DALLAS – FORT WORTH HOUSING 2Q18: The #1 Market in the Country is getting More Affordable as Demand Shifts to Lower Priced Homes
- The Dallas Fort Worth region remains the #1 market for new home starts in the country, with 35,090 annual starts through 2Q18. Quarterly starts are up 12.1% YoY.
- Annual closings skyrocketed this quarter – up 20.1% YoY and the largest quarterly increase since 3Q13.
- As the median new home price drops and resale price increases, the delta between new and resale narrows. Currently, the difference between the median resale and new home price is 26.1%. The greatest difference in price was 50% in 2015.
- This quarter’s data further reinforces the demand shift to lower priced homes. Our field survey revealed that while buyers would like to purchase homes above $350,000, they simply cannot afford it.
Metrostudy’s 2Q18 survey of the Dallas – Fort Worth housing market shows that starts for the second quarter increased by 4.7% versus the previous quarter. Builders started 35,090 homes in the past twelve months, of which 9,907 started in the second quarter, maintaining DFW’s top rank for new home sales activity in the US. When comparing 2Q18 to 2Q17, starts jumped 12.1%, which is much higher than the 3.2% jump last quarter. Builders report a strong spring selling season and are encouraged by the activity for the first half of 2018.
Annual closings skyrocketed this quarter by 20.1%, the largest quarterly increase since 3Q13. During the past twelve months, DFW closed 32,593 homes, which is a record high for this cycle, but considerably lower than the peak 46,060 closings reached in 2006. The strong second quarter closings represent an increase of 20.9% over last quarter. Second quarter annual closings also rose, but by a more temperate 8.6% over 2Q17. The robust closings follow six months of builders delivering DFW’s “new affordable” product – homes priced between $200,000 and $300,000. The median new home price in DFW decreased to $325,400, a drop of 1.7% as compared to 2017.
“As builders and developers push to deliver smaller lots and more affordably priced product, expect the median price to fall,” said Paige Shipp, Regional Director of Metrostudy’s Dallas Fort Worth market. “In a market where new and resale price appreciation significantly outpaced wage growth, a lower median price indicates that more homebuyers will be able to afford new homes. The median resale price of $258,000 is 5.7% higher than 2017. As the median new home price drops and resale price increases, the delta between new and resale narrows. Currently, the difference between the median resale and new home price is 26.1%. The greatest difference in price was 50% in 2015.”
This quarter’s data provided further proof that builders are, in earnest, delivering DFW’s new affordable homes. In 2Q18, annual starts outpace closings by 12% between $200,000 and $300,000. This difference is considerably higher than the market average of starts eclipsing closings by 7.7%. Starts outpacing closings indicate an expanding market. The greater the delta, the more rapidly the market is expanding. The 12% delta points to a growing supply of affordably priced homes in DFW.
In 1Q18, there were indications that the DFW new home market demand was transitioning from sub-$400,000 to sub-$350,000. This quarter’s data further reinforces the demand shift to lower priced homes. Our field survey revealed that while buyers would like to purchase homes above $350,000, they simply cannot afford it. Developers scramble to reduce lot costs by delivering smaller lots while DFW municipalities fight the inevitable need for higher density communities with smaller homes.
DFW’s solid resale market continues with 51,990 sales for the first half of 2018, an increase of 1.3% over 2Q17. The median price continues to set records every quarter. This quarter is no exception with a 5% increase to $258,000.
The spring selling season in DFW has again remained true to its name. The housing market has been primarily fueled by long term, explosive job growth driving unprecedented population growth. Now that builders and developers are delivering homes in the price points with the strongest demand, sub-$350,000, DFW’s new home market growth is expected to continue. At this point in the cycle, the buyers win, but builders and developers may be on the losing side. Land and development cost increases show no signs of slowing while threats to the global and national economy including tariffs and increasing interest rates impede developer and builder’s margins in today’s market.
For information contact
Paige Shipp – firstname.lastname@example.org
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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