Construction continues on Shady Brook, a residential complex near downtown Grapevine. The increase in the number of new homes is one of the factors that experts say can help reduce the pressure on the local property market. (Stephen Riesewski / Impact on Society)
On June 15, Grapevine City Council called a public hearing to consider reclassifying the Parr Lane parcel of land from one residential area to another.
If approved, the developer can build more houses than is currently allowed on the land.
This type of listening is not unique. However, the land itself may be telling a more important story. This is a lot that Ron Stombo, assistant director of planning and zoning for Grapevine, believes it reflects the current realities of the local real estate market.
The hot housing market in the Dallas-Fort Worth metro is forcing developers to look for any available land to build homes, especially in built-up markets such as Grapevine, Colleyville and Southlake. Homes in three cities sold an average of 23 days less in May compared to the same month in 2020, according to figures provided by the Collin County Association of Realtors. Average price increases for homes sold over the same period were 45.53% in Colleyville, 41.89% in Southlake and 15.32% in Grapevine.
And given the demand, there is interest in any property with zoning for residential development, even if it has development problems that increase costs.
“Cause [the Parr Lane property has] “Has never shown any interest before – there are major engineering hurdles to make it work,” Stombo said, noting topography issues such as the floodplain. “Ten years ago, it wouldn’t even be considered – now the numbers are starting to make sense.”
This can be confirmed by Cosse Maikus, owner of Maykus Homes, a custom-built construction company based in Grapevine. Mikeus is the builder of Shady Brook, a single-family apartment complex near downtown Grapevine where homes cost about $ 600,000, depending on the floor plan. He said the land for Shady Brook has adjacent facilities, including a mobile home park and sewage treatment plant, that previously hindered development at this level.
For now, however, the area seems to be a success, with most of its plots either completed or under construction.
“[The property] stepped over after many years, ”said Maikus.
Inventory demand in Northeastern Tarrant District is just one of many trends that are creating unprecedented market dynamics.
Jokes tell of houses in the Dallas-Fort Worth area that cost tens of thousands of dollars above the asking price. Randy White, a longtime Southlake realtor, recalled hearing recently about a home bought for $ 500,000 in excess of the appraised value, and Kim Taylor, a member of the Greater Fort Worth Realtors Association, said it sometimes feels like everyone is trying to move north. Texas at once.
Supply chain stress
One of the most significant impacts on the real estate market can be found in linked supply chains. Complications have slowed new housing construction, which could help ease pressure in the region.
“We’ve had issues in the past that maybe … something was missing,” explained Dr. Jim Gaines, an economist at the Texas Real Estate Research Center. “Well, the problem is we are seeing these kinds of disruptions right now, but they are going up and down the supply chain.”
This means that it is not only the lumber that has been in the spotlight that is missing.
“You can hear everything about lumber, but there is so much more,” said Cosse Maikus, a local developer, citing garage door metal hinges as another problem. “This year we have already received a 30% price increase for garage doors.”
According to the National Association of Homebuilders, in 2020, the total cost of building materials for residential construction increased by 12% compared to the same period last year, including a 300% rise in sawnwood prices since April 2020.
Construction is coming
Even if developers could keep up with the pace of demand, it would be difficult for them to find enough space to do so in Grapevine, Colliville or Southlake.
Colliville employees estimate that 90% to 95% of the city is built up with residential buildings. The Southlake FY2019-20 Annual Development Report states that 91.2% of land designated for low- to medium-density residential use was built-up.
Along with other issues such as topography, this makes it difficult to calculate ROI for builders.
“This is a five or six to one ratio of the final price to the lot price,” explained Dr. Jim Gaines of the Texas Center for Real Estate Research, explaining the equation of return. “If a developer has to buy a plot worth $ 80,000, they’ll end up building a house that … between $ 480,000 and $ 500,000.”
Bubble fears: can history repeat itself?
The question is often asked if the real estate market is in the midst of a bubble or a sudden recession. Some fear a repeat of the Great Recession, which coincided with a housing bubble.
While there are similarities to that period, Dr. Jim Gaines, an economist at the Texas Real Estate Research Center, said there were differences, in particular citing risky lending practices in the past.
“We don’t think this is happening today,” Gaines said. “In fact, national statistics … show that lenders are actually even more restrictive.”
Gaines said more secure lending principles are less likely to be a wave of foreclosures.
Others suggest that the constant migration to North Texas will help protect against deflation in the local market.
“Our taxes are lower. Schools are better. There is no crime, ”said Randy White, owner of Randy White Realty Services.
“I’ve seen a lot, but now they are gaining momentum. [than before]… “
Gaines and other experts expect prices to stabilize, but it is unclear when this will happen.
“No one expects the growth rates we saw last year to last much longer,” Gaines said. “Now, I don’t know how long it’s ‘much longer.’ More than a couple of months and less than three years – how is it?