Building On Inspiration – Don Huffines talks Aspen Meadows and Affordability with Dallas Business Journal

October 7, 2019 FILED UNDER:

“Huffines designs its communities to foster interaction amongst neighbors and connect people within the community. Residents live in smaller “villages” within the community, named, and easily recognized by their own entrances to create a sense of place and further facilitate neighbors knowing one another. Children in the communities form friendships as they attend on-site schools that are part of local independent school districts.”

Don Huffines, one of our co-owners, recently met with Bill Hethcock, Senior Reporter for the Dallas Business Journal, in our master planned community Inspiration, located in St. Paul/Wylie, TX. Inspiration is one of our Signature communities and provided a perfect backdrop for Don and the DBJ to discuss affordability, our communities including new community Aspen Meadows, and what’s happening in the Dallas real estate market.

Read the full article, published October 4, 2019, below:

Driving down Inspiration Boulevard in one of Huffines Communities’ newest developments, there’s a village called “Destiny” on the right, and another named “Hope” on the left. Keep going past George W. Bush Elementary School, and you’ll see Faith, Harmony, Discovery and other villages with similarly uplifting names.

“The goal is to inspire the residents every day with a sense of energy and enthusiasm about life,” Don Huffines, co-owner of Dallas-based Huffines Communities, explained as he led the Dallas Business Journal on a tour of Inspiration, a 600-acre master-planned development located in Wylie and St. Paul. Inspiration has about 700 homes now; at build-out it will have roughly 1,800 homes.

In 1985, Don Huffines and his twin brother, Phillip, started Huffines Communities, which has grown into one of the largest residential real estate development companies in the Dallas-Fort Worth area.

Huffines designs its communities to foster interaction amongst neighbors and connect people within the community. Residents live in smaller “villages” within the community, named, and easily recognized by their own entrances to create a sense of place and further facilitate neighbors knowing one another. Children in the communities form friendships as they attend on-site schools that are part of local independent school districts.

Inspiration is one of Huffines Communities’ most expensive developments, with homes priced in the $280,000s through about $700,000.

The company in July broke ground on its latest community, Aspen Meadows, north of Highway 380 near Providence, Texas. With pricing in the low $200,000s through the $300,000s, Huffines is positioning and marketing Aspen Meadows for first-time homebuyers.

There, Huffines is preparing 312 lots for homebuilders including LennarGehan Homes and Impression Homes, and model homes will be available in the spring of 2020. Aspen Meadows is a relatively small project for Huffines, whose focus over the last two decades has increasingly shifted to large, masterplanned communities, with 1,500 to 5,000 houses.

North Texas was the hottest home construction market in the country in 2018. Data from Dallas-based housing analyst Residential Strategies Inc. puts DFW on pace for 33,776 new home starts this year, down from about 35,040 in 2018, but still one of the nation’s most active markets.

Huffines, who served as a state senator from 2014 through 2018, said demand for new homes, especially those of the entry-level variety, remains robust across DFW. Low interest rates and the region’s recent record of producing about 100,000 jobs a year are fueling the demand, he said.

In the Q&A that follows, compiled from interviews at Inspiration and at the company’s headquarters in Preston Center, Huffines discusses affordability, the company’s history, its growth, and a wide range of hot-button residential real estate topics.

How is the North Texas market for new homes?

The market is very good. With 100,000 new jobs every year, Dallas is a fantastic place to be in business. I’ve been very fortunate to be in business here. I am fifth generation from the Metroplex. I grew up here. I’ve seen a lot of changes through the years. Dallas is always a great place to be in business and raise a family, and I think it always will be.

How many homes has Huffines Communities developed across North Texas since its inception?

More than 14,000 total single-family homes.

What’s the background of Huffines Communities?

We do land development. We’re going to be celebrating our 35th company anniversary next year. We started this company in 1985. I’ve always had an affinity for land and land development and graduated from UT in Austin in 1981. I have a finance degree and I worked for Henry S. Miller for three years — 1981 to 1984. I started this company in 1985 with my twin brother, Phillip. I’ve seen a lot of cycles. I saw the big one in the ‘80s. That’s really where our paradigm that we operate under came from. That and the last one.

How does that paradigm shape your strategy?

We’ve seen a lot of people come and go in the business and we’ve been very fortunate to stay in the business. We love land development. We do land development and apartment development primarily. We’ve built everything. I built retail, I built this office building. But primarily we focused on land development. I think we’re very conservative in our investment philosophy. We don’t like taking on a lot of debt. It’s a cyclical business and tomorrow might not be better than today.

How has Huffines Communities evolved?

Over the last decade or two, we’ve shifted more to masterplanned communities, which we define as a large project with 1,500 to 5,000 houses in the community. They’re highly amenitized with a sense of place, a sense of marketing, and in a Huffines Community we have a brand on that. We call it a Signature Community, meaning the consumer is going to receive a lot of value in living there and have a real pride of ownership in living in that community. We have program directors, a lot of activities, and a nice amenity package, and we deal with builders across the spectrum in the DFW area.

How much do you focus on affordability?

Our focus from day one has been delivering a great product in our communities to the first-time buyer.

How do you go about that?

We work very closely with our builder lineup. As the developer of the masterplanned community, we control the restrictions, the homeowner’s association, and we work closely with our builder lineup for them to deliver a nice home at an affordable price. That’s the square footage of the home, the architectural details, things like that. Our communities are very successful. We sell a lot of houses in them. I would say that’s because of not only the lifestyle you live in a Huffines Community, but the quality you get at the price.

What is an “affordable” home?

We try to start at $200,000, or $250,000. I’d say $250,000 to $300,000 is the range in most of our pricing in most of our communities. One of our communities (Inspiration) is higher. But in the past, they were certainly cheaper.

For what percentage of the buying public is a $250,000 home affordable?

I said $250,000, but actually some of our builders have product at about $220,000. According to most statistical analysis, about 54 percent of the population can afford a house that’s 20 percent below the mean. So it has to be less than 50 percent that can afford those houses.

What’s driving the prices of houses up?

Government. Far and away the number one issue driving the price of housing up is government. It’s everything from creating barriers to entry for the developers on the land-use side to rules, regulations, impact fees, everything from tree fees, park fees, sewer and water fees, you name it. It all goes in to the price of a home, to the end user. It’s always passed on to the consumer.

What other factors?

Second would be interest rates and third would be consumer demand and expectations.

It’s interesting that you’re not mentioning a labor shortage. Why?

I put labor in with the first category, under government policies. Government is comprehensive. It’s everything form creating barriers to entry for the developers on land use side, to rules, regulations, impact fees, tree fees, park fees, sewer, water fees, you name it. It all goes into the price of a home and to the end user. We do have a labor shortage of 30,000 people, according to the Dallas Builders Association. That can be resolved through proper immigration reform and temporary work visas for trades that are in demand. We’ve got a large segment of society that are illegal and being employed. That means they’re underemployed and underpaid and it’s just a big issue. Our immigration issues are a big problem in our states. I think you will see labor inflation, wages increasing, which is good and bad. It’s certainly good for the worker, but it makes the house less affordable.

On the regulation issue, DFW has so many cities so close together that some builders and developers have said that standardization of building regulations would be helpful. What are your thoughts?

I do feel like if you simplify the process any way you can, it will lessen the price of housing. Time is money in the business world. The longer it takes for the builder to complete the house due to government rules and regulations and inspectors, etc., or the longer it takes the developer to complete the subdivision or the community and the lots, it’s all about time is money. So that would help.

Can you give an example?

Land use. Land prices are a big component of the house price, and the more restrictive land use gets by the cites, the higher the house price is going to get.

What cities are particularly difficult, or particularly easy, to work with?

I find that, if cities want to really work on the affordability issue for housing, there’s a lot of improvement needed for working with developers instead of working against them. And by working together, I think the development community and the homebuilding community can, through working with the cities, go a long way toward solving affordability issue. Instead of the cities fighting developers, we should come together and work together. And some do.

What are some of those?

We’re seeing more of it than we used to. I’d rather not say which cities do or don’t. There are some that are really anti-development, and some that aren’t.

Circling way back, you mentioned interest rates as one of the factors driving housing costs. What what can you do about that?

Well, not much, but right now we’ve still got historically low rates. So it’s a great opportunity time for people to buy and it’s an exciting time for our home buyer right now. That’s obviously a more of a national issue, but we have good rates right now, and people should take advantage of it.

Will you touch on the consumer demand piece as well?

That’s an interesting one. It’s really more consumer expectations for what they want in a home today. A lot of consumers are leaving new apartments and they’re used to, for instance, granite countertops. They get to a home and they want granite countertops. It used to be a starter home or first-time home was all Formica and maybe you had one-and-a-half baths and three bedrooms. It was a 1,200 square feet on a starter home or less. And today nobody wants an 1,100-square-foot home because their apartment was about that big. They want something bigger and nicer, they want granite and all that. So the consumer expectations on what a home will have today are much higher than they used to be. The builders deliver that, obviously, to satisfy that demand.

What percentage of new home buyers want a new home versus an existing home?

I would peg it at 75 percent, but want versus afford is the question. I think most people would prefer a new home. Location and price sometimes dictate.

What is notable about Aspen Meadows?

We’re focused on affordability with quality builders. We are delivering a nice community for our first-time buyers.

What development stage are you in in that project?

Grading. We’ve broken ground and we’re starting lot construction.

What’s your next step?

We develop the lots — the water, sewer, streets, amenity package. We set up the homeowner’s association and things like that. Then we sell lots to builders, either for cash or on a take-down schedule. We pick the builder lineup and get everybody to work together, and we sell the lots to the builders. We don’t build the houses, but we approve the architectural and other plans. We handle all the landscaping, the treescaping. We’re very hands on. We tell them what kind of trees they can put in, where they need to go, things like that.

What trends are you seeing with millennial and home buying?

They’re delaying their decisions a lot longer than young people used to. Whether it’s household formation or buying a house. They’re making a decision to rent, and they’re delaying that decision to purchase. But I think what they want in a home is not that different from what their parents want.

What things are different?

They value time a little more than their parents. The amenities that save them time are important, whether it’s drive time or services or things of that nature that can offer up. And they’re certainly younger and more active. Trails are real popular. Golf is not popular. Activities are popular, so more programming.

Is it right to say that most of Huffines Community’s homes would fall into the entry-level or “affordable” category?

Yes.

How many home are in your Providence community on between Frisco and Denton on 380?

About 2,500 houses. It’s a starter home community. It’s a neotraditional approach. A lot of front porches. It’s its own city now. It’s got its own city government now. We opened that community in 2002. Our goal was to deliver the most affordable new home product in the Metroplex. We got with the builders and we delivered houses there for $89,990. We sold 100 houses the first month it opened in 2002. It was just phenomenal.

How much is that same house today?

It’s more than double.

Where are the buyers in Huffines Communities coming from?

We see a lot of relocations coming from different parts of the Metroplex. A lot are she second-time buyers who want to be in a new home.

What other trends are you seeing in masterplanned communities?

We’re seeing a consumer awareness of the difference between a real masterplanned community and a regular subdivision. That’s different for Dallas.

How so?

Dallas has never been a new home market composed of many masterplanned communities. They don’t dominate here like they do in Houston or Florida or Phoenix. Dallas has never had that much competition in the space of masterplans, and the consumer was not as aware and educated of the benefits of a masterplanned community versus a subdivision. We’re seeing a lot more education of that consumer and that means the consumer is going to get a much better value in the long-term and short-term in a masterplanned community. Masterplanned communities with their active associations not only have more programming, but they have more home value protection for the consumer. They protect the value of the house with their restrictions, and it’s a much nicer place to live.

What’s next for Huffines?

We’re always actively pursuing acquisitions to deliver more communities. It’s hard. it’s hard to find a large tract of land that we get to write entitlements to at the right pricing to deliver an affordable firsttime homebuyer community. They’re hard to create. It’s a full team effort to create a community like that. It’s not easy. It’s a lot of work and a lot of time.

This interview has been edited for clarity and length. 

SOURCE: Dallas Business Journal