By Jim McAlister IV
President & Chief Executive Officer
The U.S. is emerging from the worst downturn in land and housing since at least the Great Depression. For 5 years, land was not being developed across the U.S., even Texas, as lenders were not lending to developers. During this time it was virtually impossible to sell land sites; land transactions came to a standstill.
During those 5 years, jobs and population were booming in Texas – more than any other state. Developers and home builders were unable to put new product on the ground in response to this growth. This resulted in Texas having a severe shortage of lot and housing inventory.
In the graph below, you can see that while population in the Texas Triangle cities (Houston, Dallas, Austin and San Antonio) was strong, lots and absorption of lots (new houses being built) went on a downward spiral in 2007 and are just now heading back up. The downward spiral was a result of lenders not lending to developers and home builders.
It’s clear that a tremendous amount of land in Texas needs to be developed in order to accommodate the pent-up demand and future population growth. This movement is now under way. As of only very recently, large publicly traded home builders/developers have been able to secure loans. The result, after 5 years of land for single-family housing remaining dormant, is a land rush on premiere development-ready land tracts.
The impact of buyers coming back into the land market has certainly been felt by Rockspring Capital. Over only the past couple of months, buyers placed more than 2,000 acres, totaling roughly $60M, under contract on our partnership sites. The sales contracts are occurring at terrific prices for our partners.
The lending market is thawing, but still has a way to go. While large public builders/developers are able to secure loans, the private builders/developers are still not getting loans. My guess is that in roughly a year, lenders in Texas will be back to business as usual.
Due to a very strong demand and very low supply, an unusually large amount of land should be absorbed over the next 5-10 years. There could be no better news for us as a land investment company, and we are thrilled for what the future has in store for our investment partners.