Terry Wilkinson has sold his last home lot in Monticello Estates.
Since its launch in 1995, the 117-lot development near Fort Worth has been a popular product in the rarefied air of Southlake’s upper-end housing market.
Monticello Estate’s luxurious amenities–guard gate, sports and tennis courts, walking trail–have helped make it a favorite among builders and buyers in the $500,000-plus home market.
But with his last lot sale in October, Wilkinson now has a problem: He has nothing left to sell. And that’s not likely to change any time soon. He can’t find a suitable development site from which to capitalize on the booming market.
“I just can’t find one I’m comfortable with,” he says. “It looks like I’m going to be on the sidelines.”
Wilkinson’s situation is a common one.
Despite the North Texas market’s continuing strong home demand, developers are finding it increasingly difficult to deliver new lots in the Southlake-Colleyville area, long considered the heart of the area’s luxury home industry.
Several years of booming growth have absorbed many of the best and largest tracts, resulting in higher prices and fewer choices. As lot supplies shrink, developers are facing the twin challenges of finding marketable subdivision sites in these sought-after locations and delivering the lots at a price consumers are willing to pay.
“It is getting extremely difficult in Colleyville and Southlake,” says Doug Gilliland, president of the Greater Fort Worth Builders Association and Triwest Enterprises, a land development company in Keller.
“It’s inevitable. We’re going to reach the point where we’ve passed the consumers’ appetite. There’s a moment when the consumer takes a deep breath and says, `Oh, boy, this is too much.’ “
Builders and developers say the market poses pricing challenges across a wide swath of the northern tier of Northeast Tarrant County, which has long been one of the busiest home building markets in the county.
Even in places where land remains plentiful, like north Fort Worth and Keller, demand has pushed up land values and caused lot and home prices to rise accordingly. For example, prices have gone up enough in north Fort Worth that many developers say they can no longer serve the under $100,000 home market on any site east of Interstate Highway 35W.
But in north Fort Worth and Keller, home building is on the rise, and the lot supply is strong. Starts and inventories are dwindling in Southlake, Colleyville and Grapevine, according to the Dallas research firm American Metro/Study Corp.
During the third quarter, Southlake logged total home building starts of 134, down 19 percent from 165 during the same period last year. Colleyville totaled 41, down 18 percent from 50. And Grapevine totaled 29, down 40 percent from 48.
In comparison, starts jumped 30 percent in Keller and 46 percent in north Fort Worth. Overall, the Tarrant County area rose 7.4 percent.
How could three out of five such popular areas see construction drop when demand is high in the county as a whole? Well, there are not enough lots to build on.
Walt Sosnowski, senior consultant with American Metro/Study, confirmed that the Southlake, Colleyville and Grapevine inventories are “definitely below average” and nearing the 15- to 16-month inventory level that is considered a shortage.
“In all those cases, it’s a supply problem more than a demand problem,” he says. “Buyers are still there, but there are fewer houses to choose from, and prices are up.”
Sosnowski attributes the slowing activity to pressure from higher land prices. When land prices go up, the cost is passed on to consumers in the form of higher lot prices and higher home prices.
“It’s been a long time since the collective land owners in this market have been as strong as they are,” he says. “They don’t have to sell, they can wait. They’ve got strong balance sheets. You’ve got a lot of people who’ve gotten pretty proud of their land. They’re not going to have to sell it cheap like maybe they would have four or five years ago.”
Driving Texas Highway 114 west out of Grapevine, you’d be hard-pressed to accept the notion that the region is running out of attractive development sites. The abundant mix of rolling pastures and post oaks, combined with the artificial amenity of the sought-after Carroll school district, would seem fertile ground indeed for luxury home construction.
But Steve Patterson, a local land broker, says the wide-open countryside is deceiving. Some of the land is in the flight path for Dallas/Fort Worth Airport, making it unsuitable for residential use. Other sites have no water or sewer service, and the cost of extending the lines would make many projects cost-prohibitive.
“Then you’ve got to take out the commercially zoned property,” he says. “It’s not like you think.”
So why not build high-dollar homes in a new area? Colleyville was once the premier city for high-dollar home construction, and then the momentum shifted to Southlake. Couldn’t a neighboring city, where land is more available, become the next “in” address for upscale housing?
Circle T Ranch is one of the most often cited locations. Dallas developer Ross Perot Jr. is anticipating both commercial and residential uses for the 2,000-plus-acre property.
Ron White, chief operating officer of Perot’s Hillwood Development Corp., said there are no immediate residential development plans. In-fill projects in Southlake and Colleyville should handle the demand for several years.
But in time, the local luxury housing market “will transition very nicely to the Circle T,” he said. “We hope to be there more near term than long term.”
Gilliland says upper-end housing is already moving into Keller. In the recent past, home lots were priced from the $50,000s to the $70,000s in Southlake and the low $40,000s to the low $50,000s in Keller. Now, two new Keller subdivisions are on the market with lots priced from the mid-$50,000s to the mid-$70,000s, the same as in Southlake.
“They’re getting a lot of attention from builders who traditionally looked only in Southlake,” Gilliland says. “Keller is the next logical place.”
But others aren’t so sure.
Sosnowski says the long-anticipated rise of upper-end housing in Keller has yet to materialize.
“I’m tired of hearing people talking about it,” he says. “I’ve just been hearing it for so long and it’s just never happened.”
He says most of Keller’s new homes are priced below $220,000; most of those in Southlake and Colleyville are priced above that mark.
Wilkinson isn’t anticipating a Keller luxury housing boom anytime soon, either.
Housing developers say upper-end home buyers are most attracted to large, estate-type lots and trees.
“That’s a huge deal,” says Richard Myers, who is developing the Esates of Westlake, in Keller. “You don’t have enough trees in Texas to begin with. When people imagine their dream house, they imagine it in a grove of trees.”
Topography is important, too. Although developers of entry-level housing projects are often attracted to relatively flat, treeless sites that can be developed inexpensively, developers in the upper-price ranges tend to seek sites with hills and water, perhaps a creek or pond. Those kind of sites are getting harder to find, says David Bagwell, a longtime developer in Colleyville.
There is good land available in Colleyville, he says, adding, “There’s not, however, a lot of land that has character to it.”
But there is enough for Bagwell. And it can be had at a price low enough to meet the demands of the marketplace.
“The price of land is high, but workable,” he says. “In the first hour of Economics 101, they teach price is a function of demand. We’ve got real strong demand.”
By no means are the days of new subdivisions in the Southlake/Colleyville area over. Developers say they expect the market will shift to smaller, in-fill projects that will absorb remaining land parcels.
