Home Building Boom

Hammering as fast as they can: Builders struggle to keep up with demand for new homes

Houston builders struggle to keep up with high demand for new homes

inner loop home construction shots Nov 2013
Home sales in Houston are great, but builders need more workers to meet the backlog of sold homes. Photo by Ralph Bivins
inner loop home construction shots Nov 2013
Lots for Inner Loop homes have increased by as much as 40 percent in value recently. Photo by Ralph Bivins
inner loop home construction shots Nov 2013
Home building is up in Houston in 2013. Photo by Ralph Bivins
inner loop home construction shots Nov 2013
inner loop home construction shots Nov 2013
inner loop home construction shots Nov 2013

Houston home builders are hammering as fast as they can to keep up with a 13 percent increase in sales this year.

“Everybody is upbeat and expecting new home sales to continue to grow,” says Cernus Development’s Harry Masterson, president of the Greater Houston Builders Association. “Everybody feels we have the capacity for more home sales.”

Builders could do better if they had more tradesmen, Masterson said. When the construction business retracted three or four years ago a lot of construction workers found jobs elsewhere. Other workers were lured away by the high wages being paid in the shale oilfields.

 “Everybody is quoting six months (of waiting) for a production home,” Jarvis says. For a typical custom home, buyers are going to have to wait a lot longer. 

So if you’re buying a new home in the Houston area today, you may have to wait awhile for it to be built, says housing consultant David Jarvis, regional director for Metrostudy in Houston.

“Everybody is quoting six months (of waiting) for a production home,” Jarvis says. For a typical custom home, buyers are going to have to wait a lot longer, he says. “Builders are working hard to build their backlogs of sold homes.”

The supply of unsold completed home sitting vacant has dwindled to its lowest point in years, down 12 percent in October, compared to October of the previous year, according to Metrostudy.

The Metrostudy report in October showed home buyer interest remained exceptionally strong in Houston. The amount of “traffic” or number of people browsing at model home parks in October was up 20 percent over the number of home shoppers counted in October of 2012. So far this year, new home sales through October are running 13 percent ahead of the sales pace in the same 10-month period of last year, Metrostudy reports.

Surging home sales

Houston’s housing market, both new and existing homes, has been surging for more than two years. The city’s economy has enjoyed strong job growth, with thousands of people being relocated to Houston by their employers. At the same time, mortgage interest rates have been near record lows.

The inventory of existing homes for sale is tight – smaller than it’s been in years because home sales have been very strong. Home builders are going to have to increase the pace of construction to break the cycle.

 Lot prices in the Inner Loop market have gone up 40 percent in recent years in many cases. 

The new home market in the Inner Loop of Houston is exceptionally strong. Lot prices in the Inner Loop market have gone up 40 percent in recent years in many cases, Jarvis says.

Home sales will taper off in November and December, a consumer pattern that has held true for decades, because of the holiday season. Consumers just don’t want to buy or sell houses during the holidays if they don’t have to. But looking ahead, market conditions appear strong for the spring of 2014.

“Our sales this year have remained on pace with last year. We’re excited about that, though, because we have been preparing and we’re poised to open sales in several new communities or neighborhoods in the first half of next year,” says home builder Jim Lemming of Partners in Building. “That puts us in a strong position for sales in 2014.”

Tim Drone, executive vice president, J. Patrick Homes says 2013 was an excellent year for his company, despite the labor shortage.

“We are seeing that home sales are up by 35 percent this year compared to 2012 and we are trying to resupply the inventory which has been sold through,” Drone says.

Houston new homes sales will rise in 2014, Jarvis predicts. But they could be even better if Houston had more construction tradesmen to build the homes people want to buy.

Ralph Bivins, former president of the National Association of Real Estate Editors, is founding editor of Realty News Report.