Homestarts in North Texas are expected to slow later this year. Here’s why

Experts weigh in on the current pace of North Texas homebuilding and why it might be slowing

Residential Strategies Inc. principal Ted Wilson (Residential Strategies Inc., iStock)
Residential Strategies Inc. principal Ted Wilson (Residential Strategies Inc., iStock)

Texas home construction may slow later this year as builders, which set a record pace in the first quarter, complete the homes they’ve started.

Builders clocked about 16,000 homestarts in the first quarter, an increase of 681 units (4.5 percent) compared with the first quarter of last year, according to the Dallas Business Journal. The North Texas area is currently at an annual pace of 59,000 housing starts, but with the way things look this year and the myriad construction capacity issues builders are facing, that number is likely to only reach 46,000.

“While none of the builders want to see a slowdown, we’re in an unhealthy mode right now,” said Ted Wilson, a principal of Residential Strategies, Inc.

Read more

In Tarrant County alone, building permits have been steadily climbing since April, with over 1,300 building permits issued, the highest count in recent memory, according to Texas Real Estate Research Center data at Texas A&M University. In March, they topped 1,200.

Sign Up for the undefined Newsletter

By signing up, you agree to TheRealDeal Terms of Use and acknowledge the data practices in our Privacy Policy.

But as construction capacity issues increase, new homestarts are likely to drop, according to the publication, as it costs builders more to carry inventory. Wilson says builders just adding to the number of units they have under construction is not going to set a good trend.

“Going forward, they’re going to mete out future starts to more closely approximate how many units they’re actually closing,” he said.

He said that as mortgage rates in the area have gone up, the market has started to make a clear transition and builders in general have seen a slowdown in traffic. This was most noticeable in May when rates crossed over 5 percent, and it will all come down to how demand changes in the coming months.

“The fact of the matter is there’s a huge amount of underlying demand. It’s just a question of affordability in this market. If we were to slow down and see housing costs and inflation start to level out, I think that would actually be a good thing. Going forward, having a more predictable market is a healthier and more normal market,” he said.

[Dallas Morning News] — James Bell