Lower construction costs and discounted prices have made newly built homes less expensive than existing ones, a historic anomaly.
The median price of a new home in Dallas-Fort Worth has fallen 6% from about $423,000 in June 2022 to $398,000 in June 2023, according to Dallas housing consultant Residential Strategies.
Meanwhile, since the start of this year, the price of existing homes — or homes listed by real estate agents — has increased 9%, making new homes about $12,000 less expensive.
Existing home prices also briefly surpassed new home prices in June 2022, but before then, such an inversion had never been recorded.
“This departure from the historical trend is likely to result because of the extremely tight housing inventories in the existing-home market and the pressures it puts on price,” Residential Strategies principal Ted Wilson said at an industry seminar Thursday.
Higher mortgage rates since last year have dissuaded some homeowners from selling, limiting the amount of new listings on the market. Upgrading or moving can mean paying a dramatically steeper price and taking out a new loan with a higher rate.
“Homeowners just don’t want to walk away from an unreplaceable 3% mortgage,” Wilson said.
Meanwhile, Dallas-Fort Worth homebuilders closed a record number of sales in the second quarter.
A year ago, new homes only represented less than a third of all homes sold in the Dallas-Fort Worth area. As of June, they represented almost 38%, according to Residential Strategies.
Builders may offer incentives such as discounts and buying down mortgage rates, which could lure buyers who otherwise would have purchased an existing home.
Many builders are also focusing on smaller, less expensive products to curb affordability challenges. In 2014, only 41% of home construction starts in the Dallas-Fort Worth area were on lots smaller than 60 feet wide. As of June, that segment has grown to more than 66% of the market, according to Residential Strategies.
While local home starts overall are down from a year ago, builders have dramatically reduced higher-end home starts, the consulting firm found. Construction of homes priced at $561,000 or more dropped 40.7% year over year in the second quarter.
