North Texas builders scrambling to meet a flood of buyers have boosted home starts to the highest level in more than a decade.
Dallas-Fort Worth single-family home starts soared by more than 34% in the third quarter from a year earlier, rising in the face of the pandemic and recession. Builders started almost 13,000 local houses during the just-completed quarter, according to just-released data from Residential Strategies Inc.
“Back when the pandemic hit, we were bracing for a pretty tough summer with all the job loss,” said Ted Wilson, principal for the Dallas-based housing consultant. “But everything opened up in May with strong sales and it has continued onward.
“It’s pretty amazing considering the backdrop of COVID.”
Wilson said the third-quarter D-FW home starts were the strongest since mid-2006, before the Great Recession hit the housing markets.
Builders have started 43,246 North Texas homes in the year ending September — a more than a quarter increase in construction from the previous 12 months.
D-FW home sales for the third quarter totaled more than 11,500 houses, a gain of about 21% from the same period last year.
“You have several things that have come together to make this the perfect storm for housing,” Wilson said. “Most important is the drop in mortgage rates.
“And you have a wave of millennial buyers that builders have been expecting,” he said. “They have embraced the lower mortgage rates full on.”
Wilson said the surge in building starts has put strain on the construction industry as builders race to start homes.
“There have been a few builders that have gotten squeezed,” he said. “Lumber prices have jumped significantly.
“They are still going to make money on these houses, but the profit margins aren’t going to be as robust.”
Builders are also having a tougher time finding labor, affordable building sites and building materials.
“Not only are the houses going up in price because of the materials, but you see lot prices up 10% or 15%,” Wilson said. “If prices continue to rise, it’s going to tend to negate some of the affordability advantages. It could slow the market down.”
The median new home price in D-FW was just under $319,000 in the third quarter, down almost $10,000 from a year ago.
But Wilson said that’s because builders are constructing more affordable homes.
“We are selling more houses at the lower end so it’s brining the median price down,” he said. “The gap between existing home and new home prices is narrowing.”
In September, the median price for existing homes sold in North Texas was just under $300,000.
A few years ago, there was almost a $100,000 spread between new and preowned home prices in the area.
“In the existing home market, there is no inventory to speak of, so a lot of buyers are migrating to the new home market,” Wilson said.
Preowned home inventories in North Texas are down almost 50% from a year ago with only about 13,000 properties listed with real estate agents.
Residential Strategies reports that there were only about 5,600 new, finished houses in inventory in the D-FW area.
Wilson said that with rising prices and changing work patterns due to COVID-19, more new homebuyers are heading to the outer suburbs to buy houses.
Some of the strongest new home sales this year are in the U.S. Highway 380 corridor in Denton County, in the Forney market east of Dallas and in Southwest and North Fort Worth, according to Residential Strategies.
“Because of sheltering and working at home, there are changes in attitudes,” he said. “In the past you would see some hesitancy of buyers willing to go out to the outer ring market because the commute time was so bad.
“But now there are an awful lot of buyers saying they don’t want to be close in and want the elbow room,” Wilson said. “They are really embracing the neighborhoods in the far out markets.”
The boom in D-FW homebuilding mirrors the huge increase in preowned home sales during the last few months.
In September, sales by North Texas real estate agents were up 27% from year-ago levels. It was the fourth month in a row of double-digit percentage annual sales increases.
Through the first nine months of 2020, area home sales by real estate agents are up 6% from last year’s record levels, according to data from the Real Estate Center at Texas A&M University.