DFW Tops the Home-Building Market . . . But is There A Cost?

Wednesday, August 17th, 2016 and is filed under Economy, Housing Affordability, Housing Market

Just about anyone traveling around the Dallas-Fort Worth area these days will come across a slice of land, or two (or even three), on which houses are being built. In some neighborhoods, it seems as though new houses are being squeezed onto every bit of remaining property.

As such, it should come as no surprise that, as of mid-2016, the Metroplex topped the nation when it came to single-family housing starts, having broken ground on 29,626 new homes from Q2 2015-Q2 2016¹. In fact, DFW usurped Houston to take the top spot. The Bayou City and its surrounding suburbs had been number one in home-building but fell to second place, according to housing researcher Metrostudy.

Three of the four major metros in Texas showed a year-over-year increase in housing starts. Houston did not, due to falling oil prices and resulting job cuts. This, in turn, reduced demand for housing. Additionally, Metrostudy analysts pointed out that Houston-area builders are attempting to burn through their older inventory, before embarking on newer projects.

Meanwhile, on the northern end of I-45, Metrostudy forecasts DFW starts to range from 30,000-31,000 by the end of 2016. However, housing starts remain just 40% of where they were in 2006. And, as mentioned in previous blogs, an increase in new jobs and corporate relocations to the Metroplex are spurring demand for housing.

That Affordability Issue

Though being number one is good news for Dallas-Fort Worth, Metrostudy’s metrics pointed out that most of the starts were for higher-priced houses². Specifically, housing starts in the $200,000 and below range dramatically decreased. Metrostudy regional director Paige Shipp indicated that, housing starts in the price range from $200,000-$250,000 dropped 19.3% year over year. This could end up pushing the cost of these moderately-priced homes higher, as there are fewer to be had.

But will it mean that more potential home-buyers will wait on the sidelines until more houses are built, and prices begin to moderate? Maybe. Some of these hopeful homeowners might find themselves priced out of the market, especially when it comes to the newer, more expensive homes.

But it also needs to be remembered that, potential home buyers coming into North Texas as part of a corporate relocation from, say, California, will be thrilled at how much home $300,000 can buy. With jobs and relocations driving the housing market, demand could focus on houses costing $300,000 and higher.

So while DFW has bragging rights as the number-one home-builder in the nation, it will be interesting to see what becomes of these houses, once they come to the market.

[1] Steve Brown (2016, August 11). “D-FW Zooms to Top of U.S. Homebuilding Markets.” Dallas Morning News. Retrieved from http://www.dallasnews.com/business/residential-real-estate/20160811-d-fw-zooms-to-top-of-u.s.-homebuilding-markets.ece

[2] Metrostudy (2016, July 29). “Dallas Housing 2Q16: Growth Slows as Affordability Erodes.” Retrieved from http://www.metrostudy.com/dallas-housing-2q16-growth-slows-affordability-erodes/