Tuesday, August 14, 2018

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The Uberization of the world is happening, and like everything else, you can blame the Millennials.  As most everyone knows, Uber is the ride-hailing company that has disrupted the cab industry across the U.S. (and now much of the world) by having "drivers" and "riders" communicating directly, via the Uber App.  The Uber App allows drivers and riders to rate each other on a 5-star scale, and allows riders to see exactly where a driver is on a map on the riders' phones.  Having the map feature on the app allows riders to confirm that the most direct route is being taken by the driver.  
Not only is Uber more efficient than a cab, it is much more affordable.  The market dictates the price, meaning the price of a ride fluctuates up and down depending on the current supply of drivers and demand of riders at any given time.  Riders have their credit card numbers saved on the Uber App, so no physical money changes hands at the completion of a ride.

So, as someone selling lots and development land, I have to wonder, how is the Uberization of the world going to disrupt real estate and development?

First and foremost, data is key.  Data has become sexy and is accessible to the masses through their mobile devices and cellphones.  For the time being, engineers, builders, developers, and real estate agents are the gatekeepers to the information.  Much of the future real estate decisions will revolve around all of this data that is available and easily accessible.  Lenders will be the first to adopt data-based, real estate investment strategies to protect themselves against potential failure of real estate projects.  Eventually, lenders will require a "data report" prior to lending on a project.

Uber has paved the way for driverless-cars and they are currently testing the market for driverless rides in Philadelphia.  In the near future, robots will be replacing drivers.  

In the scope of real estate Uberization, like the drivers being replaced, many construction jobs will in essence be replaced by 3-D printers.  They have recently started printing houses in Asia and it is being tested in the U.S.  A robotic printer prints the house with a concrete product.  The printing does not stop until the house is finished.  Houses can be finished in 45 days, and companies are working to make 3-D construction even more efficient.  Houses and subdivisions will, in a sense, be printed.

With data laying the foundation, and 3-D printers building/developing the real estate, we will see more institutional investment in speculative building and developing across the world.  Data will tell these investors when, where, and what needs to be built, which will be dictated by algorithms made up of historical, and real-time trending data.  Due to the data available to all, local expertise and local relationships will not hold the same value that they have in the past.  

Milennials do not and will not require the same housing needs that we have seen in the past.  First of all, homeownership is not overly important to Millennials.  Millennials not only want money to spend on their needs, but they want the ability to spend money on their wants.  Because of this, many Millennials choose to rent rather than own.  They see renting as a cheaper alternative than the continual cost of homeownership, and they would rather spend the money that they would be spending on a down payment and home upkeep on themselves.  

For those Millennials that do choose homeownership, their homes won't require as much square-footage because families will be smaller, and they will spend more time outside their home than in it.  
Currently, approximately 90% of American households own at least one car.  This percentage is declining at an increasing rate.  3-car garages will no longer be the norm, as families will not own as many cars due to the affordability and ease of transportation via Uber or Uber-like, ride-hailing companies, offering driver-less transportation that will be paid for on a per-use basis, which will be more affordable than owning.  Due to the smaller width and size of homes, lot sizes will continue to shrink and subdivisions will increase in density.

In San Francisco, apartment building owners are already using monthly-transportation subsidies for their dwellers to sell their cars and instead use Uber or public transportation.  Parking lots and garages in dense areas will decrease significantly, due to less commuters needing parking spaces for their privately-owned vehicles, which will open up a lot of development opportunities in urban areas.

It is still early for definitive answers on how everything will play-out, but these are points to consider.  Access to data will be the what sells in the future of real estate, because a smile and friendly handshake don't move quick enough.

In today's environment, mitigating risk and proper plat layout are of the utmost importance. The market price of homes SELLING can be worked backwards into the acquisition of land, developing lots, and appropriately pricing the lots from plat inception to meet the market for new construction homes. By taking the approach of the right mix of lot types and appropriate number of lots developed per phase, it leads to pre-sales prior to plat completion and limits carrying costs for the development group, which in turn leads to maximizing value.

New development has been my primary focus since 2009, when I got my real estate license. I have spent the past eight years working with landowners, developers, and builders, providing insight on both large and small development projects.

In 2016 I graduated with my MBA from the University of Iowa with an emphasis in Marketing and Data Analytics. This education has helped me better facilitate research in lot and land availability, sizing, pricing, and analyzing lot characteristics through quantifiable models. After a lot is built on, the quantifiable characteristics of the new homes are added to the models to determine market assumptions, which are then worked back into the land acquisition of future development projects. All of this information is put into a report which is then shared to put clients in the best possible position in the market.

It is clear that in today's market the most challenging issue is the shortage of affordable lots (< $50,000). In fact, finding mid-range lots (<$70,000) in the right areas is a challenge.  This is due to a number of factors, including high land costs, excessive city development fees, and the wrong types of lots being developed. Post-Recession, there was a plethora of high-end new construction buyers that had been sitting on the fence, waiting for the right time to purchase.  In turn, high-end lots ($85,000+) were developed to meet demand of the market at that time.  Most of these "on the fence buyers" have already made their purchases, yet lots have still been being developed to cater to that market. That needs to stop because there is a significant over-supply of these high-end lots, and the only answer will be to discount those lots to generate sales, which in turn will hurt developer returns and also give consumers "more lot" than what they actually need in their lot purchases.


 

 

Q1 2017 Properties for Sale

  • Allerton Park | Urbandale, Iowa - 14 Single Family lots available - Price:  $92,500 - $145,000
  • Autumn Ridge | Ankeny, Iowa - 31 Single Family lots available - Price:  $64,500 - $120,000
  • City of Des Moines Ground | Des Moines, Iowa - 14.14-acre Development parcel available - $308,000
  • Four Mile Four | Ankeny, Iowa - 3 acreage, Single Family lots available - Price:  $250,000 - $275,000
  • Fox Valley | West Des Moines, Iowa - 2 Single Family lots available - Price:  $65,000
  • Prairie Trail | Ankeny, Iowa - 97 Single Family lots available - Price:  $53,900 - $98,500
  • Woodhaven | Polk City, Iowa - 16 Single Family lots available - $55,000 - $120,000

"Big Data", data analytics, and algorithms are changing the landscape of the world today.  There is more happening in a more efficient manner than ever before.  Analyzing data helps us make better decisions, minimize risk, and help save the most valuable thing in life, time.

Nathan Drew has created a database of over 500,000 (and counting) quantifiable data points of developed subdivisions, along with data points of new construction homes throughout the Des Moines Metro.  This is far more encompassing than what is available on the MLS and/or Xceligent.  It took Nathan and his Marketing Director over a year to compile the data, and they keep it updated monthly.

With this data, Nathan is able to manipulate it and make projections on future development needs.  Having this information available helps Nathan's clients' decision making in acquisition of land and disposition of finished lots.  With this data, Nathan generates quarterly reports on lot and housing needs throughout the 20 cities that make up the Des Moines Metropolitan Area.

The Lot Book2015 produced some major growth throughout Des Moines, and as always, it started with the ground! We saw an increase in new home sales, an increase in the average sale price of a new home, and an increase in developed lots. Overall, the new construction and development market is doing quite well, and conveniently, I was able to take advantage of a hot market. In 2015 I closed 153 lots and 49.65 acres of development ground. Without a doubt, working with the metro's best builders and developers helped to make 2015 a success. From my crystal ball to you, 2016 is going to be even better. There are a number of things in store for 2016 on my end. Here are just a few of them:

  • We have plenty of new subdivisions coming. If you are looking for lots, please reach out to me. The following developments have subdivisions currently in the works: Autumn Ridge (Polk County with Ankeny schools), Otter Creek (Ankeny), Prairie Trail (Ankeny), Fox Valley (West Des Moines), Southern Ridge (Des Moines), and Highland Meadows (Urbandale).
  • Also, we will be redesigning our website (www.TheLotBook.com) and app (The Lot Book, find on the App Store… it's free). It will include all listed lots throughout the market (not just mine), broken down by city. This should be available by Q2 2016.
  • Finally, Staci (my wife) and I have spent the last year dialing into significant data points pertaining to all vacant developed lots, lots in the pipeline, new construction homes, and vacant pieces of ground (this is not MLS data, it's our own that we have accumulated… and it's much more comprehensive). We are taking these accumulated data points, quantifying them, combining them, and incorporating the data into future developments. Basically, this will help clients paint a picture of how a piece of ground should be developed and how it should be priced per the market. Stay tuned on this, because this is what I'm most excited about for 2016.

I look forward to seeing the metro continue to grow and prosper in 2016. I'm confident that it is going to be a very good year.


 Market Update:

The Lot Book

 

 

 

 

 

The Lot Book

 

 

 

 

 


 The Lot Book

 Starting December 1st, we began a promotion to help a local animal shelter here in West Des Moines called "Furry Friends Refuge." They are the only no-kill animal shelter in Iowa, and they receive no government assistance. The shelter is run by employees and volunteers; therefore, Furry Friends Refuge stays afloat solely by donations. From December 1st - December 25th, we helped raise awareness through our social media promotion, i.e. Facebook, Instagram, Twitter, etc. Every "like" or "retweet" we received we donated $1 toward Furry Friends Refuge. We were able to raise over $1,000 for Furry Friends Refuge and help find a home for two dogs!
There is no greater gift to your soul than the gift of giving!

HAPPY NEW YEAR!

The Lot Book I love summer!

Lots closing, foundations going in, homes being built… as a lotman, it doesn't get any better. Summer is also a time that new development opportunities become available. Over the past few weeks, I have listed some really cool new projects! Click the links below:


Fox Valley - West Des Moines | Woodhaven - Polk City | Allerton Park - Urbandale | Four Mile Four - Ankeny

 Market Update:

New construction and land development are strongly moving along in the second quarter of 2015. In the Des Moines metro, new construction sales were up nearly 17% from a year ago. The average sale price of a new home is $296,000, which is up about 7.5% from last year. This is more than likely due to increased lot costs, increased labor costs, and increased materials costs. Land developers and builders are still anxiously trying to find the answer to affordable, new construction housing (under $250,000) in the highly-coveted western suburbs.

Properties for Sale Q3 2015

The Lot Book

 

 








Nathan Drew Closed Lot/Land Sales in Q2 2015

The Lot Book

 

 



 

The Lot Book2015 Home Show

Prairie Trail has been, without a doubt, one of the most exciting developments that I have had the opportunity to market. With its architectural designs, parks, and walkability, Prairie Trail in Ankeny is truly an amazing place. Don't forget to join us for the 2015 @DMHomeShow on July 11-12, 16-19, 23-26 @PrairieTrail. $10 for adults and $5 for kids. I look forward to seeing you there! #2015HomeShowExpo