The Dallas market continues to sizzle, with the median price for single-family homes increasing by about 8 percent in May compared to last year.
To paint a bigger picture, prices in North Texas have increased by about 40 percent since the 2009 economic recession, according to a new report from the Dallas Builders Association (DBA) and Meyers Research for the Dallas-Fort Worth-Arlington Metropolitan Statistical Area.
Earlier this year, Dallas overtook Houston as the leading new home market in the country, and it still keeps that spot. Overall, housing inventory was at a 2.3 months’ supply with certain areas, like Collin County, with even less.
The report says about 29,000 new homes are expected in the North Texas region by the end of 2016. This is due in part to one of the strongest employment markets in the country. But prices are still going up, with labor shortages and more regulation increasing prices as builders still struggle to keep up with demand.
The properties feeling the pinch most are starter homes priced between $100K and $300K. These have less than two months’ supply.
“Half of our region’s demand continues to be for the under $250,000 price point,” said DBA executive officer Phil Crone. “Unfortunately, the housing industry cannot adequately meet that demand due to our ongoing labor shortage and increasing local regulation.”
In fact, starts of new homes between $200K and $250K in North Texas dropped more than 19 percent in the most recent quarter, according to a new report by Metrostudy Inc.
“Over the past two years, starts below $200,000 decreased dramatically while starts between $200,000 and $249,000 remained relatively flat or slightly increased,” Paige Shipp, regional director of Metrostudy’s Dallas-Fort Worth region, said in the report. “This quarter, starts in that price tranche dropped 19.3 percent, which signals a possible extinction of new homes below $250,000 in DFW.”
Luxury homes are still in good supply in the region, according to the DBA study, as anything priced higher than $500,000 has five or more months of supply. Homes costing more than $1 million have about a 14.3 months’ supply.
In a recent DBA survey, more than 80 percent of member builders claimed that the labor shortage was a substantial factor in increased prices and delays. More than one-third claimed that fee increases and development dedication requirements were a substantial factor.
Because of low inventory for starter homes and high costs for building homes, many North Texans are being compelled to continue renting. Apartment occupancy rates reached 95.3 percent in 2015, the highest percentage in the last 20 years. That figure tends to climb commensurate with home price increases.
Correspondingly, rents also increased 5.7 percent in 2015; the largest single year increase in the last 20 years. More than 16,000 new multifamily units are expected in 2016.
Intown Dallas and Collin County continue to be the most active multifamily markets. New multifamily construction, built in the last six years, rents for an average of $1,355 per month in Frisco ($1.34 per square foot). The average rent for new multifamily in Intown Dallas is $1,847 per month ($1.96 per square foot).