DALLAS – FORT WORTH HOUSING 1Q18: It’s About Volume and Speed of Construction as DFW transitions to a sub-$300k Market

  • Dallas – Fort Worth Remains the #1 Market for New Home Starts in the Country; Quarterly new home starts in 1Q18 fell 11.3% from 4Q17 levels but are up 3.2% YoY
  • The median new home price in DFW decreased to $323,100, down 2.4% compared to 2017, due to the product mix, smaller, less expensive homes, and fewer sales in the higher price points.
  • DFW’s resale market is off to a strong start with 22,037 sales for the first three months, an increase of 3.9% over 1Q17. The median price continues to set records every quarter.
  • The efforts made by developers and builders to deliver homes sub- $300,000 is a reality which will extend DFW’s housing cycle and provide a buffer from future economic distress.

Metrostudy’s lot-by-lot survey of the Dallas – Fort Worth housing market shows that new home starts in 1Q18 fell by 11.3% versus the previous quarter. Builders started 33,518 homes in the past twelve months, of which 7,537 started in the first quarter, maintaining DFW’s top rank for new home sales activity in the US. When comparing 1Q18 to 1Q17, starts edged up 3.2%, which is much lower than the 16.9% jump last quarter. Annual closings increased slightly, demonstrating a slight flattening for the first part of the year. In 2017, DFW closed 31,755 new homes, marking the highest number of calendar closings since 2007. The first quarter closings increased slightly to 31,923, up about 0.5%. First quarter closings dropped by 14.3% as compared to 4Q17. Conversely, year-over-year quarterly closings rose 2.4% versus 1Q17.

As builders deliver more affordably priced new homes, below $300,000, the DFW new home market growth will continue. The majority of demand remains below $400,000 and is not expected to dissipate any time soon. The median new home price in DFW decreased to $323,100, a drop of 2.4% as compared to 2017. This is after an annual increase of only 2.6% in 2017. The median resale price inched up slightly with an increase of 1.3% versus 2017. Currently, the difference between the median resale and new home price is 29.9%. The greatest difference in price was 46.8% in 2015, and the delta continues to shrink. As builders race to reintroduce more affordable product, the median new home price will continue to drop or remain flat. The decrease in median price can be attributed to both the product mix, smaller, less expensive homes, as well as fewer sales in the higher prices.

“While DFW’s strongest price point during the last cycle, below $200,000, is no longer viable, the “new affordable” price bracket, $200,000 to $300,000 grows,” said Paige Shipp, Regional Director of Metrostudy’s Dallas-Fort Worth market. “In 1Q18, annual starts outpace closings by almost 11% between $200,000 and $300,000. This difference is considerably higher than the market average of starts outpacing closings by 5.0%. The average delta between annual starts and closings narrowed this quarter as resales prices increase and the new prices decrease. The difference between resale and new prices is now 29.9%, the lowest since 2005. As DFW transitions to a sub-$300,000 market, builders will continue to build and inventory spec homes, especially since making money in the lower price points is about volume and speed of construction rather than margin. However, for communities priced above $400,000, builders must be vigilant about not exposing themselves to too much inventory as we enter into a historically slower selling season.”

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Vacant developed lot (VDL) inventory climbed by 1.1 MOS, which is the largest increase since 1Q11. At this point in the cycle, the additional inventory is welcome. Since the market rebound in 2010, DFW developers struggled to get ahead of builder’s voracious appetite for lots. This quarter’s VDL jump was not only a rise in months of supply to 19.2, but there are also an additional 3,380 vacant developed lots in DFW.

There are currently 38,944 lots under construction in DFW, an increase of over 1,150 since last quarter. North Ft. Worth has, by far, the most lots under development with 4,386, an 18.7-month supply. Southwest Ft. Worth is second with 2,196 lots, a 31.8-month supply. DFW’s resale market is off to a strong start with 22,037 sales for the first three months, an increase of 3.9% over 1Q17. The median price continues to set records every quarter. This quarter is no exception with a 6% increase to $249,500.

The first quarter of 2018 is off to a decidedly stable start. Sales are solid, builders worked through aging spec inventory, and affordable, new homes are becoming a reality. The efforts made by developers and builders to deliver homes sub- $300,000 is a reality which will extend DFW’s housing cycle and provide a buffer from future economic distress. Lower priced product introduces another set of issues including downward pressure on margin and required shorter build times.

For information contact
Paige Shipp – pshipp@metrostudy.com
Tel: 972-793-0646

About Metrostudy  Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com

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