With labor shortages and escalating material costs, Dallas-Fort Worth builders are having a hard time keeping a single-family home under $400,000 and they have begun seeing an impact to the sales pace of homes. "Area builders share with us that they are seeing 'pushback' from prospective home buyers, especially for houses at the upper price points," said Ted Wilson, principal at Dallas-based Residential Strategies Inc. "As a result, there has been some choppiness in sales reported by the high-end production builders during the past few months," he added. Even though October sales have picked back up, Wilson said the last few months in the third quarter have been choppy with builders closing on 7,036 homes in the third quarter, which is up 3 percent year-over-year, according to Residential Strategies' third quarter 2016 research. Meanwhile, the median price of a new home was up 13.2 percent year-over-year to $336,381. With robust sales activity for first-time and first-move up buyers, Wilson said North Texas builders are focusing their efforts on building homes in new, more affordable communities in the Metroplex. They are also building less expensive homes, such as townhomes. "Houses targeting a price point from $250,000 to $300,000 saw the greatest increase in start activity this past quarter," said Wilson, adding Fort Worth to the west and Princeton, Anna, Fate to the east and Red Oak and Waxahachie to the south were desirable locations for affordable homes. Last week, the Dallas Business Journal reported that North Texas builders say labor shortages are tacking on at least $4,000 to the cost of a home in the region, with skilled labor being particularly hard to recruit. Even lot construction has been impacted by labor shortages, Wilson said. There are more than 37,000 home lots under development in Dallas-Fort Worth, which is a historic record level. "While the number of lots under development today exceeds the rate experienced in 2006, the big difference today is the length of time it takes to deliver a new community," Wilson said. A lack of paving companies, extended processes with municipalities and franchise utility companies that are over-loaded with work have all led to the protracted development times," he added. "The backlog of orders has really swelled the number of lots under construction."
Here are a few takeaways from the third quarter housing report by Residential Strategies:
- Construction started on 7,824 new homes in the third quarter of 2016.
- There were 15,770 homes under construction at the close of the third quarter, which represents the highest level of homes under construction since the third quarter of 2006.
- At the close of the quarter, there were 52,508 vacant developed lots available to builders. This is a 21.5-month supply, with 24 months considered equilibrium.
- It took developers more than 14 months to develop a home lot in the third quarter. Typically, it takes developers about nine months to build a home lot.
With 117,300 new jobs added to Dallas-Fort Worth in the past 12 months, Wilson said he expects to see a growing demand for single-family homes.
- Dallas Business Journal, October 10, 2016