Formerly abandoned lots in Houston market beginning to show signs of life; currently empty lots in existing neighborhoods may represent only cheap lots in the future as builders focus on master-planned communities, higher-end neighborhoods, says analyst
April 17, 2014
– A for-sale sign in front of a new house in Southview Villas is one of the few signs of life in this seemingly forgotten neighborhood near Hobby Airport, where a developer once envisioned at least 70 homes for young families and first-time buyers.
But that was several years ago, and only a dozen homes were built before the land and the houses fell into foreclosure. Weeds are now as common as the Southwest Airlines jets that fly overhead. Some streets end abruptly into a grassy field where the subdivision was meant to continue. A red and white caution fence warns of the dead-end ahead.
Beyond that fence, here and in neighborhoods like this throughout the Houston area, are vacant lots meant for houses that were never built. They stand in odd contrast to Houston's supercharged housing market, which has builders scrambling to find lots to meet an insatiable demand for new homes. These "zombie lots" are found in neighborhoods some builders just won't touch. Not yet, at least.
Across the region, there are 6,000 empty lots created during better times but abandoned when demand for housing crashed with the national economy. They're scattered in various locations across the area, according to the residential research firm Metrostudy, which tracks home building.
"They're owned by variety of investors, builders, developers sitting on them waiting for market to come back around," regional director David Jarvis said. When the market hit bottom in 2009, he said, there were about 15,000 of these lots left over from the boom.
Another term for them, "deadwood lots," was coined by longtime Houston housing analyst and Metrostudy co-founder Mike Inselmann in the 1980s, a tough time in Texas when tens of thousands of such lots were placed in the hands of the Resolution Trust Corp., a government agency established to sell assets of troubled thrifts.
"People would say, 'Those are deadwood. Don't count those anymore because they'll never be used again,'" Inselmann said. "They were wrong. Ultimately, they got bought by a builder and came back to life in some fashion. And I think that's going to happen again."
In some areas, the revival has already started.
On the south side of town, houses are going up in the formerly idle Hall Park Place where a massive yellow banner hanging on the fence surrounding it advertises "New Homes" for "$0 Down."
The builder, LGI Homes, bought the property because the lots were already developed and "that location right off the Beltway in our mind is a fantastic location," said CEO and chairman Eric Lipar.
The homes, targeted at entry-level buyers, are selling for an average of $150,000.
That's a market many builders have soured on, as lending standards remain tight and land prices have shot up.
During the last housing boom, developers created new subdivisions outside of master-planned communities. Builders put up modest homes meant to attract first-time buyers with access to easy credit.
When the mortgage market crashed and home values dropped, many of these neighborhoods became littered with foreclosures. Builders couldn't compete on pricing with the distressed properties. Many subdivisions were left partially built, their futures in limbo.
As the Houston area has recovered, builders have focused on master-planned communities and higher-end neighborhoods, where demand has returned in full force.
"Not very many people are addressing the starter-home market," Inselmann said, "and frankly those deadwood lots might represent the only inexpensive lots that will exist in the future."
Southview Villas is close to a community center, a park and a middle school. It's also near a strip of metal warehouses and an older neighborhood that's been around since around the 1950s.
The property, including the homes, were recently purchased out of foreclosure by investors.
"I was told they have a builder who was interested in taking those lots over and building on it," said S. Abbas Ali, a real estate agent who is listing the houses for sale.
Angela Hunter lives in one of the older houses in the adjacent subdivision.
She was excited when she first saw new development in Southview Villas. Over the years, the larger community has lost some of its better stores, she said one afternoon after returning from a shopping trip to Kroger. She has to drive a little extra to get to get to the nice one.
New housing, she said, could attract more retail.
Sitting at her kitchen table, she expressed hope someone would come in to finish building out the neighborhood.
"I hope they do," Hunter said. "That's an investment somebody put out there."
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