New homes are sprouting up all over Dallas-Fort Worth, despite rising construction costs and mortgage rates.
North Texas builders started construction on 13,348 homes in the third quarter, a slight dip from the 14,637 starts in the second quarter but a whopping 39 percent increase compared to the same period last year, the Dallas Business Journal reported, citing a study from Residential Strategies.
This has boosted the annual start pace to 45,908 units, marking an 8.9 percent increase quarter-over-quarter.
However, the situation varies by submarket, with northern suburbs benefiting from relocation buyers, while areas characterized by lower household incomes struggle with housing affordability, resulting in a decline in new home sales.
Meanwhile, new home prices in Dallas-Fort Worth have either reached or remained near all-time highs, further underlining the ongoing demand for new homes.
In contrast, the existing home market has seen a drop in sales activity. Homeowners with 30-year mortgages of 3 or 4 percent are hesitant to list their homes for sale, causing a 12.9 percent year-over-year decline in existing home sales in North Texas. In addition, there’s a limited supply of existing homes, with just a 2.7-month inventory, well below the six-month equilibrium mark.
While homeowners cling to their ultra-low mortgage rates, builders have been offering mortgage rate buy-downs that make new home purchases more affordable.
While the new home market has benefited from an uptick in sales and construction, concerns have been raised about the surge in 30-year mortgage rates toward 7.5 percent, which may lead to a slow-down in sales.
Yet, housing inventory levels remain favorable for supply-demand conditions, with construction cycle times improving over the past year.
Builders are keeping a close eye on the Federal Reserve’s actions and its plan to maintain higher rates to combat inflation. The 30-year mortgage rate reached 7.49 percent in October, and many builders are conducting stress tests on their sales backlogs and closely monitoring for increased cancellations, as history suggests a potential slowdown in traffic and sales when rates exceed 7 percent, the outlet reported.
—Quinn Donoghue
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