At last count there were 51 cleared lots in River Oaks, only four of which were actively on the market. Most of the other lots were in private hands, often adjoining existing homes or being held for future custom new construction. Six were destined for speculative new construction.
Lot sales in the first half of 2017 included everything from a large lot in a premium location to small lots on highly trafficked streets. The larger lot sales are typically for custom new construction and, with one exception, that was the case in 2017. The only lot type missing from the mix was ravine lots.
Twenty custom new-construction projects were underway in the Summer of 2017, together with 12 major remodeling projects. If you happened to live close by to any of these ‒ and they are curiously clustered ‒ it may not feel this way, but the number of these projects has fallen significantly since 2016.
The small lot purchases ‒ those 10,000 square feet or smaller ‒ were predominantly by speculative builders, despite the widely held notion that speculative houses in River Oaks are no longer feasible on lots smaller than 11,000 square feet. It’s all very well for private buyers to purchase small lots, even in trafficked locations ‒ they usually have a good reason for doing so ‒ but for speculative builders it’s another matter. And usually ends in tears.
Combine that small lot with a heavily trafficked location, plus a high price per square foot, and a spec builder may easily get squeezed before the house is sold. We know that when small premium lot prices converge with small highly trafficked lot prices (see graph River Oaks’ Two Small Lot Prices), there will be trouble. Here’s how the process works:
- Builder: I need to get some of that River Oaks new-construction action! Those other guys say they are making a killing.
- Builder’s friend: I heard from my buddy the other night that River Oaks lots are going for over $160 per square foot.
- Builder: Wow, that’s crazy! That’s twice the price of Memorial. Maybe I can find a small lot to bring the cost down, and I can save some money by not using a realtor. And I will build the maximum size house allowed so that the deal makes sense on paper for my banker.
- Builder’s friend: My buddy also told me there is a terrific tear-down on …… Drive, backing up to …… Street. It’s a fantastic location and only 8,000 square feet. There are houses just blocks away that are worth tens of millions. What a deal!
- Builder: (thinking: Well, it backs to a very busy street, but I know that I can make up for it. I’ll show those River Oaks guys what a great house looks like. I’ll design the house myself and make all the design selections. It will be like nothing else in the neighborhood. People will be tripping over themselves to take a look.)
Many months later:
- River Oaks Buyer: I really need to downsize from this big house now that the kids have grown, but I don’t want to move out of River Oaks. Cameron, can you show me some new construction? I want something new and I don’t want to have to fix anything up.
- Realtor: Certainly, we can take a look. Perhaps one of these will be suitable. But keep in mind that there’s no such thing as a perfect house ‒ even if you build it yourself. You may have to compromise if you want to buy a spec house.
- River Oaks Buyer: (Shocked) But why are they so ugly? And huge? That traffic whizzing by is making me dizzy. Will the grandkids ever visit us? Why do these builders do this stuff?
- Realtor: (Just shakes head)
Thankfully, there are plenty of other possibilities too. For a full rundown of upcoming new construction choices in River Oaks, please call us 713-240-2611. You can also find a recent article, posted in March on our website, here.