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Real Estate Real estate rush: Homebuilders, developers struggle to satisfy demand

Real estate rush: Homebuilders, developers struggle to satisfy demand

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Median Home Price 2015

Dallas-Fort Worth: $308,261.

Dallas, including Collin County: $334,973.

Fort Worth: $268,626

Source: Residential Strategies

Eager Dallas-Fort Worth residents hoping to tap into the American Dream of homeownership sent the housing market into a frenzy last year with many existing homes selling above asking price and homebuilders scrambling to satisfy demand.

The overall housing market is predicted to cool off a bit but new home starts are expected to top last year’s rate of nearly 28,000 in the Metroplex.

Housing analysts are forecasting new home starts of about 30,000 this year despite a variety of challenges that might make it harder for builders to deliver as timely or as affordably as buyers would like.

With a market that has added about 100,000 new jobs during the past few years, the Dallas-Fort Worth area has a robust economy and a strong appetite for homeownership.

The industry standard is roughly one new home start for every two new jobs, said Fred Balda, president of Hillwood Communities. “By that measure, we should be starting about 50,000 new homes a year.”

But neither housing analysts nor industry insiders see that happening anytime soon.

“The problem is that it has become harder to build a home and builders can’t get ahead of demand,” said Paige Shipp, Dallas-Fort Worth regional director of Metrostudy, a national housing industry data provider.

If forecasts hold true and builders begin 30,000 new homes this year, the new home market will resemble more of a boomlet than the pre-recession explosion when builders started about 50,000 new homes in 2005 and 2006.

The 28,000 homes builders started last year were more than double the 13,000 that were started at the height of the Great Recession in 2009.

Analysts say the Dallas-Fort Worth market may overtake Houston as the nation’s hottest homebuilding market this year due to the slump in oil prices and the toll it is taking on jobs and the economy in more energy-dependent Houston. New home starts of about 36,000 in the Houston area topped the nation, followed by Dallas-Fort Worth with about 28,000, according to U.S. Census data.

The Dallas Fort Worth area’s strong economy combined with low mortgage interest rates make home buying an attractive option especially for millennials who are eager to get into the market for the first time.

But the low supply of starter homes, particularly affordable new homes, has driven prospective buyers into apartments and rental property, analysts say.

Stymieing the pace of construction are a low supply of lots and a crippling shortage of skilled labor. New state energy regulations due to take effect in September could further complicate the building process, according to analysts.

But perhaps the biggest the stumbling block for builders is delivering a home for a price tag of around $200,000.

“In 2006, about 65 percent of the local market were priced under $200,000,” Shipp said. “Now about 19 percent of the market is under $200,000.”

Buying a new home priced about $200,000 is rare in this market, where building costs increase about 10 percent a year.

The median new home price in Dallas-Fort Worth in 2015 was $308,261. In the Dallas area, including Collin County, the median price was $334,973. The media new home price in the Fort Worth area was $268,626, according to Dallas-based housing analyst Residential Strategies.

The two hottest homebuilding spots in Dallas-Fort Worth area are Frisco and North Fort Worth in the Alliance Airport-Haslet area.

Since the housing market started rebounding in 2011, demand for new homes has been strongest in the middle and upper ends of the market. Lured by low mortgage interest rates, move-up buyers swooped in to buy bigger homes with lower monthly payments.

Meanwhile, the relocation of major corporations such as Toyota, State Farm and FedEx has brought in new residents from higher-priced housing markets like California with home equity money to spend here.

But the lower end of the market languished due to residual problems associated with sub-prime lending that led to the Great Recession, analysts said.

“A lot of the new regulations put into place (after the market crash) prevented millennials and people with credit problems from obtaining mortgages,” said Ted Wilson of Residential Strategies. “But now, more people have saved up cash and repaired their credit and want to buy houses.”

Pent up demand set off a flurry of home-buying last year, sending home prices in the resale market soaring 16 percent, according to Zillow, a real estate data provider. The median sales price was $247,021 as of the end of February, Zillow reported.

Resale homes can be as much as $100,000 cheaper than new homes but many prospective homebuyers prefer the energy efficiency of new homes that can lower overall monthly housing costs and the prospect of better schools in new suburban neighborhoods, according to analysts.

“There is huge demand for affordable new homes,” said Lynn Motheral, president of the executive committee of the Greater Fort Worth Builders Association. “It’s a real challenge for builders but everyone is trying to make it happen.”

Dallas-based Hillwood, one of North Texas’ largest residential developers, has plans to meet the demand for affordable homes by building smaller homes on smaller lots, Balda said.

“We’re not talking about cheap homes,” he said. Instead, Hillwood would apply the same square-footage cost for a 3,000-square-foot home to a 2,000-square foot home. As a result, an estimated home built at a cost of $100 per square foot would cost $200,000 instead of $300,000, he said.

At Hillwood’s Harvest, a $1 billion master-planned, mixed-use development of 1,150 acres in the Northlake/Argyle area, homes start at $250,000 and go up to about $400,000. About 3,200 new single-family homes are planned for construction there.

Homes in a new Hillwood development in the Collin County town of Celina will be affordably priced in the $300 million range. The master-planned community that will break ground later this year. Hillwood announced this week that it has acquired an additional 244 acres to add to its 400-acre holding for the 900-single-family home development, where home prices will range from $275,000 to $400,000.

Balda said Hillwood is able to leverage its bulk buying power of land and its ability to attract quality laborers with its consistent stream of work to build affordable homes.

Analysts say if costs continue to rise, buyers could be forced to readjust their expectations just as they have in high-priced markets in the northeastern U.S. and California.

“We’ll have to get used to smaller homes in higher density developments,” Shipp said.

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