Rising mortgage rates are starting to take their toll on the nation's homebuilders, who are more concerned about affordability heading into the all-important spring housing market as mortgage rates surge.
Builders' sales expectations for the next six months declined a steep 10 points to 70, according to the National Association of Home Builders/Wells Fargo Housing Market Index. The index doesn't often see such large monthly moves. Builders' view of current sales conditions fell 3 points to 86.
Overall, builder sentiment in the market for single-family homes dropped 2 points to 79 in March. February's read was also revised lower. Last March it stood at 82. This is the fourth straight monthly decline and the first time the index has slipped below 80 since last September, when the delta variant of Covid-19 was spreading. Anything above 50 is considered positive sentiment. Overall sentiment is still good, but there are concerns for later this year.
Dallas-Fort Worth new home sales and median prices are running at record levels, but a disrupted material supply chain and limited construction labor pool are causing it to take longer to get houses built and closed. North Texas homebuilders initiated housing starts on 14,216 units in the most recent quarter, eclipsing the third-quarter 2020 pace by 1,277 units and up 9.9% year over year, according to statistics released today by Dallas-based Residential Strategies Inc. The annual start rate, which includes the fourth quarter of 2020 through third-quarter 2021, has now climbed to 58,625 units — up 35% year over year, according to the housing market analyst.
"Even with higher prices there continues to be solid demand for new houses," said Ted Wilson, principal with Residential Strategies. "The biggest challenge for builders today is that, with limited construction labor and a disrupted material supply chain, it is taking much longer to get houses built and closed." Despite the delays, builders set a record for closings in the most recent quarter at 11,985 units, up 3.5% year-over-year. The annual closing rate stands at 45,574 units, up 13.7% year over year.
The cost and shortage of construction labor has been problematic for builders, said Cassie Gibson, Residential Strategies' senior vice president. Lumber future prices peaked in May 2021 and have subsided since, but supply chain issues persist for many other components used in housing construction, causing higher prices to persist for builders as they determine their true input costs, Gibson said.
New home demand in North Texas has soared over the last year and a half because of a shortage of existing homes and surplus of people moving to the area.
Some potential buyers are understandably skittish about making a move. A North Texas builder is hoping to assuage consumers' fears by offering a mortgage payment protection plan. Megatel Homes is agreeing to pay up to six months of mortgage payments if a new homeowner loses his or her job after the purchase. "People coming into our model homes were evading purchase now because they could lose their jobs," Megatel co-founder Zach Ipour said. "That's a concern of lot of people have that currently have a job – what if they get laid off three months down the road?" To make buyers more comfortable, Megatel is offering to cover the mortgage payments if the customer's job goes away. The program is available for houses in the company's completed inventory. He said the program, which has been quietly rolled out, has already boosted sales.
Megatel is also offering paying six months of new mortgages for health care workers and first responders.
Over 12,000 people already work in Cypress Waters – will double over the next two years
The booming Cypress Waters development northwest of Dallas adjoining Coppell has landed four more major office tenants. The 1,000 acre development at LBJ Freeway and Belt Line Road is already home to more than 12,000 office workers. "We are very excited to have four new tenants join our Cypress Waters community during this time," said Lucy Burns, Partner at developer Billingsley Company. "We have numerous other leases soon to be announced as well. We are thankful to see this type of positive momentum in times like these. Our property teams have been working tirelessly to prepare our buildings for re-entry." The newest tenants are Goosehead Insurance, Artisan Design Group, Northstar Builders Group and Robert Half. Cypress Waters is already home to companies including 7-Eleven, CorelOgic, Nokia, Brinker International, Nationstar Mortgage, Toyota Industries Finance, BT America and Constellation Brands.
The Cambridge Crossing community just west of the Dallas North Tollway will include 1,600 homes
Developers have opened the first phase of a new residential community in Dallas' far northern suburbs. The Cambridge Cos. is building the $1 billion, 639 acre Cambridge Crossing community just west of the Dallas North Tollway in Celina. The project will include about 1,600 homes plus mixed-use, office and retail. The first phase that opened up includes 330 home sites priced starting in the low 300,000s. Builders in the project include Coventry Homes, Highland Homes, Perry Homes and UnionMain Homes. Model homes in the community are already under construction. Cambridge Crossing will have a 6,700 square foot clubhouse for residents that will be built starting this summer. The community has five lakes and will have 89 acres of open space.
2019 was the best year for North Texas home starts since the Great Recession. North Texas homebuilders hit the ground running with new construction in the final months of 2019, starting almost 22% more homes than a year before. Builders began work on almost 8,900 houses in October, November and December – the strongest fourth-quarter construction total in more than a decade, according to data from Dallas-based housing analyst Residential Strategies Inc. "Lower mortgage rates energized the North Texas housing market in the second half of 2019," Residential Strategies principal Ted Wilson said in a new report. "Our builder clients reported unseasonably strong sales in the fourth quarter, many sharing that October and November were some of the strongest sales months of the year." The year-end construction blitz was enough to push D-FW home starts for the year to 35,884 units — up about 2% compared with 2018 to the highest level since the Great Recession. "Usually you get a pop in sales in the spring," Wilson said. "It was pretty dreary back then, and it wasn't until July when the rates declined [that] things started to improve. "It was a great third quarter and an even greater fourth quarter, and builders are going into the New Year with a lot of momentum."
The U.S. is short more than 2 million homes as building activity still lags.
Nationwide home mortgage rates are near record lows. Employment rates are near record highs. And demand for housing is strong in most U.S. metro areas. You'd think homebuilding would be booming. But you'd be wrong. Single-family home construction across the country and in North Texas is nowhere close to reaching the levels we saw before the Great Recession. And homebuilding is likely to lag demand through the next three years, according to a new report by Zillow.
The real estate marketing firm and Pulsenomics surveyed economists, investment strategists and real estate professionals who said that home construction will remain below historic averages through at least 2022. Zillow estimates that nationwide homebuilding has lagged by more than 2 million houses during the last decade. In the Dallas-Fort Worth area, we're short more than 40,000 homes from where we would have been if builders could have kept up with demand.
"Without new homes to meet population growth and replace an aging housing stock, homebuying is expected to move further out of reach," Zillow director of economic research Skylar Olsen said in the report. Zillow's findings are in line with what the National Association of Home Builders has been warning for the last few years — that builders can't produce enough houses.
In North Texas, the country's busiest homebuilding market, production for this cycle may have already peaked. Home starts in the area are down about 2,000 units this year from last year's peak, according to data from Residential Strategies. While homebuilding activity may catch up a bit, don't expect a D-FW building surge, Residential Strategies principal Ted Wilson said. "Even with the ultra-low mortgage rates restimulating the housing market, we are forecasting a similar flat market through 2020," Wilson said. "While the underlying demographics for D-FW remain very favorable, housing affordability continues to be the primary factor that controls for-sale housing growth." In other words, not enough North Texas buyers can afford the new homes builders are able to construct.
- Dallas Morning News, September 13, 2019
But in Texas and the South, Up 4.9%
Sales of new U.S. homes slumped 7.8% in May, as sales plunged in the pricier Northeastern and Western markets. The Commerce Department said Tuesday that new homes sold at a seasonally adjusted annual rate of 626,000 in May, down from 679,000 in April. During the first five months of the year, purchases of new homes have fallen 3.7% compared to the same period in 2018. Lower mortgage rates and a healthy job market have yet to unleash more home-buying. Sales of new homes plummeted 35.9% in the West and 17.6% in the Northeast. New-home sales rose 4.9% in the South and 6.3% in the Midwest, which are generally more affordable markets.
East-West Line thru Plano, Richardson, North Dallas, Addison, Carrollton, Coppell, Cypress Waters, DFW Airport
Completion Date – December 22, 2022
Trains every 20 minutes
The final approved DART Cotton Belt Line from Plano to DFW Airport
The Dallas Area Rapid Transit board on Tuesday approved $872 million to build its first east-west commuter rail line — the Cotton Belt — even though it doesn't have the actual cash quite yet. DART leaders met with the Build America Bureau in Washington, D.C., last week to confirm that the federal loan that will finance a 26-mile route connecting Plano, Richardson, Addison, North Dallas and DFW International Airport is expected to close Dec. 20. Within the next few weeks, DART expects to be issued a notice to move forward on the project with its design-build partner, Archer Western Herzog 4.0, which was unanimously awarded an $815 million contract Tuesday night, contingent on the federal loan. The contract will run through Dec. 28, 2022, the anticipated completion date.
It also kept the door open for the board to decide next month whether to spend an additional $90 million to $120 million to add a second track along the line, something the board listed as a preference. "We've discussed the double-track subject for a couple of years," board member Paul Wageman said. "We're going to have significant savings over what we thought the finance costs were on this." Cotton Belt was budgeted as a $1.1 billion project.
About half of the project, including the nine rail stations, is double-tracked as currently bid. Though plans are for Cotton Belt to debut as an every-30-minute service, the contract also calls for three more miles to be double-tracked. That would enable enough two-way passing opportunities to allow runs every 20 minutes. If it doesn't fully double-track the line, the board also has the option to spend $27 million to add a second track to a three-mile area of Far North Dallas, where grade levels and four bridge crossings pose a challenge.
The contract already includes $32 million in "betterments" for neighborhoods lining the route, providing for sound walls, rubber chips to minimize track vibration and other amenities. The first six to eight months, according to staff presentations, will focus on design of the project. The first signs of progress on the ground will be utility relocation and foundation work for bridges.
The Cotton Belt will also connect to DART's existing light rail system at stops in Carrollton, Plano and Richardson. But it will be a commuter rail line, similar to the Trinity River Express, which DART co-owns with Fort Worth's Trinity Metro and connects downtown Dallas and Fort Worth.
The massive $1.1 Billion DART Cotton Belt Line is scheduled to start construction in less than one year with a completion and operational date of December 2022. The line will begin on Shiloh Road in Plano and travel through Plano, Richardson, Addison, Carrollton, Dallas, Coppell and Grapevine, with its final destination at DFW International Airport. Along the way it will reach hundreds of thousands of workers in various office parks and connect with the Red Line, the Green Line and reach DFW Airport and the Orange Line. Some of the major features and changes.
The next and nearing the final DART hearing for resident input on the Cotton Belt is March 27th, 6:30 pm, at DART headquarters downtown. After that there will be a 45-day period for public input after the federal government releases its final environmental study. From there, the plans are set and DART will move to construction.