By Jim McAlister IV, President & CEO
In 2010, the Dodd-Frank Act was passed to protect consumers from abusive lending standards, promote transparency and ultimately prevent another collapse of major financial institutions. This Act has impacted consumers, businesses and the overall economy in different ways. One area I’d like to focus on though is how it unintentionally helped to create a “Perfect Storm” in Texas land investing.
Around the country there wasn’t much demand for new real estate development during the recession. But in Texas, it was a different story.
Texas’ economy continued to thrive while the rest of the country was having difficulty. With our prospering economy, new buildings and housing were needed but development companies were having trouble getting loans, because of the Dodd-Frank Act, to turn raw land into a development-ready property. The graph below helps explain the stages a piece of land has to go through before construction of buildings begin. How much developed land is needed to catch up to demand? Well with more than 1,200 people moving to Texas every day, let’s just say it’s a lot. Rockspring is currently in the eye of this “perfect storm” storm. Using our all-cash model, Rockspring is quickly buying up land in the high growth areas of Texas’ four major markets, getting the lots ready for development, and selling to builders so they can continue to put new housing inventory on the ground.
This storm is far from over as banks have not fully recovered their lending to this sector. Rockspring will continue to capitalize on this generational opportunity for its investment partners.