TEMPLE, Texas — Three years ago, Vista Real Estate owners Jimmy Torres and Emilio Perales began creating property development companies to help the builders they worked with find land to build on.
Now, in 2021, they still have options to build properties, though the market is facing unprecedented challenges. A healthy housing market has six months of available inventory. The current market has around just more than a week of inventory.
6 News met up with Torres to discuss how Central Texas got here and how long the market will take to improve.
1. Property to build on has become hard to find.
Central Texas might be a big place, but many people are moving in to take advantage of the cost of living. Torres said some companies or individuals are buying properties before they even get them and holding on to those properties, which leaves less to develop.
"We have folks out of California and the West Coast buying the land and they'll go and develop it later on or sit on it and wait and see that happens," Torres said. "Right now it's hard to find lots, land, finished homes, you have just a shortage of everything."
Torres and Perales were still able to buy up land in Temple to create their own opportunities. A new subdivision just West of I-35 and 363 will have 110 single family homes and 38 duplex lots, though building those homes has been made much more complicated by the next issue: Materials.
2. Materials are scarce, costs are skyrocketing
Many builders are now in the difficult situation of starting a home and having no idea what the cost will be once they complete it. Torres told 6 News the price of plywood has increased around 700 percent in the last year and builders need plywood to finish wrapping homes. The cost of other materials has increased. The only way developers or builders can mitigate the issue is to buy in bulk before large projects.
"We are having to buy all the materials prior to even starting the subdivision," Torres said. "We bought the plumbing, all the sewer, everything."
Torres told 6 News that COVID-19 impacted wood production when it shut down plants in the northern U.S., and that's made plywood and 2x4s hard to get, and expensive when you do get them. Torres said even concrete was getting scarce. He said the development company spent $650,000 on materials for a Temple subdivision three months before they even broke ground.
Torres said some companies are even driving across state lines for materials to finish homes.
"We represent 18 builders. In the past, they have all, on average, been able to finish a home in about five months. Right now it's like 6 or 7 months. If we get really lucky we can get that five months, but any normal time you are going to have to add a month to that at least. The bigger projects will be taking more time."
3. Plumbers, electricians, and other tradesmen are hard to find
Torres and Perales told 6 News many plumbers, electricians, carpenters, and other tradesmen have more work than they know what to do with after February's winter storm. The combination of COVID-19, a lack of materials, and the freezing weather stalled many projects and now tradesmen are working hard to catch up before they can move on to new subdivisions.
"Frames are 15 homes behind. Electricians are trying to finish five or ten homes a day. Right now everyone is behind," Torres said.
4. Builders are waiting to put properties on market due to changing prices
The rising costs of materials put builders in a tough situation. If they were under contract on the price of the home, they are losing money. If they are not, and are trying to sell a home before it is completed, they may continue to raise the price to account for materials. Torres said many builders are now simply waiting until homes are complete to put a listing on the market because they still don't know what the final price is.
"They don't know what their cost is. It's not because they are trying to make more money, they just don't know," Torres said. "This is evolving and everyone is working together to figure it out."
The Temple subdivision east of I-35 and 363 was originally supposed to be ready for builders to start in October of this year, but Torres said they don't really know what the timeline is going to be at this point. He said some larger projects have been delayed up to six months and homes take at least a month longer to build right now. He hopes to see developments return to normal time lines by the end of the year.