Builders in DFW are very thankful Hurricane Harvey’s fury bypassed this part of the Lone Star State. Houston, on the other hand, was pummeled to the tune of about 100,000 homes being flooded. Any residual effects of the hurricane in North Texas have not compromised the construction activity of homes, here.
It is impressive that housing starts in DFW have reached an unprecedented level over the past 10 years, according to Dallas-based Residential Strategies, Inc. North Texas home starts climbed by 9.8% year-over-year during the third quarter while new-home closings increased by 14% year-over-year. Ted Wilson, principal of Residential Strategies, shares home-builders’ reasons for the success of North Texas’ new-home sales: price point and location in the market.
Pricing Dictates Selling Trends
Homes priced at $500,000 or more are not selling as quickly as they did in the past. No longer are many potential buyers willing to open their wallets to further price increases. When you consider Residential Strategies’ incredible revelation, it becomes clearly understandable why buyers have become more stand-offish: Over the last six years, Dallas home prices have risen by a whopping 52.7%! Because of diminishing sales of higher-priced homes, builders in the $500,000 and higher bracket are adding more incentives and discounts.
As demographic group, millennials are positively impacting the housing market. Wilson strongly believes this group of young adults will become increasingly robust home-buyers for, at least, five years. Because of this, home-builders are concentrating on moderately-priced homes in the $200,000 to $500,000 category. This price range has experienced the most growth for new-home starts – a 14.5% increase year-over-year, ending in the third quarter.
Builders choosing to cater to home-buyers who desire more-affordable housing options have reaped the rewards. Wilson says home prices under $300,000 were strong throughout the 2nd quarter of 2017. The influx of new homes priced under $300,000 has pushed the quarterly home starts to 8,912; and this represents the highest level North Texas has enjoyed since the fourth quarter of 2006!
Perhaps, you are wondering about housing starts for homes priced under $200,000 – surprisingly, they decreased by 16.5% year-over-year in the third quarter. And the reason? – the price of land. Wilson says the demand for homes under $200,000 is definitely out there; but the difficulty rests with builders finding reasonably-priced land that would yield lots for less than $40,000. Needless to say, this is an ongoing angst for North Texas builders.
More Inventory Needed
Residential Strategies shares additional insight: currently, there is a 2.66 month supply of new-home inventory which equates to 22,475 homes on the North Texas market. That figure needs to be pumped up to reach equilibrium which would be a 6 month supply. Additionally, tens-of-thousands of new residents flow into North Texas each year; and North Texas has added 682,200 new new net jobs over the last seven years – an expansion of its workforce by 23%. After it’s all said and done, even though builders are constructing homes in North Texas at a fevered pitch, it will take time for the housing supply to coincide with the sheer number of available home-buyers.