During the Real Estate bubble, Dallas Realtor extraordinaire Della Lively told me every home builder in town was drinking champagne. Then the bubble burst, and now, with the exception of a very few, they can barely afford beer. The real estate downturn sliced and diced home starts in the Dallas-Fort Worth area by more than 70 percent. The Home Builders Association of Greater Dallas lost more than a third of it’s members. We don’t know if thinning of the ranks had anything to do with it, but the HBA of Greater Dallas is even changing their name to a simple, streamlined “Dallas Builders Association.”
I like it! Also note where most of this building took place: Denton County, in-town Dallas (inside LBJ!!), McKinney, Southeast Arlington, Trophy Club, Little Elm and North Fort Worth.
Can you say rebound? Home starts in the D/FW area rose 22 percent in the second quarter of this year from the same period last year, according to Metrostudy Inc. In fact, sales of new homes were up 15 percent from a year ago, they said. In fact, they just may have to tweak forecasts: David Brown, who leads the consulting firms’ Dallas office, says this is the first time in over five years that he has actually had to increase MetroStudy’s forecast for homebuilding activity.
“We expect to see closings continue to increase throughout 2012 given the strong sales during the first half of the year and significant jump in starts during the second quarter, says David.”
They are even happy for once over in Fort Worth: Mitchell Schnurman boasts that last week’s S&P/Case-Shiller Index reported that Dallas-area prices rose in April, the second straight month of solid gains. Prices were 2.8 percent higher than a year ago and are now just 7.9 percent shy of their pre-bust peak. Yeah, we are looking a lot prettier these days. Schnurman says prices have recovered in Dallas more than in any other metro area, and the index for all 20 major cities is still 34 percent off the all-time high. All this is more evidence that the Dallas-Fort Worth real estate market is clawing back faster than most of the country and that it wasn’t hit as hard initially, either.
Still, anything could happen: we have a November election, we have some major tax changes coming in to roost at the end of this year. And don’t get me started on what they are talking about doing in California — that’s for another post!
I’m not ready to call it a Seller’s market. Credit markets are loosening, but still tight. The cost of borrowing is going up. Sure, we are getting multiple offers, but I have not heard of any offers over asking, have you? If you have, please let us know. I do hear of buyers still getting deals, like a $4.2 house for $3.8, stuff like that. But let’s keep open on this because we in Dallas are definitely in the drivers seat!
Here is MetroStudy’s release:
(Dallas, TX – July 5, 2012)
Dallas-Fort Worth New Home Starts and Closings
Metrostudy reports the Dallas-Fort Worth new home market strengthened during the second quarter. “New home starts and closings were up significantly during the second quarter as a result of strong sales through the spring selling season”, said David Brown, Director of Metrostudy’s Dallas-Fort Worth office. Homebuilders reported strong buyer traffic and sales throughout the first half of 2012. “This was the fourth quarter in a row that starts increased year-over-year and the market gained momentum during the last three months. We are expecting starts and closings to be up substantially again in the third quarter”, said Brown.
Starts were up 22% over the same period a year ago and up 41% over the first quarter. Closings also gained momentum during the second quarter, as the new homes that were sold and started over the last six months were completed. Closings during the second quarter were 15% higher than a year ago and 22% higher than the first quarter. “We expect to see closings continue to increase throughout 2012 given the strong sales during the first half of the year and significant jump in starts during the second quarter. This is the first time in over five years that we may have to increase our forecast for homebuilding activity”, said Brown.
The annual starts pace has now risen to 15,123 homes, 12% higher than bottom of the market in 2009. The starts pace, however, is still 71% below the peak of the market in 2006. Although starts have increased substantially, it is likely to take several years for the homebuilding market to fully recover to a level more typical for the region. “The market is just beginning to recover”, said Brown.
The submarkets with the largest increase in starts during the quarter include the unincorporated areas of Denton County, In-town Dallas (inside LBJ), McKinney, Southeast Arlington, Trophy Club, Little Elm and North Fort Worth.
Even though home starts were up substantially during the quarter, finished new home inventory fell another 15%. There are currently only 2,683 finished vacant homes in Dallas-Fort Worth. “New home inventory is the lowest it has been since the early 1990s, yet the region has about 1.5 million more people”, said Brown. As long as new sales continue in their current trend, starts will continue to grow because inventory is so low.
With both new home inventory and resale inventory low for the region, home prices are expected to increase during the second half of 2012. “We have recorded more price increases on new home floor plan offerings during the last two quarters than any time in the last five years”, said Brown.
Metrostudy is the leading provider of primary and secondary market information to the housing industry and related industries nationwide. In addition to providing information, the company is recognized for its consulting expertise on development, marketing and economic issues, and is a key source of research studies evaluating the marketability of residential and commercial real estate projects. Services are offered through an extensive network of offices strategically located in major metropolitan areas throughout the U.S.