2002 CCIM Land Forecast

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2002 CCIM Land Forecast
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• Presented by
• Edward Taravella, CCIM, CPA

TARACORP
610 W. Greens Rd. Houston, Texas
77067 281-872-8888
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HEADS UP !!

• Late breaking issues which could be put a brake
  on some land values.

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Revenge of TxDOT Points of Conflict

• Access to State roadways is not assured!
• TxDOT was lax in the past. Much greater
  emphasis is being placed on safety issues. i.e.
  Points of Conflict 
• Must ensure that tie-in wont produce a traffic
  hazard.

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Revenge of TxDOT

• Do you currently have legal access ?
• - Is there an alternate way onto the property?
• May require modified access and a warrant
  study to determine if signalization is necessary.

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Latest on I-10 Access

• Until recently, TxDot was considering selling
  access based on a With and Without appraisal.

• Now, it appears land owners along north side of
  I-10 will have NO access to the new feeder.

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NEW FLOOD PLAIN MAPS PENDING !

• Will have a significant impact on values. Could
  pose a threat to the tax rolls and the budgets of
  local taxing entities. 
• Will be some very upset property owners.
• Draft copies of these maps will be available for
  public review in March.

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TIP From the Judge

• Buy flood insurance !

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What Will Land Prices Do in 2002 ?
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Houstons Economic Recovery (?)
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Rule of Thumb

• For every 1.75 jobs created, 1 new household is
  formed,
• Of which around 80 purchase homes. 

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Problem

• This equation doesnt address WHEN they will
  purchase homes.

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Jobs Mean Households

• Houston created over 100,000 jobs in 1997 and
  over 80,000 in 1998.
• We are still feeling the effects on single family
  starts.
• Will the lack of job growth in 2001 and 2002
  impact sales in future years ?

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What, Me Worry ?

• Despite anemic job growth, 2001 was the best year
  for single family starts since 1982.
• Sales traffic was up in 2001 over 2000, despite
  the national recession and 9/11.

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What, Me Worry ?

• 2001 Housing Starts exceeded 2000 starts.
• Except for September, every month in the year
  2001 was better than the same month in the
  previous year for single family starts. This
  includes Oct, Nov and Dec.

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of Residential Lots PlattedYTD Nov 2000 vs.
YTD Nov 2001
Source Growth Indicators Dec 2001, Vol 9, No. 15
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Houston Housing Market

• Lot delivery and absorption in equilibrium.
• Some speculate we may not be able to deliver more
  than 30,000 lots per year due to a limitation on
  resources.

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2002 Forecast

• of Single Family Residential Starts 26,995
• Avg. Lot Price for 65 Lot -
  34,800.
• of New Home Lots Developed 28,900

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Valuing Houston Area Land
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Development Variables Which Effect Values

• Drainage Detention and Outfall
• In or near existing utility district.
• Qualify

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Two Schools of Thought on Land Prices in 2002
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One School Prices will be Mushy

• Spread will get larger between bid and asked.
• No agricultural exemption on commercial land
  makes it harder to hold.
• This statement will probably hold true for quite
  a bit of land inside the Loop.

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The Other Most land is in strong hands

• Dont feel pressure to sell.
• Have confidence in Houstons prospects for 2003
  and later and are willing to hold to get their
  current price or better.

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Two Schools of Thought on Land Prices in 2002

• Answer is probably a mix of the two.

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Outlook for 2002

• Difficult to find investor land. Most owners
  have user/developer prices.
• Some investors are known to be looking beyond
  Fulshear to the west, the Waller County area and
  north of Conroe for larger tracts at reasonable
  prices.

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Suburban Land Prices in 2002

• There still appears to be a feeding frenzy on
  suburban land in or near existing MUD districts
  which can be drained, even in school districts
  which were out of favor 1 or 2 years ago.

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Suburban Land Prices in 2002

• Some tracts have changed hands in the last 6
  months in the 6,000 - 9,500 per acre, but there
  are far fewer now.
• More typical now is land 12-15K per acre to as
  high as 20K. Those with the fewest development
  problems will go first.

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Inner City Land Prices in 2002

• Inner city land had seen a tremendous run-up in
  prices over the last 4 5 years but this is
  slowing or has stopped.
• Land in Mid-town is still trading in the
  22-28/SF range, the same as 2001. Asking prices
  are still in the 30 - 35/SF range.

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Inner City Land Prices in 2002

• Crash in the Demand Curve.
• There is a glut of three story townhomes in the
  West End/Rice Military area.
• Sticker shock.
• The market has reached a plateau.
• Puts a cap on land values. (Temporarily)

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Inner City Land Prices in 2002

• There are certain key strategic tracts which will
  still command prices in the 40 - 50/SF range
  but a very limited number of transactions.
• Buyers will be more selective.
• Slower growth in the residential market will
  impact commercial land demand.
• Fewer overall transactions in 2002.

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Platting Activity in AcreageYTD Nov 2000 vs.
YTD Nov 2001
Source Growth Indicators Dec 2001, Vol 9, No. 15
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of Final Plats ProcessedYTD Nov 2000 vs. YTD
Nov 2001
Source Growth Indicators Dec 2001, Vol 9, No. 15
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2002 Forecast

• of Sales for Grocery Sites
  20
• of Sales for MF Developments 18
• of Sales for Office Developments 8

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Where are the Opportunities ?

• If you can buy decent land that can be drained
  and is in or near a good MUD for less than
  10K/acre, even in less desirable school
  districts, BUY IT!
• We will see continued strong demand and pricing
  on this type of suburban land.

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Summary

• There will be an active land market, but it will
  be predominantly in the suburbs.
• Demand and growth in suburban land prices will
  result from the large amount of housing currently
  being built.
• User demand for commercial use will be
  neighborhood oriented, primarily grocery, retail
  and services.