Post on 26-Jun-2020
Presented by:
David Jarvis
5909 West Loop South Suite 590
Bellaire, Texas, 77401
(713) 906-3829
djarvis@realestateconsulting.com
Impact of Hurricane Harvey
Trusted Analysis for Executive Decisions
Our Proprietary 5-Step Process to a Profitable Project1 . D E M O G R A P H I C T R E N D S
Our Proprietary 5-Step Process to a Profitable Project
The 4 Big
Influencers
During 5 Main
Life Stages
Help Answer 6
Key Consumer
Questions
1. Childhood
2. Early Career
3. Family
Formation
4. Late Career
5. Retirement
1. Government
Policies
2. Economic
Cycles
3. Technology
Advances
4. Societal Shifts
1.How many will there be
and how much money will
they have?
2.What will they purchase?
3.When will they purchase?
4.Where will they
live/spend?
5.Who will buy and who will
they live with?
6.Why will they buy certain
products and not others?
History Lesson #1 – Labor Costs Will RiseR O L L I N G 1 2 M O N T H G R O W T H I N W A G E S & S A L A R I E S P E R C O N S T R U C T I O N
W O R K E R , M I S S I S S I P P I
Source: John Burns Real Estate Consulting, LLC
History Lesson #1 – Labor Costs Will RiseN E W H O M E C O N S T R U C T I O N C O S T S W I L L R I S E F O R S E V E R A L Y E A R S
Source: John Burns Real Estate Consulting, LLC
• Government regulation and oversight will likely increase, making home
construction more expensive. After three major floods in less than three
years, most Houstonians no longer believe flooding is a once in a life time
event.
• Labor costs will rise. 8 of the 14 builders we spoke with last week expect
new home permits to decline for the balance of the year, primarily due to
short supply of labor. All expected labor prices to continue increasing.
Construction worker compensation rose 14% in Mississippi after Hurricane
Katrina. Our clients in Dallas expect to lose workers to Houston as well.
• Land prices likely to remain stable. The shortage of land in good locations
will likely continue to keep land prices high.
• Construction volumes will be higher than forecasted in 2018 and later. It
took about 5 years after Hurricane Katrina to rebuild the housing stock in
Harrison and Hancock counties.
History Lesson #2 – 5+ Years of Rebuilding For Areas
Hardest HitH U R R I C A N E K AT R I N A I M PA C T O N H O U S I N G S T O C K : H A R R I S O N A N D
H A N C O C K C O U N T I E S , M S
Source: John Burns Real Estate Consulting, LLC
112,460
91,253
107,049
90,000
95,000
100,000
105,000
110,000
115,000
2005 - Before Katrina 2006 -After Katrina 2010 -5 Years After Katrina
Hurricane Katrina Impact on Housing Stock:Harrison and Hancock Counties MS
-19% Loss of Housing Units
5 Years of Rebuilding
History Lesson #3 – Short Term Pain Immediately After
Storm, Followed by ‘Catch-Up’ in Construction VolumeN E W H O U S I N G P E R M I T S : G U L F P O R T - B I L O X I - PA S C A G O U L A , M S
Source: John Burns Real Estate Consulting, LLC
History Lesson #4 – Resale Home Prices Take a 1-Year
Hit After a FloodM E D I A N R E S A L E H O M E S A L E S P R I C E S - % C H A N G E Y O Y
Source: John Burns Real Estate Consulting, LLC
Flood Plan from 1940s - Houston
Summary
Source: John Burns Real Estate Consulting, LLC
• Prior to the hurricane, many new home sellers and apartment landlords were offering incentives to buyers and renters due to a slowly growing economy and an overbuilding of expensive apartments.
• With housing vacancy certain to decline, we expect the incentives to diminish.
• It will be a long time before Houston returns to normal.
• We believe new home construction will fall in the short term, but rise in the long term. New home prices will have to go up because costs will go up.
• We believe Houstonians will work hard to rebuild the region we love.
Questions?
CONSULTING
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David Jarvis, SVP(713) 906-3829
djarvis@realestateconsulting.com
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
LOCAL & NATIONAL FOOTPRINTHOUSTON ECONOMICS CLUB
INTRODUCTION
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
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technology advisors as well as leading
data company providing our clients with
a clear perspective and a strategic path
forward.
Our Advantage: The combination of
deep real estate knowledge and cutting
edge technology backed by the most
comprehensive data.
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Our Team: Based in Beverly Hills, we
are home to 80 experts in 10 offices
across the country.
About Us
Meyers Research
© 2016 Zonda | Meyers Research LLC
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
SERVICES
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Development
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Development
• Commercial Analysis
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Analysis
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Witness
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Define strategic insights to
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and placemaking through
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Our Clients: builders, REITS,
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AdvisoryAbout Us
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we work in at a given time
540Approximate number
of studies a year
ADVISORY
TECHNOLOGY
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© 2016 Zonda | Meyers Research LLC
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
LOCALLY BASED, NATIONALLY EXPERIENCED
Beverly Hills | San Diego | Orange County | Bay Area | Dallas | Houston | Phoenix | Denver | Charlotte | Philadelphia | New York | Seattle
IMPACT OF HURRICANE HARVEY
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
REVIEW OF 9 SIGNIFICANT FLOODS IN HOUSTON
• March 1992
• October 1994
• October 1998
• November 1998
• June 2001 (TS Allison)
• December 2005
• April 2008
• May 2015 (Memorial Day Flood)
• April 2016 (Tax Day Flood).
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
AVERAGE SALES RECOVERY: 6 MONTHS
85%
90%
95%
100%
105%
110%
115%
120%
125%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
% o
f F
oo
d M
onth
Sa
les
Months
Months to Sales Recovery, Major Floods
Mar-92 Oct-94 Oct-98 Nov-98 Allison
Oct-05 Apr-09 Tax Day Memorial Day
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
NEW CONSTRUCTION ON AVG RECOVERS IN 3 MONTHS
85%
90%
95%
100%
105%
110%
115%
120%
125%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
% o
f F
lood
Mo
nth
Sa
les
Months
Months to Permit Recovery, Major FloodsMar-92 Oct-94 Oct-98
Nov-98 Allison Oct-05
Apr-09 Tax Day Memorial Day
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
RECOVERY TO PRE-FLOOD LIKELY MARCH/APRIL 18
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 2 4 6 8 10 12 14
% o
f C
ases R
ecovere
d
Months to Recovery
Harvey Recovery ScenariosPermits Pricing Sales
70% probability of
recovery 6-8 months
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
WHAT DID WE MISS FROM HARVEY
Sales were lower by 100+ per day vs 2016 the week after the storm; by the following week sales were above 2016 levels.
Source: Meyers Research analysis of data from HAR MLS
7 8 9
20
16
20
17
Mo Tu We Th Fr Sa Su Mo Tu We Th Fr Sa Su Mo Tu We Th Fr Sa Su
-6
-4
-2
-6
-4
-2
Week of Month
50
100
150
Sales
Daily Sales
July-August-September Sales
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
MONTHLY SALES TIME SERIES DECOMPOSITION600
1000
1400
data
-300
-100
100
seasonal
800
1100
1400
trend
-300
-100
100
2008 2010 2012 2014 2016 2018
rem
ain
der
time
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
NEW HOME CLOSINGS UP 6.2%
0
100
200
300
400
500
600
700
800
Closings Jan - Sept
New Home Closings 2016 vs 2017 YTD
NSA New Home Closings SA New Home Closings
Source: Meyers Research analysis of data from HAR MLS
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
FORECAST SHOWS 2017 & 2018 UP FOR NEW SALES
2008 2010 2012 2014 2016 2018
80
09
00
10
00
12
00
14
00
Source: Meyers Research analysis of data from HAR MLS
Forecasts show 2017 closing out as high as 10% over 2016. Probably aggressive – should end up at 5% or less.2018 forecasts now look to be about 1.5% - 3.5% over 2017.
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
SEASONALLY ADJUSTED MONTHLY SF LEASES IN MLS
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
9 TRILLION GALLONS OF RAIN WATER FELL DURING HARVEY
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
82% OF HOMES IN FLOOD ZONES BUILT BEFORE 2000
AVERAGE AGE OF HOMES IN INUNDATION ZONES: 1980
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
HARRIS COUNTY PROJECTS IN HCFCD INUNDATION ZONES
Status Projects Units VDL3 Mo
ASR
12 Mo
Asr
Active Projects 90 7582 3179 1.7 1.72
Sold Out Projects 72 3223
- 1.49 1.31
Upcoming Projects 9 128 128
Grand Total 171 10933 3307 1.66 1.62
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
8,000 SF UNITS LEASED IN AUGUST
0
2000
4000
6000
8000
Month
Tota
l Un
its
Leas
ed
Source: Houston Association of Realtors MLS
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
SEASONALLY ADJUSTED MONTHLY SF LEASES IN MLS
LOCAL & NATIONAL FOOTPRINT
October 2017 | THEC Houston Housing Post-Harvey
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Houston Economics Club Houston
Housing Market Update
October 31st2017
Houston Economy and Harvey’s Impact
New Home Market Highlights
www.metrostudy.com / www.builderonline.com
Houston After HarveyHarvey: Initial Observations
• Harvey dumped one year’s typical rainfall on the Houston region in five days (49”).
• Moody’s Analytics estimates total economic losses to the Texas Gulf Coast (including Houston) of $97B, $87B of which is property losses.
• Upstream Energy, Health Care, and Aerospace, the three pillars of Houston’s economic base saw relatively minimal impact from Harvey.
• Downstream energy saw greater impact as more than ¼ of the nation’s refining capacity was offline on August 30th due to Harvey. As of September 7th 16% of capacity was offline, and this number continues to improve.
• Only 40 of the region’s 1,200 office buildings received damage.
• Apartment Data Services found that 9,662 apartment units in 177 properties, or 1.6% of the overall market inventory, were damaged. Apartment occupancies have improved slightly….but for how long?
• The Houston region is anticipated to lose approximately 300,000 vehicles with a total value of $2.4B
www.metrostudy.com / www.builderonline.com
Houston After HarveyHarvey: What Does This Mean for Homebuilding?
167,000 single-family homes were damaged or destroyed in the Houston area…………
www.metrostudy.com / www.builderonline.com
Houston After HarveyHarvey: What Does This Mean for Homebuilding?
….but virtually all look like this:
….not this:
www.metrostudy.com / www.builderonline.com
Source: New York Times, Metrostudy
Houston After HarveyHarvey: Initial Observations for Homebuilding
• Largely a resale market phenomenon
• Little disruption of new home community operations
• Top 30 Builders generally reporting 1% to 5% of their inventory and models receiving damage
• Few new home communities and new home areas received flooding damage
• Sales and traffic up slightly since Harvey
• Operations disruption from employees being impacted.
www.metrostudy.com / www.builderonline.com
Houston After HarveyHarvey: What is Next for Homebuilding
• Any sales volume increase due to flood victims is not likely until late 4Q or 1Q 2018.
• Risk of competition for trades, vendors, and materials.
• Growth opportunity for builders with BOYL operations.
• Mostly business as usual….
Houston Economy and Harvey’s Impact
New Home Market Highlights
Houston New Home Market HighlightsMSA Annual New Home Starts - Ranked
www.metrostudy.com / www.builderonline.com
Source: Metrostudy
Rank Market Annual Starts Annual Change % Change
1 Dallas/Ft.Worth 31,280 1,654 5.6%
2 Houston 27,111 1,072 4.1%
3 Atlanta 22,594 2,145 10.5%
4 Central Florida 22,520 3,000 15.4%
5 Phoenix/Tucson 21,629 1,778 9.0%
6 Southern California 19,589 1,534 8.5%
7 Denver/Colorado Springs 19,549 1,550 8.6%
8 Austin 16,088 2,665 19.9%
9 Northern California 13,951 175 1.3%
10 Charlotte 11,929 1,227 11.5%
11 Raleigh/Durham 11,420 645 6.0%
12 Salt Lake City 11,365 1,340 13.4%
13 San Antonio 10,949 971 9.7%
14 Philadelphia Region 10,675 430 4.2%
15 Suburban Maryland 10,081 770 8.3%
0
0.5
1
1.5
2
2.5
3
3.5
5000
10000
15000
20000
25000
30000
35000
4Q101Q112Q113Q114Q111Q122Q123Q124Q121Q132Q133Q134Q131Q142Q143Q144Q141Q152Q153Q154Q151Q162Q163Q164Q161Q172Q17
M-O-S FV Ann Starts Annual ClosingsSource: Metrostudy
Houston New Home Market HighlightsAnnual New Home Starts and Closings
www.metrostudy.com / www.builderonline.com
27,112 Starts
26,744 Closings
Houston New Home Market Highlights Annual New Home Starts and Closings by Price Range
www.metrostudy.com / www.builderonline.com
4084
10896
6531
2881
1228797
219 477
3990
10459
6401
2989
1283891
256 468
0
2000
4000
6000
8000
10000
12000
$0 - $199 $200 - $299 $300 - $399 $400 - $499 $500 - $599 $600 - $799 $800 - $999 Over $1M
Annual
Starts
Annual
Closings
-19%
Source: Metrostudy
-12%
+ 5%
+10%
+10% -7%
+10%
-17% -24%
-5%
-29%
-4% -9%
-8%
-14%
+9%
Houston’s Top Builders and CommunitiesTop Fifteen Builders Ranked by Closings – All Brands Combined
Source: Metrostudy
www.metrostudy.com / www.builderonline.com
Rank Builder Brand Annual Closings
1 DR Horton 2787
2 Lennar 2295
3 Perry 1451
4 K Hovnanian 1338
5 Long Lake 1169
6 KB Home 1040
7 Pulte 864
8 Meritage 804
9 Taylor Morrison 746
10 Highland 744
11 Weekley 742
12 Beazer 721
13 LGI 704
14 CalAtlantic 680
15 Westin 590
#1 Riverstone507 Starts
#5 Sienna Plantation362 Starts
#9 Miramesa294 Starts
#10 Imperial Oaks293 Starts
#3 Bridgeland413 Starts
#8 Tamarron303 Starts
#6 Woodforest340 Starts
#11 Harvest Green288 Starts
#2 Aliana443 Starts
Top 2Q2017 Communities
Ranked by Annual Starts
#4 Cross Creek Ranch382 Starts
#7 Towne Lake
305 Starts
#5 Wildwood / Northpointe362 Starts
#12 Ventana Lakes
272 Starts#14 Cypress Creek Lakes
247 Starts
Source: Metrostudy
#13 The Woodlands261 Starts
#15 Rodeo Palms224 Starts
#15 Rancho Verde
224 Starts
www.metrostudy.com / www.builderonline.com
Houston New Home Pricing PowerHouston Remains Affordable Despite Price Increases
Houston New Home Pricing Power% of Annual New Home Closings by Price Point
www.metrostudy.com / www.builderonline.com
Source: Metrostudy
10000
15000
20000
25000
30000
35000
40000
45000
50000
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017YTD
Tota
l An
nu
al N
ew H
om
e C
losi
ngs
% O
f A
ll N
ew H
om
e C
losi
ngs
Total Annual Closings
% Closings < $199K
% Closings $200-299k
% Closings $300-399K
% Closings $400-499K
% Closings $500-599K
% Closings $600-799K
Volume reduction sub $200K
www.metrostudy.com / www.builderonline.com
New Home Inventory and Sales EnvironmentAnnual New Home Starts and Closings $0-199
Source: Metrostudy
11724
7780
931510111
9007
7203
4659 4084
12187
87149178
9828
8923
7661
4931
3990
2000
4000
6000
8000
10000
12000
14000
2Q 2010 2Q 2011 2Q 2012 2Q 2013 2Q 2014 2Q 2015 2Q 2016 2Q 2017
Starts
Closings
Starts down 65% from 2Q 2010
www.metrostudy.com / www.builderonline.com
New Home Inventory and Sales EnvironmentAnnual New Home Starts and Closings $200-299
Source: Metrostudy
5621
4587
5749
7545
8290
9269
9888
10896
5873
4910
5439
6788
8013
8557
996610459
4000
5000
6000
7000
8000
9000
10000
11000
12000
2Q 2010 2Q 2011 2Q 2012 2Q 2013 2Q 2014 2Q 2015 2Q 2016 2Q 2017
Starts
Closings
Starts up 94% from 2Q 2010
www.metrostudy.com / www.builderonline.com
New Home Inventory and Sales EnvironmentAnnual New Home Starts and Closings $300-399
Source: Metrostudy
2122 2213
3063
4079
5360
5942
6531 6531
2360
2153
2878
3551
4774
5855
6401 6401
1500
2500
3500
4500
5500
6500
7500
2Q 2010 2Q 2011 2Q 2012 2Q 2013 2Q 2014 2Q 2015 2Q 2016 2Q 2017
Starts
Closings
Starts up 208% from 2Q 2010
10000
15000
20000
25000
30000
35000
40000
4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Ann Starts Ann Deliveries
Houston Land and LotsAnnual New Home Starts and New Lot Deliveries
www.metrostudy.com / www.builderonline.com
30,502 Lot Deliveries
27,112 Starts
5,320 lots delivered 2Q 2017
Source: Metrostudy
www.metrostudy.com / www.builderonline.com
Houston New Home MarketFORECAST
Annual New
Home Starts
Annual New
Home Closings
2015 Actual 28,064 27,922
2016 Actual 25,489 26,949
2017 Projected 26,950 26,250
2018 Projected 27,550 27,000
…now you know