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Real Estate Price punch: Fierce competition for affordable homes

Price punch: Fierce competition for affordable homes

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Dallas-Fort Worth-Arlington MAS

Third Quarter 2016 Housing Report

Median home price


Up 9.4 percent from 2015

Of the homes sold:

37 percent were $199,999 or less

54 percent were $200,000-499,999

9 percent were $500,000 or more

Source: Texas Realtors and Texas A&M Real Estate Center

As the spring home-buying season gets set to start, the residential real estate market isn’t as frenzied as the past few years. But prospective buyers hoping to score their slice of the American Dream will face fierce competition for affordably priced homes.

Demand for homes priced less than $300,000 is a continuing trend in the Dallas-Fort Worth market with bidding wars common for resale homes and homebuilders hustling to deliver homes in a market plagued by rising costs and labor shortages.

“Homebuilders can’t build homes fast enough in this price range,” said Paige Shipp, Dallas-Fort Worth regional director of Metrostudy, a national housing industry research firm. “There’s a clear division with houses priced over $400,000, where demand has slowed down.”

For homes priced $1 million and above, it’s a buyer’s market, according Shipp and local homebuilders.

New home starts in 2016 reached projections of 30,000 and 2017 forecasts place starts at close to 32,000, according to Metrostudy.


The demand for new housing is directly tied to population growth in Texas, which led the nation in the number of newcomers, according to the estimates from the U.S. Census Bureau. The state’s population grew by 432,957 people from 27.4 million in 2015 to 27.8 million in 2016.

Tarrant County is the third most populated county in Texas with a population of nearly 2 million people, up from 1.8 million in 2010, according to Census data. Is rate of 9 percent growth from 2010 to 2016 made it one of the fastest growing in the state as well.

Yet, despite population growth and resulting demand for housing, new home starts continue to lag behind starts of about 50,000 per year leading up to the Great Recession in 2007.

While the demand is there, analysts say getting back to those levels is difficult because of a lengthier development periods and labor shortages that drive up costs and extend the time it takes to build a home.

“Statewide sales [in January] on homes priced between $200,000 and $400,000 increased over 14 percent but fell 6.8 percent for homes under $200,00,” according to a new report from the Real Estate Center at Texas A&M University. “Weak supply stunted sales for low-priced housing. The low number of days that houses were on the market illustrates the strength of demand.”

Among the state’s major cities, sales rose in January by 7.8 percent in Austin and 9.7 in San Antonio and 2.9 percent in Dallas. Sales stagnated in Houston at 0.4 percent and fell in Fort Worth by 0.1 percent from December 2016, according to the report

The Real Estate Center identifies part of the problem facing homebuyers is that their income lags behind rapidly rising home prices. The average home price for all homes in Tarrant County was $165,514 in January 2011 compared to $241,768 in January 2017, according to center data.

The supply of homes in this past January was a meager 1.6 months, one of the lowest levels within the past two years, the report said.

Tarrant County remains one of the strongest areas for affordably priced homes, particularly the North Fort Worth area, based on Metrostudy’s 2016 data for the Dallas-Fort Worth area.

Collin, Tarrant and Denton counties accounted for 73 percent of the 2016 new home starts, with Tarrant County accounting for 5,766 or 20 percent. Denton County led the area with 7,731 or 26 percent and Collin County accounted for 26 percent or 7,534. Dallas County had only 4,014 home starts, representing 14 percent, according to the data.

While the Dallas-Fort Worth area is among the top homebuilding markets in the country, local homebuilders say building homes in the $400,000 to $800,000 price range targeted to professionals – many relocating from places like California and Northeast to work in firms such as Toyota and FedEx – is lot easier than building for first-time buyers and down-sizing empty-nesters, who want homes priced below $300,000.

One of the biggest problems facing homebuilders is the lack of laborers skilled in the building trades.

“A lot of construction workers left during the downturn of the recession and went to the oil fields,” said Scott Sandlin of Sandlin Homes, a family-owned homebuilding firm celebrating its 60th anniversary in Tarrant County. “For whatever reason, they never returned.”

At the same time, more and more millennials are bypassing construction work to take high-tech and office jobs, Sandlin said.

“They don’t want to work outside building a house in the August heat,” he said. “They would rather be inside in the air-conditioning.”

Sandlin and others say fewer workers available to work on a home extends the time it takes to build a home, translating to higher costs for builders who have to carry their building loans longer. Before the recession, an entry level home could be built in 90 days whereas now it takes more than 150 days, they say.

Compounding the problems are escalating costs for lumber and concrete as well as fees charged by local cities for development. More and more cities have also raised the bar on new subdivision development by requiring neighborhood parks, open space, trails and curbs and gutters on internal roads, even in more rustic areas. All of this increases costs and extends development times, they say.

“We were expecting to have 600 lots ready to build on by the end of last year but we had zero,” Sandlin said. “Now we are looking to have 150 this month.”

Because of the challenges, homebuyers seeking affordable homes may have to settle for homes averaging around 2,000 square feet on 40-foot-wide lots rather homes of about 2,500 square-feet on 50- to 60-foot-wide lots.

“The market in the under $300,000 price range is very strong,” said Lane Wright, president of Grapevine-based Historymaker Homes. “There are challenges and supply is not keeping up with demand but we are accelerating to starting four homes a day.”

Founded in 1949 in North Richland Hills, Historymaker is the oldest homebuilder in DFW, Wright said. Founder Olen N. Mitchell began the company in the garage of his home, signing contracts on the hood of his car.

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