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Housing prices are on the rise... still
According to the Dallas Business Journal, despite increases in land, labor and materials costs, Dallas-Fort Worth annual new home starts set another housing cycle record in the second quarter of the year, with area builders initiating construction on 9,902 units in the past three months.
The housing starts pushed the annual rate to 35,399 new homes in the July 1, 2017 through June 30, 2018 timeframe, according to Dallas-based Residential Strategies Inc., or RSI. Annual starts are up 12 percent year-over-year, RSI reports.
Increases in lot and land prices and labor and materials costs along with an uptick in 2018 mortgage rates have challenged home builders’ ability to maintain affordable new home prices, said Ted Wilson, principal with Residential Strategies Inc. Even so, “most of the growth today is among affordable price points, especially the $250,000 to $350,000 range,” Wilson said.
Another study also released Tuesday by buying platform Open Listings found that Toyota employees relocating to work at the auto giant’s new North American headquarters in Plano face the highest price in the region to live nearby work, with median sale prices in the area of $289,000.
Of the growth in new home starts in DFW over the past year, 8 percent has occurred under $250,000, 69 percent from $250,000 to $350,000, 18 percent from $350,000 to $500,000 and just 5 percent were over the $500,000 mark, according to RSI.
The rise in mortgage rates in 2018 also plays into the affordability equation, Wilson said. As of July 5, the 30-year mortgage rate stood at 4.52 percent. While the 30-year mortgage rate is down slightly from the May 24 high of 4.66 percent, it remains well above the 2017 levels that were under 4 percent.
Area lenders have kept a watchful eye on new home inventory levels in 2018, Wilson noted.
Increases in material prices, especially lumber, have impacted builders’ construction costs in 2018. Most builders report that their direct construction costs are already up 5 percent to 6 percent this year, Wilson said. In addition,the recent rise in construction activity has put subcontractors and tradesmen in high demand.
A&M Real Estate Center, for the 12-month period ending May 2018, there were 102,402 existing home sales in the North Texas area, a 2.45 percent year-over-year increase.
Listing inventory continues to be tight, with 22,343 houses listed for sale at the end of May 2018, representing a 2.62-month supply. A 6-month supply is considered equilibrium.
“The number of houses for sale under $250,000 continues to decline,” Wilson said. “Millenials and investors pounce on the more affordable houses as they come to market. This is the price point where we are seeing the greatest amount of housing inflation.”
With housing costs continuing to rise, most builders find it challenging to produce new homes priced under $250,000 today.