Real Estate Round-up
The burrito wars heat up and $5 for a gallon of gas looms: Houston real estate warnings
Incoming missile fire. Take cover. Watch out for shrapnel. Is it a weapon of mass destruction?
Nope. It’s just a super grande burrito with a double load of guacamole.
This is what Matt Keener warns us of as he talks about burrito restaurant competition in Houston.
“The burrito wars are underway,” says Keener, a shopping center broker with the CB Richard Ellis commercial real estate firm.
A lot of burrito outlets are opening new outlets to get a share of Houston’s burrito market, Keener said. Chipotle, which is one of the strongest stocks in the New York Stock Exchange, is the heavy hitter. Chipotle is being challenged by several including Freebird’s, Mission Burritos and a newcomer, Bullritos, which is a spinoff from the Gringo’s Mexican Kitchen organization.
The trend to eat cheaper has made a difference in the recent tough economy, Keener says. Many folks are cutting corners, trying to be frugal with their dining dollars.
“People are dining at Maggiano’s instead of Tony’s,” Keener says.
In the shopping center business, the frugal approach extends to the stores themselves. When they do open new stores, retailers are downsizing. Retailers, such as the big office supply chains, are now opening 10,000-square-foot stores instead of the 30,000-square-foot footprint that had been common for years. Shelves will be stocked with only the very best revenue generating inventory and obscure items may be hard to find.
The shopping center developers haven’t been building or starting many new projects during the recession and they are going to be extremely cautious for awhile.
“These guys have been down in the bomb shelter,” Keener says.
Over the next five years, only three million square feet of new retail space will be built in Houston. In the early 2000s, developers were building more shopping centers than that every single year.
Keener believes it will be 2012 before the local shopping center market regains its footing and it could take until 2015 until the market is in full health.
Saving Mortgage Money
Homeowners need to pursue a refinancing of their home mortgage soon because the low rates won’t last forever, says Ted C. Jones, chief economist for Houston-based Stewart Title Guaranty Co.
Mortgage rates are at their lowest point since 1951. The Freddie Mac organization reported the national 30-year, fixed-rate home loan hit an average of 4.19 percent last week.
Within six months, the average mortgage will be above five percent, Jones predicts. Around the nation, there has been a surge in refinancing in October.
Jones, a speaker last week at the Houston Association Realtors’ Expo, also believes gasoline prices will rise dramatically over the next three or four years. Get ready to pay $5 per gallon.
What will $5 a gallon gas do the local housing market? Home buyers will want to be able to do a quick commute. Houses near the major employment centers, such as downtown and the medical center, will be in high demand, Jones says.
Apartment rents are rising in Houston.
The average apartment unit in Houston went for $765.42 per month in August, according to O’Connor & Associates, a Houston firm that tracks the market.
That represented a $10.45 per month increase over the last year.
If you look only at Houston best apartment projects — ones in great location or newer projects that get the highest rental rates — rents were up there also. Rents in the so-called “Class A” units averaged $1,114 per month, O’Connor reports.
The apartment market has been rising partly because buying a home has become more difficult. Mortgage companies are rejecting more applicants, forcing people to rent instead of buying.
Ralph Bivins, former president of the National Association of Real Estate Editors, is editor-in-chief of RealtyNewsReport.com.