Nothing stimulates the ‘home-buying’ mood quite like warm weather and sunshine; and it is this time of year when buyers, typically, face the most competition which means homes will sell faster and at a higher premium. It should, also, be noted that potential buyers will face a very limited supply of available homes in the Lone Star State. Unfortunately, Texas has reached a 28-year low with its housing inventory.
Across Texas, as of February 2018, only a 3.1-month supply of new and preowned homes was available. During that same month, new-home permits, statewide, were down by 2.6% – this, according to the Real Estate Center at Texas A&M. Shockingly, new-home construction in Texas is more than one-third below what its levels were, before the Great Depression! Building permits, per capita in Texas during February 2018, remained more than 36% below the state’s prerecession levels; and housing starts were 39.5% below prerecession levels.
The Real Estate Center tells us that existing homes have been in short supply for some time; but the current shortage is greater than it has been and is being much more felt by buyers and builders, alike. North Texas, especially, is feeling the brunt of this historically-low inventory. Compared to February 2018’s 3.1-month supply for Texas as a whole, North Texas stats were lower with a slim 2.7-month inventory with preowned, single-family homes listed with local real-estate agents. Lower, still, were move-in-ready new homes in the Dallas-Fort Worth area which came in at only a 2.2 month supply. This may not mean a whole lot unless one realizes that a healthy home market will offer a 6-6.5 month supply of available homes.
Supply and Demand Tells the Tale
In 2017, the DFW area was able to boast of being the top home-building market in the country! During that same year, DFW had more than 30,000 starts; but the demand for homes in North Texas is, most definitely, outweighing the low supply that currently exists. Texas home inventories have been falling since 2011. Economist, Luis Torres, puts it quite simply: “Building permits peaked in 2007; and they have never come back.” Though building permits maintained growth during 2017; by February 2018, new-home permits, statewide, were down by 2.6%. In 2017, median home prices rose by 9% which was an unprecedented high, due to the home shortage.
The current, meager housing inventory is a result of:
minimal availability of skilled labor
scarcity of affordable building sites
new and costly building regulations
US tariffs on Canadian lumber
High demand added to a stark shortage of land availability for new-home construction translates into increasingly expensive land prices. In turn, new home prices continue to rise with land accounting for about 20% or more of the cost of new-home construction.
Now Could Be the Best Time to Buy
Total-Texas housing starts were stable during the first quarter of 2018, but they could not come close to 2017’s impressive first-quarter growth. The Texas housing market is being challenged, to say the least; and home-builders are facing frustrating difficulty as they attempt to keep up with Texas’ strong economic growth and population expansion.
When it comes to purchasing a new home, this could be the best time to buy since the harsh reality is there likely won’t be a lowering of prices anytime soon.