DALLAS-FORT WORTH HOUSING 4Q17: Growth Pushes into the “New Affordable” Market as Production in the $200-300k Range Ramps Up
- Dallas-Fort Worth remains the top new home market in the country, with quarterly starts up 16.9% YoY.Builders started 33,243 homes in 2017.
- We are seeing a jolt of starts between $200,000 and $300,000; an exciting development in DFW’s new home market which has suffered an extreme shortage of affordable, new homes since 2013.
- The median new home price rose slightly to $328,400, an annual increase of only 1.9%. The median resale price climbed 8.4%, further narrowing the difference between new and resales prices. Currently, the delta between the median resale and new home price is 32.3%.
- If developers deliver the large number of lots under construction and builders supply homes below $300,000, 2018 could be a banner year for DFW’s new home market.
Metrostudy’s 4Q17 survey of the Dallas-Fort Worth housing market shows that new home starts for the quarter fell by 5.9% versus the previous quarter. Builders started 33,243 homes in the past twelve months, of which 8,561 started in the fourth quarter maintaining DFW’s ranking as the top new home market in the nation. When comparing 4Q17 to 4Q16, starts jumped 16.9%, which is a sign of builders preparing for a strong spring selling season. However, builders report weaker than expected backlogs as they enter into 2018. Annual closings continue to climb. Last quarter, DFW’s closings exceeded 30,000 and in the fourth quarter, closings surged past 31,000 with 31,708 homes closed. Fourth quarter closings surpassed the previous quarter closings by 3.7%. Conversely, year-over-year quarterly closings rose 12.8% versus 4Q16. As closings continue to outpace starts, the delta between starts and closings shrinks. Currently, starts are 4.8% higher than closings, considerably smaller than the greatest difference, which occurred in 1Q16, of 16.7%. Starts outpacing closings, regardless of how much, indicates an expanding housing market, which has been the case in DFW since 3Q12.
“Builders report stronger than expected sales at the end of 2017 – a year that experienced generally slower sales than 2015 and 2016,” said Paige Shipp, Director of Metrostudy’s Dallas-Fort Worth market. “Rapid price appreciation and weak wage growth created the current market – overvalued as compared to what buyers can afford. The encouraging news is that developers and builders heeded earlier warnings and the push into the “new affordable” market, priced between $200,000 and $300,000, is evident. Significantly higher quarterly starts and closings indicate a real shift in the new home market landscape.”
The median new home price in DFW rose slightly to $328,400, an annual increase of only 1.9%. The median resale price climbed 8.4%, further narrowing the difference between new and resales prices. Currently, the delta between the median resale and new home price is 32.3%. The greatest difference in price was 46.8% in 2015, and the delta continues to shrink. As builders race to reintroduce more affordable product, median new home price will flatten or drop. The decrease in median price will be attributed to both the product mix, smaller, less expensive homes, as well as fewer sales at the higher prices.
Not surprisingly, new home starts below $200,000 continue to shrink. Builders’ and developers’ push to deliver lower priced product is apparent in the jolt of starts between $200,000 and $300,000. This is an exciting development in DFW’s new home market which has suffered an extreme shortage of affordable, new homes since 2013. Closings priced $200,000 to $250,000 and $250,000 to $300,000 rose 20.9% and 30.9% respectively. Starts outperforming closings from $200,000 to $300,000 indicates builders are delivering more affordable product in DFW.
For the fourth quarter, vacant developed lot inventory dropped to 18.2 MOS, as compared to 18.7 MOS in the third quarter. This quarter, developers delivered 9,041 lots, an increase of 2.0% over 4Q16. Annual deliveries topped 36,349 lots, a jump of 19.6% over last year. There are currently 37,793 lots under construction in DFW, an increase of over 5,600 since last quarter. North Ft. Worth has, by far, the most lots under development with 4,309, an 18.7-month supply. Kaufman County is second with 1,856 lots, a 19.6-month supply. Some notable submarkets with the lowest vacant developed lot inventory include Princeton with 6.0 MOS, Anna with 8.3 MOS and North Ft. Worth with 10.9 MOS. Equilibrium for vacant developed lots is two years or 24 months. Anna and Princeton are amongst the top secondary submarkets in which builders and developers scramble to find land and lots. Buyer demand for new homes in these areas has skyrocketed recently.
MLS recorded another banner year with over 106,000 sales year-to-date and a median price of $245,000. The DFW resale market boom will continue as long as the new home prices remain considerably higher than resale prices. However, finished vacant inventory continues to trend upwards, in both units and months of supply. As a completed, unsold home is the “kiss of death” in homebuilding, builder discipline is mandatory to maintain healthy spec levels. If developers deliver the large number of lots under construction and builders supply homes below $300,000, 2018 could be a banner year for DFW’s new home 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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