ABJ: Centex pulls out of 1,400-home project

by Steve Crossland, REALTOR in Austin TX on December 6, 2007 · 4 comments

Looks like Austin is seeing some contraction in the new home inventory, which is a good thing, at least for now. The fact that Centex is backing out of a 1400 home project tells us more about the national housing market, and the financial problems of the large production builders than is does Austin’s market. Yes, we are experiencing a breather right now in Austin as inventory has risen and sales have slowed. But prices are still rising and all of our economic news is solid. Nevertheless, reslae owners looking to sell should be thankful that builders are pulling back some, as it means less compitition for resale homes.

Austin Business Journal
A plan that would have brought 1,400 new homes to northern Travis County has been eliminated as problems in the national housing sector force one of the region’s biggest builders to cut back on its projects.

Centex Homes has decided not to close on 465 acres of the 750-acre Pearson Ranch near Parmer Lane and State Highway 45. The company, which had announced plans in February to develop a 1,400-home community on the tract, said in a statement it would not close on the purchase of the land after a strategic review of projects companywide.

“While nationally many housing markets have experienced extreme shifts, Austin continues to remain in healthy standing with positive employment growth and supply and demand dynamics staying balanced by industry standards to date,” the company said in a statement, adding that it would continue to invest in future and existing communities around Central Texas that better align with Centex’s long-term objectives.

Like many national homebuilders, Dallas-based Centex has been trimming staff and delaying projects across the country amid the decline in the housing markets.

{ 4 comments… read them below or add one }

1 ARZ December 6, 2007 at 6:40 pm

Texas in general is having way too much cheap land (in both local and national standard) to build new homes. That is probably the real reason why texas real estate pricing lagged behind the national average for years. Yes, it makes texas’s pricing looks “normal” and “affordable” now in the face of the national trend. However, in long run, the building activity will have to get to a point of equilibrium in order to give used homes a better change. Until then (maybe 100 years from now), texas will remain affordable but not appreciating above inflation rate. That makes the real estates here not particularly appealing to investors.

2 Ed December 7, 2007 at 5:04 pm

That is the case in California, New York, Florida everywhere. The rules of supply and demand apply in Texas or any other state. The abudance of land in Texas is just one of the many indicators for why home prices are in expensive relative to income and other markets. If the population continues to grow, the economy continues to grow, and interest rates stay in check, Texas real estate will grow.

One of the big reason why Texas real estate hasn’t risen as much as some investors would like is that the property taxes are astronomical compared to other states. (Being from California my provide some light on this opinion) Also, the weather sucks.

However, as a small time investor of a dozen properties in Texas, the rents in comparison to property values remain at a fair equilibrium with a 25% or more down payment. The value of the properties should continue to rise at a reasonable 5% to 8% over the next 10 years making the return on investment between 20% and 32% a year assuming you can make it cover from a cash flow standpoint. The tremendous tax benefits from Real Estate gains vs stock gains proves to be a viable option for patient investors. There are many risks with real estate investment as there are in stocks, but Austin remains a terrific place to look for real estate investments.

If you are looking for a quick gain as we enjoyed in Real Estate in California between 2000 – 2005, you are better off going to Vegas and your odds are better.

3 Ray December 20, 2007 at 11:32 am

Isn’t it probably more than mere coincidence that new housing starts nationally began their decline just as the focus on finally dealing with corporate exploitation of illegal aliens was also taking over the news airwaves? How much of this slowdown is not just buyers waiting it out, but builders waiting for the illegal and exploitable and most importantly artificially cheap sub-subcontract labor pool to reappear after the electioneering political stunts are over with. In mid 2006 our nationally known builder claimed to be taking sweet their time (took more than year after closing) to finish things due to having a very hard time finding contractors, but then they repeatedly refused my offer to provide them with a list of available and legal contractors! Another way to look at it is the new home industry as a whole threw up as many houses as they possibly could whilst the illegal labor was still available and whilst the winds of change were blowing with regard to illegal labor – thus contributing to the current oversupply and sub-prime loan issues. Of course loan officers were incentivised by the builders to make even marginal loans.

4 Jeremiah December 27, 2007 at 9:10 am

This is great news! It’s good to see that major builders in Austin aren’t too greedy to notice they could kill the golden goose if they aren’t careful.

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