Houston home builders’ pipelines are completely backed up

Homebuilders discussed pricing, supply shortages

(iStock/Photo Illustration by Steven Dilakian for The Real Deal)

Skyrocketing diesel prices, material shortages and permitting delays are pinching Houston home builders’ ability to quickly develop lots in a market starved for inventory.

“Speed, speed, speed. Time kills,” said David O’Reilly, CEO of The Woodlands development company Howard Hughes. “When it takes an extra nine months to deliver a finished lot to (builders), that shrinks supply and demand doesn’t change. Pricing goes through the roof.”

O’Reilly was among some of the region’s top builders and developers speaking at an industry event held by the Greater Houston Builders Association. More than 800 people attended the event at the Hilton Americas as affordability remains one of the biggest challenges facing housing, according to the Houston Chronicle.

On top of the average price in Houston surpassing a record $400,000, mortgage rates in the Bayou City have also risen rapidly, topping 5 percent after starting the year near 3 percent.

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Skyrocketing building costs aside, the supply of vacant finished lots for homebuilders to develop on remains historically low. Furthermore, local government agencies responsible for permitting are facing severe staffing shortages, pushing back timelines for both lot development and home construction, said Jim Jenkins, another panelist at the event.

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“In several of our communities, we’re having to get approvals for the same thing in the city level and the county level,” said Jenkins, who serves as vice president of master planned communities at Toll Brothers.

Supply chains are getting further tangled by rising diesel prices, Jenkins said.

“When the price of diesel fuel is getting to the point where you really can’t afford to drive a truck anymore — you’re going to have to do something about that,” Jenkins told the Chronicle after the panel.

Shortages are driving some builders to stockpile supplies and equipment, such as HVAC systems, said Allan Merrill, president and CEO of Beazer Homes, an Atlanta company with several communities in the Houston area.

“That’s not really a sustainable answer; builders aren’t warehousers,” Merrill said. As an alternative, he says builders should simplify houses, give manufacturers more lead time and only sell homes that they can deliver in a reasonable time.

[Houston Chronicle] — Maddy Sperling