Homes change with our lives
A builder adjusts to new regulations, millennial buying habits and rising land prices.
New building regulations, millennial buying habits and rising land prices are reshaping Houston’s housing market.
Houston-based Trendmaker Homes, historically a high-end suburban builder, is adapting to some of the changes by offering new homes at lower prices and on smaller lots.
After 25 years with the company, Joe Mandola took over as Trendmaker’s president this month, succeeding fellow building veteran Will Holder. Mandola spoke with the Chronicle about Houston’s housing market and its challenges.
Q: What’s been the biggest change you’ve seen in Houston over the last 25 years?
A:
When I first got into the business, we were at the tail end of building formal living rooms with formal dining rooms. We phased out the living room and added the study, so it quickly became the norm to not have a formal living room.
It was born out of fact that we have product team meetings here and people were saying, “I use my formal dining room like two times a year.”
When we did that, it freed up space on the first floor because we were also getting calls for buyers wanting another bedroom down. That’s a gotta-have now. That bedroom suite could be for an aging parent, a guest or a boomeranger.
One of the other things is Houston has been a really dynamic master-planned city. A lot of those communities have matured and been built out. The Woodlands was the monster for years, and it’s at the tail end of its life.
You don’t see a lot of rolling out of new master-planned communities that are thousands of acres. You’re seeing smaller communities.
Q: How has the market changed for you more recently?
A:
When the Saudis decided they were not going to cut production and the shale play became the swing market, if you will, that changed dramatically the face of Houston pretty quick. The resulting impact was we lost 90,000 oil- and gasrelated jobs, and we had massive capital expenditure decreases. Then you take all the feeder employees of those jobs, and you have a ripple effect across the housing market. We feel it pretty dramatically at Trendmaker.
You couple it with the growth and the maturity of the millennial generation. They’re going to impact what we build.
Q: How so? A:
What we’re seeing is $350,000 and under is what’s moving briskly.
At $350,000 and up, it’s drastically slower. $350,000 and under is what’s moving in this market, and I’m not really that sure that’s not here to stay from the standpoint of smaller lots.
As land continues to go up in price … that causes you to have to change your densities and product types.
At Trendmaker we’re developing product for that to get down to the $200,000s and low $300,000.
We are by no means abandoning our current market positions. But we need to supplement with this lower price point to serve more of this market and to serve the millennial buyer.
We’re looking at product that goes all the way down to a 40-foot lot. For Trendmaker that would be new. But we still want it to feel good, be very well built and sustainable. We want that customer for their next house.
Q: How do you expect mortgage rate increases to play out in Houston?
A:
It’s got to have an impact. It’s a matter of when or how much. It’s absolutely on buyers’ radar right now. People are falling into two camps: Act before rates go higher or stay on the fence and wait to see where rates go.
We’ve been kind of spoiled by low rates for a long time. There will be a little bit of sticker shock.
Q: In response to Hurricane Harvey, the city recently changed its regulations for building. What’s your reaction? A:
Obviously, it’s going to be more expensive. It is going to slow down some growth in the city. It’s probably going to impact negatively some current property values of some homes that are existing. In a way it’s going to probably be a goofy street scene. The only tough pill to swallow is if you were in area that didn’t have an issue, but you’re making them build 2 feet above the (500-year flood plain).