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HCA Hosts its Sixth Annual Developer’s Forum
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HCA Hosts its Sixth Annual Developer’s Forum

 

 

 

 

The Houston Contractors Association was pleased to welcome two of the most prominent single family developers in our region and a locally renowned economist to discuss with our members the past, current and future situation of the neighborhood construction market in the greater Houston area.  HCA was proud to have as its presenters this year Mrs. Becky Ullman, Director of Land Acquisition and Planning for KB Home, Mr. Heath Melton, Vice President of Regional Master Planned Communities for the Howard Hughes Company/The Woodlands Corporation and Mr. Patrick Jankowski, Senior Vice President, Research and Regional Economist for the Greater Houston Partnership.

 

 

The first presenter for the day was Mrs. Ullman who started with a quick overview of KB Homes.  They are the sixth largest builder in the Houston Metro area with an average sales price of $240,000.  They are building in 23 communities throughout the area and expect to close over 1100 homes in 2017.  KB Home is bullish on Houston and expects to see continued growth in the coming years.  Houston has been a growth juggernaut for decades and there appears to be no end in sight, said Mrs. Ullman.  The Greater Houston Partnership (GHP) reported that Houston should grow from its current six million residents to 7.5 million in 2020 and 8.3 million in 2025. 

 

With job losses in the energy sector over the last couple of years, most builders have been retrenching as they struggled with new home affordability issues, otherwise known as creeping elegance. Houses got bigger and more expensive without necessarily offering more to the buyer.  Prices have slowly crept up since 2012 and are now priced above the $300,000 new home average. This has caused the Houston home building market to become softer above the $300,000 price point, however it is very strong below that number.  Mrs. Ullman stated that KB Homes has kept their focus on the affordable home range between $100,000 and $200,000 and as a result have enjoyed 10% growth for the at least the last three years.  Currently homes under the $300,000 price range are considered affordable homes.  KB Homes remains optimistic and bullish on the Houston market, noting that the population growth has been continuous over the last few decades and there is no reason to think that growth will stop.  KB Homes has an objective of increasing its year over year growth by at least 30% over the next three years in Houston.

 

The next presenter was Mr. Heath Melton, with the Howard Hughes Company/The Woodlands Corporation.  Mr. Melton started by recapping the location of their development properties in the Houston area noting their existing developments of the Woodlands off of I-45 North, the Bridgeland development off of the Grand Parkway and US-290 and their newest, yet un-named community located off of I-45 North and FM 830. 

 

Looking at the Woodlands development, Mr. Melton stated that most people think that the Woodlands is completely built out, however there is still about 1000 acres of commercial land and 800 single family lots left to be developed.  Currently there are over 100,000 people living in the Woodlands in more than 41,000 residences.  The area has 2,182 employers with over 63,000 employees and a total taxable value of $18.4 billion.  With the Woodlands, the approach has always been to have one job for every rooftop and that is the same approach that they will take with the Bridgeland community, said Melton.

 

Looking at the Bridgeland community, Mr. Melton stated that this is one of their more active communities right now.  This development is bisected by the Grand Parkway with Fry Road, Langham Creek, Katy Hockley and Louetta road the outer boundaries.  This community will have four distinct neighborhoods within it, as well as a large town center similar in design to the Woodlands.  Bridgeland has seen 211 net home sales so far in 2017.  That is an increase of 34% over last year.  There were 52 home sales in May and Bridgeland is listed as the third top selling master planned community in Houston and climbing.

 

Mr. Melton next talked about their new community located off of I-45 and FM 830 which is 15 miles north of the Woodlands.  This property will have just over 2000 acres with 4,500 residences with 20 neighborhood parks.  The new neighborhood has yet to be named but will have all of the amenities that you have come to expect from a Woodlands development including extensive hike and bike trails, a lazy river, lap pool, yoga area and an amenity center.

 

The final speaker for the day was Patrick Jankowski with the Greater Houston Partnership, and he started his presentation by announcing the worst is over for Houston’s most recent economic downturn.  He stated that the bottom of the downturn occurred in the third quarter of last year.  Looking at a regional employment chart, Houston was at its peak in December of 2014 with 120,000 jobs created.  From that point on the numbers fell with the low point occurring in the summer of 2016 when we lost 3,800 jobs.  May of this year shows Houston is back to creating jobs again with 45,000 new jobs as of that month.

 

Mr. Jankowski warned that the ride is not over with yet, and that there are still some soft parts in the market.  He stated that the commercial side of construction is really struggling right now.  At one time there were as many as 17 million sq. ft. of office space under construction and now there is less than one million.  We are also seeing a downward trend in industrial construction in Houston, warehouse, distribution and manufacturing space.

 

Mr. Jankowski stated that people often ask just how many jobs did the energy industry lose during this recession.  Looking at the primary sectors associated with the energy industry such as exploration & production, oil field services, fabricated metal products, machinery manufacturing and engineering, and you will see that together they lost a total of 81,000 jobs.   That is one fourth of the energy industry that got laid off during the economic downturn.  Mr. Jankowski noted that the City did manage to create jobs during the same time period, mainly in the leisure and hospitality area, healthcare, public education, retail trade and financial activities.  The job losses were all associated with the downturn in the oil and gas industry, while the jobs created were all related to an increase in population.  The hidden problem with this is that the average compensation for jobs in the oil and gas industry is $70,000 or more.  With the jobs that were created through population growth, there is only one sector that pays greater than &70,000 and that is financial activities.  Mr. Jankowski stated that the City was able to replace all the jobs that were lost in the oil and gas market, but we replaced them with lower paying jobs.

 

Mr. Jankowski said that there are reasons to be hopeful despite the negatives that are weighing on Houston’s economy.  He stated that Houston will continue to grow but not at the pace seen in  2013 or 2014.  He noted that the U.S. economy is still growing fairly strongly and all of the forecasts indicate that it will continue to do so.  The world economy is starting to pick up and that is important to Houston because we are much more globally focused than we have been in the past.  Houston added 125,000 people last year and all of the projections show that Houston will be adding over one million people over the next ten years.  He stated that there will also be over a million jobs added to the Houston market over the next ten years.  Most will not be in the oil and gas industry however.  Houston has always found a way to grow, despite the fluctuating history of oil prices.  Energy should be looked at as the governor on the economic engine of Houston, stated Jankowski. When oil prices are high the governor opens up and allows the engine to turn very fast and Houston’s economy runs hot.  When oil prices are low the governor closes and slows down the RPM’s.  The motor still turns, but you just don’t move as fast.  Oil will always be important to Houston, but it is not the determinant of our future.

 

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10/25/2017
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