Seth Fowler: New Construction Contributing to North Texas Housing Crisis
Share News:
A new home used to be an option for many buyers. Not so much anymore (photo: Eric Dunlap)
In Part One of this look into the end of affordable housing in the Dallas-Fort Worth region, we discussed the giant void of quality homes under $200,000. This void will continue to move housing prices upward, force buyers to spend more than they should, and create a stagnant sales economy in our community. Neglecting the needs for a large segment of the population will have a dramatic effect on the housing industry in all price points.
What’s The Problem?
When I first started selling homes in the early 2000s for a D/FW-based tract home builder, the homes were listed from $85,000 to $135,000. Yes, they were located in a rural area where there weren’t a lot of high paying jobs, but the point is that the developer was able to sell land to the builder who was able to offer a new home for a reasonable price.
And now that is an impossibility.
New construction used to supply many starter homes under $200,000. Now the median price is $350,000.
A quick search at newhomesource.com for homes under $200,000 in D/FW Metroplex shows that out of 78 eligible communities there is ONE community that matches that criteria … and it’s not anywhere close to an area of growth or demand. The inability to purchase land, develop it, and sell to builders to then build homes under $200,000 — or even under $300,000 — is remote and rare. Therein lies the problem.
Who’s to Blame?
When playing the “Blame Game,” the finger should be pointed at everyone.
Raw land costs. Material costs. Development costs. Shortage of labor. Increasing fees and regulations from local governments. Need to be profitable. Greed of sellers to get as much as they can out of the transaction. All are major factors in this crisis.
In the Great Recession, developers completely shut down buying raw land and spending money on the infrastructure necessary to sell to home builders. Builders were too busy trying to reduce their inventory without going out of business. They certainly were not thinking about expansion.
Laborers were being taken advantage of from builders just to stay busy. Material manufacturers were cutting all sorts of deals to move their products.
We all knew it would happen. I read numerous articles about how there would be a huge void in new construction options once the Great Recession ended. Sure enough, those warnings came to fruition and now costs are much higher.
Local governments are also a huge contributor to this problem. The overall greed and laziness of our cities in the increase of taxes, fees, oversight, and regulations are forcing developers and builders to pass those costs on to the consumer. This greed is causing delays and delays cost money.
New Homes vs. Existing Homes
According to the National Association of Home Builders, “The cost of building a new home has increased over 30 percent in the last five years. New construction now costs on average $100,000 more than an existing home. The D/FW Metroplex has one of the fastest increases in home prices in the country.”
Once again, this cannot be sustainable and this is certainly not good if the Metroplex desires to continue to entice large corporations to move to the area and tout a relatively low cost of living. As we discussed in the previous article, existing homes are at an all-time high in price and an all-time low in inventory. Now we’ve established that new construction is at an all-time high in price. Something has to be done, and yet very few are acknowledging or discussing it.
So Why Should We Care?
I know what many of you are thinking. “Shaddup Bow Tie Realtor! Nothing to see here! Times are good!” And you’re probably right. Maybe this a all much ado about nothing. But do you really believe that? Something has to change. Builders are currently building at a median starting price of $350,000. Those that can afford homes upwards of that price represent a fraction of the market. So if builders are catering to the minority of those looking to buy a home, what about everyone else?
In my next posts I’m going to share what it’s like for those prospective buyers who are eager, able, and willing, but constantly run into the “Multiple Offer Wall.” We’ll also throw out a few ideas and suggestions for ways to bring solution to this ever-increasing crisis. Who knows, maybe these posts will actually start a dialogue among those that can bring change. Maybe nothing happens. Maybe the worst happens. At the very least we need to start the discussion.
Well that’s all from Tarrant County this week, Dirty Readers. Remember, if you have comments, questions, or ideas for future stories – I’m always here to listen! Bring it.
Seth Fowler is a licensed real estate sales professional with Williams Trew Real Estate in Fort Worth. Statements and opinions are his own. Seth has been involved in the home sales and real estate business in DFW since 2004. He and his family have lived in the Fort Worth area for over 14 years. Also, Seth loves bow ties. You can reach Seth at 817.980.6636 or [email protected].
4 Comments
Leave a Comment
Seth,
I appreciate your article, but no discussion of the affordable housing crisis facing us is complete without mentioning the Federal Reserve’s manipulation of asset prices, and in particular, real estate.
Housing markets are bifurcated across the United States and even in Texas it is now difficult to find a quality affordable home. This should come as no surprise because we never allowed the markets to clear after the last housing crisis. We bailed out Wall Street and the banks at the expense of the broader economy. The Federal Reserve drove interest rates to the basement while expanding their balance sheet by roughly $3.5 TRILLION dollars. All of this liquidity made the rich even richer, thus exacerbating wealth and income inequality across the board. It has been a massive failed experiment in trickle-down monetary policy.
Now builders cannot find a piece of cheap land even in Texas, an area that used to be awash in affordable homes and plentiful lots to build on.
If you want to understand the affordable housing crisis in America look first to the Federal Reserve and their continued policy failures which have primarily served the wealthy and well-connected.
Thanks for your comments. I think anytime the government starts poking around and trying to manipulate areas of free enterprise – problems tend to happen. Local municipalities are a huge issue these days with over-regulation, impact fees, delays, reduced inspection staffs and wasteful spending. They are putting blame on developers and builders for rising costs and yet they are one of the major problems! This issue will never be “solved” but I truly believe there can be creative and out of the box (don’t you hate that term) thinking for solutions…and what’s nuts is that when we are talking “affordable housing” we are talking $150-$250,000 homes…thanks for reading
Nice article Seth. As a builder I too wonder when the train is to stop. As a small boutique builder it’s very discouraging to see available lot prices. Same goes for availability of interior lots. Gone is the day of the $100k lot, now budget for $280k for a lot. NO THANKS! I think this is why smaller boutique builders hassle with the inevitable “CLIENT” based home. The trade off is dealing with the needs of the client rather than expose yourself to the HUGE risk of the speculative market..oh well, on with the chase i guess!
Thanks for reading and replying Curt–it is a very difficult dilemma for sure –and if you’ll recall from the last builder you and I worked for here in FW, the way the builders put the absolute screws to the sub-contractors when the market was tight–and now those subs are laughing all the way to the bank…and rightfully so! Instead of paying for for quality labor it seems many builders are paying the same but they’re getting the lowest quality or skilled labor they can find and yet they’re still passing their product off as “custom” and “high end”….where will it lead? Hope you’re doing well…keep on fighting the good fight!