Posted in Dallas - Ft. Worth Market | Posted on 01-14-2014 | Written by Metrostudy News
(Dallas, TX – January 13, 2014) Dallas-Fort Worth New Home Starts and Closings
Metrostudy reports the highest new home starts and closings in six years for the Dallas-Fort Worth Metroplex. “The strength in the housing market during 2013 pushed residential construction activity to the highest level since 2007 in Dallas-Fort Worth”, said David Brown, Regional Director of Metrostudy’s Dallas-Fort Worth office. The torrid pace of sales during the first half of 2013 reduced the inventory of new and existing homes to record lows, pushing prices significantly in the Metroplex. “Supply constraints were the headline in the homebuilding business for 2013 and will likely remain the story in 2014”, said Brown. Existing home inventory ended the year at a 2.6-month supply, the lowest figure Metrostudy has on record and well below the 6-month supply considered to be a balanced market. Finished new home inventory ended the year at a 1.6-month supply, below the 2-months considered to be equilibrium and 8% below 2012. Construction delays due to subcontractor constraints added between 30 and 45 days to the construction time and slowed completions for the year. Additionally, lot deliveries lagged the absorption all year driving down lot supply to just over a one-year supply in most A and B locations.
Unlike 2012, the Dallas-Fort Worth Metroplex experienced a more normal seasonal slowdown in sales during the fall and early part of the winter. With interest rates increasing and prices jumping 10% or more in the A locations, buyers took a bit of a breather in the second half of 2013. “The year-over-year growth was on an unsustainable track from the first half of 2013. It was inevitable and a good thing that the growth rate moderated in the second half of the year” said Brown. Existing home sales and new home starts and closings were still higher in the second half of 2013 than the unseasonably strong the second half of 2012. “The market will not have the ability to grow at the same rate in 2014 as it did in 2013 because of the supply constraints” said Brown. The region has almost 3,000 fewer existing homes on the market than it did at this time last year (down 13%), and finished new home inventory is 8% below a year earlier. Additionally, some buyers won’t find the same price points available in certain submarkets in 2014 that were available last year.
With the increased construction activity in 2013, the months of supply of lot inventory in many submarkets, such as Frisco and McKinney, has dropped more than 30% during the last year, driving up lot prices significantly over the last year in these high demand locations. The higher lot prices are pushing builders to more affordable submarkets to meet buyer demand at certain price points. Even with increased lot development activity in 2013, these constraints are not likely to be alleviated during 2014. There are currently about 15,000 lots under construction in the DFW Metroplex. Only about 3,000 lots were nearing completion by the end of the year. Thus, new lot deliveries are likely lag the demand for most of 2014.
The end of the year continued to see the recovery expand to across the Metroplex. Up until the fourth quarter, the recovery was led by the northern suburbs, such as Frisco and McKinney. During the fourth quarter, the growth in starts was led by more peripheral submarkets that had less lot constraints and lower prices. The recovery is expected to continue to expand in these secondary areas in 2014, with the growth limited in the highly constrained submarkets experiencing much higher lot prices on the next generation of developments.
2014 is expected to be another strong year for homebuilding activity, but the growth rate will likely continue to moderate because of lot constraints and home affordability pressures due to rising prices and higher interest rates. The Metroplex continues to have strong housing demand due to the significant job growth. “Metrostudy will be watching the inventory level closely in 2014 for any signs of relief. Until the supply begins to rise or the job growth slows significantly the market should remain very strong”, said Brown.
DFW Historical Housing Activity and Inventory
Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide. Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. www.metrostudy.com
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