DALLAS-FORT WORTH

Housing starts hit a 4-year high

Homebuilders are digging out of darker days, now can’t keep up with demand despite price
increases

By STEVE BROWN

Real Estate Editor
stevebrown@dallasnews.com  

Homebuilders who are scrambling to meet buyer demand have ramped up housing starts in the
Dallas-Fort Worth area to the highest point in four years.

They jumped by more than 34 percent in the third quarter, with starts of more than 5,100
single-family homes.

And the supply of new homes on the market has fallen to the lowest level in almost two decades.

“Last year, our housing market kind of fizzled after the spring,” said Ted Wilson, a partner in
Dallas housing analyst Residential Strategies. “This year we have continued to
have good traffic and sales.

“The builders are having challenges in getting them all built,” Wilson said.

Builders are now starting homes at an annual rate of more than 16,000 units. That’s an increase
of almost 25 percent from the bottom of the market in mid-2009.

But home construction in the D-FW area is still a fraction of the level it was before the recession
hit. North Texas builders started almost 50,000 houses in 2006.

Builders hustling

The sharp decline in building during the recession has made it hard for builders to get back up to
speed and meet buyer demand, Wilson said.

“There is concern by the builders that the pace of the recovery is outstripping their capacity,”
Wilson said. “There is a shortage of new home lots.

“And we have increases in a lot of the costs, like concrete and steel,” he said. “The manpower
downsizing that the industry experienced during the past six years cut
construction capacity to its core.”

Wilson said the rise in construction costs is causing a jump in prices for homes in some markets.

“In a market like Frisco, lot prices are up over 50 percent from where they were,” he said. “We
are hearing routinely across the northern suburbs that builders are raising
their prices a couple of thousand dollars a month.”

Even with increases, demand for new homes is up significantly this year.

New home sales were about 14 percent higher in the third quarter than the same period in 2011.
Builders sold 4,397 new homes in the D-FW area during the 3-month period.

“With the interest rates down, it’s still a better deal for the customer, even with those price increases,”
Wilson said. “Builders have a backlog of orders to meet.”

Unlike in recent years, new homebuyers usually have to wait for a house to be built.

Inventory low

The inventory of houses available in the D-FW area has fallen to an almost 20-year low.

Finished new home inventory is below a two-month supply, according to researchers at Metrostudy
Inc.

“The last time D-FW had only 2,500 finished new homes in inventory was 1993 when there was a little
over 4 million people in the metroplex,” said Metrostudy’s David Brown. “There
are now about 6.5 million people in the region.”

New home supply in North Texas is less than a fourth of what it was before the recession.

“With inventory so low and sales climbing, we are seeing more and larger price increases in the market,”
Brown said.

Demand for new homes this year has grown in almost every price range, Metrostudy’s latest survey
shows.

The strong demand for new homes is another good sign for the improving D-FW housing market, said Dr.
James Gaines, an economist with the Real Estate Center at Texas A&M
University.

“Low building for the past few years is catching up to market,” Gaines said. “Loans are still
difficult for builders to get.”

So far this year, builders have sold about 15 percent more homes than they did in the first nine
months of 2011.

That’s about the same as pre-owned home sales, which are running 16 percent higher in North Texas
this year.

Pre-owned home prices in D-FW are up by between 3 percent and 7 percent year-over-year, depending on
which numbers you look at.

In some neighborhoods, competing homebuyers are putting multiple contracts on houses.

And the inventory of pre-owned homes on the market has fallen to less than a five-month supply. Six
months of housing inventory is considered a “balanced” market.