders, and Developers.  While discussing these items, we're going to talk about the types of Communities that are prevalent in each of the Areas and Submarkets.  By defining up-front the types of Communities, it will enable us to have a more in-depth discussion on what makes these Areas and Submarkets unique, rather than reciting the rote definition of what we are discussing.

After reading today's blog post, when I say The Woodlands and Cinco Ranch are Master Planned Communities, you will know exactly what is meant (OK, most of you already have a fairly good idea, but that's an easy one!  How about when I say mini-MPC???  We'll cover that one next time.).

Master Planned Communities
Houston, moreso than any other MSA, is dominated by its Master Planned Communities (MPCs).  MPCs are large acreage developments that include a wide array of residential uses, as well as pre-planned commercial (grocery stores, gas stations, strip malls, etc) and public uses (schools, fire stations, libraries, etc).

It takes a Developer with very deep pockets and a patient, long-term approach to pull off a successful MPC.  To purchase, develop and hold the amount of land necessary to develop an MPC is staggering.  While some developers are able to structure their original land purchase so that they can buy the land over a period of time, that is not always the case.  Imagine buying several hundred acres of land up front, with no guarantee of success.

Because Houston literally has little-to-no zoning requirements in place, MPCs enjoy fairly sizable price premiums over their competitors.  However, it takes years for a Developer to reap the benefit of this premium.  Why, you ask?  First of all, there is the overall investment in the property.  What investment?

• Land Planning - paying an expert to draw up the street grids that strike the proper balance between maximizing the number of houses while providing a street scape that buyers will be willing to pay a premium for.
• Soils Testing - paying a geotechnical engineer to analyze the soils to not only help determine how to develop the property (strength of the street pavement, depth of the undergrounds, etc.), but also to analyze the tract for the myriad of environmentally harmful substances (old underground fuel tanks, farmers burn pits, leaking underground oil/gas lines, you name it...), etc.
• Engineering - paying engineering firms to develop the plans for the underground utilities and paving.
• Attorneys - paying attorneys to create the litany of documents that are needed to successfully operate a large MPC like creating the HOA documents (have you seen the Deed Restrictions in your community?).
• Form a Municipal Utility District (MUD) - more attorneys and engineers to form the legal entity that will re-pay the developer for the facilities needed to treat both the sanitary (the stuff from your toilet, tub, and kitchen sink) and storm sewer (the stuff off your roof and gutters).  How does this get paid back?  The quick answer is property taxes, but we'll have to cover this one in more detail at another time.

All of this has to be paid for before the Developer actually starts developing!!!  Once you've spent this money (which is considerable), you still have to spend the funds to actually put the pipes in the ground, build the facilities to handle the sanitary and storm sewers, pave the roads, etc.  Not only does it cost money, but more often than not, the bulk of the money is borrowed from the bank.  Interest accrues on the money from day one.  The developer won't see a dime of money until the first homebuilder purchases their first lot!  The total time to take a property from "raw land" to developed lots can be as little as 6 months (MUD already in place) to several years!

We can (and will) spend entire blog posts talking about each MPC in Houston.  For now, here is a list of what is considered an MPC in Houston:

• The Woodlands
• Cinco Ranch
• Sienna Plantation
• First Colony
• Kingwood
• Champions
• Bridgelands
• Fairfield
• South Shore Harbor.

There are others, but I think you get the general idea.  Now that we have defined an MPC, next time we'll talk about mini-MPCs.

Is there a specific MPC that you would like to discuss (or just know more about)?  Drop me a line at houstonhomeboy@yahoo.com. 

Until next time,
Houston Home Boy
11/30/2011

Defining Houston's Areas

Hello,

Thank you for reading my blog covering the Houston single-family new home construction market.  Whether you are a realtor, work for a production builder, a contractor, or just someone interested in the new home construction market in Houston, I welcome you!!!

Today, I am going to attempt to define the geographic boundaries for each of the 10 "Areas" as loosely defined by MetroStudy for the Houston MSA.  Mind you, this is just geographic boundaries.  I plan to devote many future blog posts to the communities (both large and small, past and present), builders, employment centers, and demographics in each Area.  So, without further ado, let's define some geographic boundaries:

1. Far North - This area is basically everything due north of The Woodlands, including the Conroe area.  As you might expect, it is dominated by The Woodlands, the largest active Master Planned Community (MPC) in the country.  It also includes what many hope to be the community that will carry the torch once The Woodlands completes its record breaking run of excellence:  Woodforest.

Don't worry, we'll spend many a blog post discussing The Woodlands, Woodforest, Bender's Landing and all of the other communities in the area!

• Northeast - This area is fairly straightforward.  Its western boundary is I-45.  Its southern boundary is just inside the Beltway (to include Fall Creek).  Its bounded on the east by 90 & The Beltway.  Looking at the face of a clock as your compass, it encompasses everything from 12 o'clock to about 2 o'clock.  In years past, this submarket was dominated by Kingwood "The Livable Forest."  As it winds down, there are several much smaller communities that are vying for the lion's share of residential housing.

• East - The east submarket is one of the few that has not been dominated by the typical Houston master planned community.  It picks up on the southern boundary of the Northeast Area (90 & the Beltway), and goes south down the Beltway to include the ship channel, La Porte, ending about Red Bluff Road.  Included in this submarket are Pasadena, Channelview, Baytown, Deer Park, and La Porte.

• Southeast - This is basically everything up and down the Gulf Freeway (I-45) south of The Beltway.  It includes Friendswood, Webster, League City, Clear Lake, Dickinson, Texas City, La Marque, Santa Fe, and even Galveston.  The 900 pound gorilla in this Area for years was South Shore Harbor, and before that Friendswood itself (which was the birthplace of yet another MPC in Houston).  As with all of the Areas, there is a stark dichotomy in the housing stock.  This will be a fun one to explore!

• South - The South submarket includes Pearland, and everything down the 288 corridor.  Its western boundary is basically FM 521.  The eastern boundary is 35.  The submarket includes Alvin, Arcola, Manvel, Fresno, and Iowa Colony.  This Area had been largely overlooked up until the past decade.  However, the promise of a shorter commute into the Medical Center via 288 (among other factors) helped fuel an explosion of growth along the western border of Pearland along 288. 

• Southwest - This Area includes everything west of (and including) Missouri City, extending all the way to 1093 in northern Fort Bend County.  For years, this Area was dominated by Sugar Land and the surrounding communities.  However, as as First Colony and the like are built out, there have been new players to step up such as Telfair and Sienna Plantation.  It is a large geographic Area that contains many popular Houston area suburbs.  Known for its excellent schools and well-to-do reputation, this Area has continued to perform well during the most recent economic downturn.

• West Southwest - This Area is basically everything in between I-10 and 1093.  It has been dominated the last several years by the country's second largest master planned community, Cinco Ranch.  Known for its excellent schools, and proximity to the famed "Energy Corrdior," this Area (along with the Southwest) is among the best housing markets in the entire country.

• West Northwest - This Area is bound to the south by I-10 and extends northward to FM 529.  As much as the previous two are known for their excellent public schools and housing stock, this Area is known for its high density single-family housing and cultural diversity.  It has been hit particularly hard during the recent economic downturn, but is still rife with competition in the homebuilding community.  One theory that I will want to explore is the recent revelation that I heard stating it was more affordable to purchase resale in this Area than new homes.  If this is true, then it will go a long way to explaining the current circumstances there.  I can't wait to get into this one!

• Northwest - Everything north of 529 extending all the way to I-45 (at least those parts of I-45 south of The Woodlands, and north of the Beltway).  This Area includes the well-known Cypress-Fairbanks ISD, as well as Tomball.  Like all of the Areas, the Northwest has quite a diversity of neighborhoods.  Like the Far North and Northeast, there is a preponderance of heavily treed communities, which belies the myth of the typical Houston landscape.

• Central - For ease of definition, this Area includes everything inside the 610 Loop and most everything inside the Beltway.  The main exception to this rule being Fall Creek in the Northeast Area.  Hey, there's just not a lot of single-family residential construction going on in this Area.  Other than the once surprisingly strong townhome market that popped up in the late (and I mean late) 1990's, this isn't an Area of town that is looked at by my industry.  Like my production home-building brethren, I plan to spend very little time here.

One final note regarding these Areas.  There has to be some sort of dividing line between these Areas.  When in doubt, I will stick with the definition provided by MetroStudy.  It is not my intention to engage anyone in a debate as to which Area a particular submarket or community is in.  By definition, there are blurred lines all over the landscape, and I am simply not interested in debating something so trivial.  I say "to-MAY-to" and you say "to-MAH-to."

Next time, I will attempt to categorize the four different types of neighborhoods that are predominant in the Houston market.  Mind you, these are my definitions, so they are definitely subject to debate! 

With the conclusion of this penultimate step, we are one step from beginning our discussion of the different submarkets, communities and builders that are predominant in Houston.  This is where it will be interesting.  I implore you for your feedback.  While very well versed in Houston single family residential construction, I do not pretend for a minute to know it all.  I invite your feedback, and look forward to dishing on the best (and worst) of Houston homebuilding!!!

Until Next Time,

Houston Homeboy
11/22/2011


PS  I would be remiss if I did not take a moment to wish you and yours a Happy Thanksgiving.  Here's hoping that your Thursday includes a nap-inducing overload of tryptophan and lots of football!!!

Competitive Building Environment

Hello All,

First of all, thanks for coming back to read my blog all about the single family residential construction market/industry in Houston. 

After thinking more about it, I decided that I was rushing too quickly into "Areas" and "Submarkets."  Before getting into the details, some of you might appreciate a bigger picture view of the market.  Foe example, did you know that 15 of the nation's top 20 builders (as measured by Big Builder magazine) are active in the Houston market?  Here's the list (by revenue ranking):

1. DR Horton
2. PulteGroup
3. Lennar
4. NVR (not active in Houston)
5. KB Home
6. Habitat for Humanity
7. K. Hovnanian
8. Ryland Homes
9. Beazer Homes
10. Meritage Homes
11. MDC Holdings (not active in Houston)
12. Standard Pacific (not active in Houston - exited market ~2001)
13. Toll Brothers
14. Taylor Morrison
15. M/I Homes
16. Villages of Lake Sumter (not active in Houston)
17. Weyerhauser (builds in Houston under the Trendmaker name)
18. Shea Homes (not active in Houston)
19. David Weekley Homes
20. Highland Homes

Wow!  Where to start with this information?  We could dedicate months talking about each of these builders and how they position themselves in the market; but again, we are getting ahead of ourselves.  Believe you me, we will definitely delve into each of these operations and try to gain a better of understanding of why they do what they do.  (Disclaimer:  I do not pretend to know exactly why they do what they do, but I have been around long enough to have an educated guess!)

Is there a builder that you'd like to start with?  Say the magic word!

However, before we start that, we need to address two more important topics:

• Types of communities.  There are bascially four types of communities in Houston.  My next blog post will describe each of these four, and give examples of each.  (Try to contain your enthusiasm.)
• Areas and Submarkets.  Yes, I defined them in an earlier post, but I think it is important to understand the physical geography of the different areas before going too much further.  It is my opinion that proceeding without this information is akin to driving to an new destination without directions (or your Garmin).

That's it for today.  Come back next time, or better yet, please subscribe to this blog!!!

Until Next Time,
Houston Home Boy
11/14/2011

PS  Catch me on Twitter @houstonhomeboy

MetroStudy Update

Hello All,

Got a chance to see Mike Inselman speak (along with the rest of the Houston market) on Thursday.  While I failed to take any notes (I'm not used to thinking like a blogger, yet), the main item I remember was a big one:

It is Mike's opinion that the Houston market is primed for a very good 2012.  Of course, he's not predicting an immediate return of the halcyon days of the previous decade; but, he is very optimistic about 2012 in Houston, so read on to find out why.

Number one, the Houston MSA is basically back to pre-recession job levels.  We have been creating far more jobs in houston than any other MSA.

Number two, MLS listings of available homes is at a low not seen in some time.  (We're actually onm the verge of being in a seller's market!)

Number three, it is now actually cheaper to purchase a home rather than rent an existing single family dwelling or Class A apartment in Houston.   Think about this last one for a minute.  Read it again if you have to.

It all adds up to a bounce-back year for the new home construction industry in Houston!

That's all for now.  Please check back in frequently (or hey, better yet, actually subscribe to my blog!).  You can also catch me on Twitter @houstonhomeboy.

Until Next Time,
Houston Home Boy

The Houston MSA

What?!?!  After my first post, there aren't hundreds of people hanging on my every word?  Heck, there's not even one!!  Shocking.

Quick, before the disappointment sets in, let's get right into today's topic:  the Houston MSA.  For an exhaustive definition of the Houston MSA, click here - http://en.wikipedia.org/wiki/Greater_Houston.  For the purposes of this discussion, the Houston MSA (as it pertains to single-family residential construction) is largely composed of five counties:

1. Harris,
2. Fort Bend,
3. Montgomery,
4. Brazoris, and
5. Galveston.

Yes, there are five more counties (Liberty, Waller, Chambers, Austin, and San Jacinto) that make up the technical definition of the Houston MSA, but the overwhelming majority of homebuilding occurs in these five counties.

However, when it comes to homebuilding, analysts don't focus on counties.  Instead, they look at "Areas" and "Submarkets."  According to Metrostudy, a national Houston-based firm that specializes in housing and retail data, Houston can easily be broken down into the following Areas:

• Far North,
• Northeast,
• East,
• Southeast,
• South,
• Southwest,
• West Southwest,
• West Northwest,
• Northwest, and
• Central.

Further, each of these areas can be broken down into "submarkets" which are loosely defined areas that share common characteristics.  In laymen's terms (and for the purposes of this blog), a submarket is an area that is typically well-defined geographically and contains housing, retail, and industrial uses of like kind. 

For example, some well-known submarkets in the Central Area are the Heights, Montrose, and Midtown submarkets.  Each of these three, while not seperated too much from a geographic perspective, are very different.  Each one has its own unique characteristics.  These may be as mundane as commuter patterns and school zoning/districts, or to even something as esoteric as the general "feel" of the general area. 

There can be (and sometimes is) a great deal of debate regarding the exact boundaries between two submarkets.  Where exactly does Midtown stop and Montrose start?  As you can imagine, it can be a touchy subject.  It is not the intention of this blog to get into such debates.  Rather, I want to talk about the new homebuilding activities in the different submarkets, and what makes them unique.  In addition, I plan to spend an exhaustive amount of time onthe different builders in the market.

Enough for today!  Those discussions will be for another day!  Next time, I will attempt to define the geographic boundaries for each of the ten Areas.  After that, we will start with an Area and define more specifically the general charactieristics of the existing housing stock and communities, and how that area is perceived by the new home building community (of course recognizing that there are no exact definitions/answers).

If you happen to stumble upon this blog before next time, please let me know where you would like to start!  Otherwise, I'll pick one and go, go, go!!!

Until next time, I thank you for reading and following my blog. (I realize that this a bit presumptuous given the fact that not one person has viewed this blog, but bear with me here.)

Houston Home Boy
11/7/2011

Welcome!

Welcome to my blog all about Houston homebuilding. 

Whether you are in the market to buy a new home, work in the industry, or just like to keep up to date with the Houston new home real estate market, you may find this blog to be a good resource.  I want to keep it simple and straightforward, so here's my proposed roadmap:

1.  Start with a general overview of the Houston homebuilding market. 

2.  Discuss the larger submarkets, specifically identifying the communities and builders that are doing well (and maybe even some that aren't doing so well!).

3.  Discuss the larger builders and how they position themselves in the market.

This will be a chore, but I choose to think of it as a labor of love.  I am sincerely interested in your feedback, and will attempt to respond to as many questions, comments, and/or concerns as possible.

HoustonHomeBoy

11/3/2011