Houston Home Run

For most of the 1990s, Houston was a bastion of housing affordability. The late 1980s Texas economic collapse depressed land values and housing prices to such an extent that it took a decade for this city to catch up with the rest of the country. But that’s now happened, and the furious pace of recent price increases left many blue-collar Houstonians behind in the dust. Beazer Homes Texas president Kurt Watzek went looking for that mother lode of lost entry-level buyers, and found it with a product line he calls Squires Series.

The whole product line is a stellar example of providing solid value to entry buyers on limited budgets, but we think two of the houses are especially noteworthy. Shown here in the east Houston community of Sterling Green the 1336 square-foot Carling ranch plan, which sells for $80,990, and the 1831 square-foot, $95,990 Benhurst two-story have Houston home buyers’ endorsements as this month’s Smarter Houses For The Money.

Just how fast new home prices have escalated in Houston is shown by recent statistics from market analysts American Metro Study. As recently as the third quarter of 1996, they show Houston’s average new home sale price was $157,925. Early this year, that average peaked at $202,445 before retreating slightly to the present $196,528. Even the market median now stands at $168,705.

Obviously, trying to beat that kind of price trend with a product under $100,000 must start with a smart land buy. Watzek’s first step was to look for small and affordable lots to suit the Squires product line. In some cases, he found them in old subdivisions started before the 1980s crash and never completely built out. Sterling Green fits that mold. Beazer bought 77 lots, measuring 40 X 105 feet, at $11,000 each. He built the two model homes in just over 60 days. They opened June 4 and Watzek had 57 sales by early August, including 16 Carlings and 13 Benhursts.

"This community, which is just outside the Houston city limits in Harris County, already has over 1000 homes, built in the early 1980s," says Watzek. "Those existing homes sell for between $62,000 and $120,000, averaging about $48 a square foot. Our prices average about $60 a square foot, but we have a significant edge in features and perceived value."

Beazer’s first leg up in this battle against existing housing stock is two-car garages, which most of the old houses do not have. A second critical edge is interior utility rooms. The older homes have utilities in their garages. The third important advantage is brick-front exteriors wrapping ten to twenty feet around the sides of the Beazer homes, with the rest of the house finished in cement lap siding, which has become very popular in Houston over the past five years.

"Houston is still a brick market," says Watsek, "and from the street, you see a lot of brick on these houses. And we’re using the same quality finishes and products we spec in our higher priced houses. These homes are just a little smaller, and on smaller lots."

In fact, this product line of six floor plans, designed and merchandised in-house, actually starts with a 960 square-foot, two-bedroom ranch, priced at $69,990. The loss leader has only two sales.

The buyer profile at Sterling Green is mixed. "It’s very diverse, not just the Hispanic market we expected, but young, blue-collar families in a real rainbow coalition: Asian, white, and African American buyers, as well as Hispanic," says Watsek. "They are all two-income families, and their jobs are pretty stable. A lot of the wives work in retailing or for the local school districts. Practically all of them have kids. That’s why they don’t want the two-bedroom. It’s not big enough and they can afford more. If they have a problem, it’s usually in qualifying for a mortgage. Their credit histories are often checkered."

Still, virtually all of the deals Watzek is writing are for fixed-rate mortgages, not adjustable.

The Carling succeeds by hitting the midpoint of the pricing spectrum, but it’s also a very cleverly designed house. "It’s wide open, and the buyers love that," says Watzek. The openness allows the family room to borrow space from the kitchen to create a cozy primary living space at the back of the home.

The Benhurst is the largest plan in the product line at 1831 square feet. It offers the simple efficiency of doubling the square footage of the footprint with a box-on-box, two-story design.

The whole product line benefits from careful value engineering. For instance, ceilings are all eight feet. Beazer is not even offering a nine-foot plate as an option. Windows are all the same size, with the exception of one architectural window on the front of each plan. Every room is designed to drastically minimize waste in lumber, drywall, and even carpeting.

"We’re trying to get as close as possible, in on-site construction, to the techniques manufactured housing companies produce in their plants," says Watzek. "Elimination of waste is a big part of it. You could build another house with what’s left over after most site-builders are done.

"However, a bigger piece of this puzzle is scheduling, getting trades there at exactly the right time. We have to build these houses in 60 days to hit our budget. We’re not quite there, but we’re close. We’ve got our hard costs down to an average of $32 a square foot."

Watzek is now building these houses in three locations, and they’re selling fast everywhere. He’s buying land now for future projects, knowing he’ll have to develop his own lots in most cases. All of the locations are either in or just outside Houston city limits.

"We have a community down south where we are developing our own lots, and prices are coming in at just under $11,000 for a 40 X 105-footer," he says. "The municipalities are receptive as long as the surrounding neighborhoods are similar in pricing and character. The City of Houston wants to work with us because Mayor Brown has a goal to build 5000 new houses in ‘affordable’ areas of the city."

Also See:

Vital Statistics