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Commercial Real Estate

Building a New Home in DFW Has Become Less and Less Affordable

Ten years ago, homes priced at $199,000 or less represented 62 percent of new home starts. Now that number is at 8 percent.

A study published by Metrostudy, a Hanley Wood company, shows that building an affordable new home in Dallas-Fort Worth is becoming harder. A comparison of Q1 for 2016 and 2017 showed that the number of starts for homes priced at $199,000 or less has dropped by 50 percent. Home starts in this range represented just 8 percent of this year’s Q1 total starts—a price point that represented 62 percent of starts 10 years ago.

The market saw 7,205 new home starts in the first quarter, up 1.7 percent from this time last year. However, data shows that the number of homes that closed (or, transferred from seller to buyer) was up 14.3 percent when comparing this year’s Q1 to last year’s. Metrostudy said that builders reported positive Q1 sales, which will lead to more starts in the middle part of the year.

“In response to rapid price increases over the past six years, builders race to deliver affordably priced homes. Most of these communities are in locations further from employment centers, and the homes have a lower feature level and shallower pitched roofs,” Paige Shipp, director of Metrostudy’s Dallas-Fort Worth region, said in a statement. “Builders indicate that higher interest rates have not slowed sales, but have affected how much buyers spend on upgrades. Buyers are purchasing the same size home in their preferred location, but are deferring options such as hardwood floors and upgraded kitchens.”

Source: Metrostudy
Source: Metrostudy

While several factors have led to increased costs to build a new home, one notable factor comes in the form of zoning and platting. Currently, raw, unentitled land can take up to 18-24 months to complete the zoning and platting process. In 2010, by contrast, the process took about six months. Couple that with the construction labor shortage, and the increased prices begin to take shape.

“Not only has the time increased, which is costly to developers, but also the direct and indirect fees associated with platting and permitting in North Texas [have increased]. Compounded by steep land prices as well as lot development, labor and material cost increases, building a new home at an affordable price is nearly impossible,” Shipp said. “The current ‘sweet spot’ for new home pricing is less than $400,000. Yet, if cost increases persist, it may be difficult to build under that price in the next few years.”

Comments

  • WestTexan70

    You pay that much and then you have to live near the Metroplex.

    Woof.