As Dallas-Fort Worth’s supply of pre-owned homes for sale remains limited, local builders saw a strong summer, despite heightened interest rates.
North Texas builders sold 13,096 new single-family homes and townhomes between July and September, according to Dallas-based housing analyst Residential Strategies.
Builders previously sold a record number of homes in a better-than-expected second quarter. Residential Strategies principal Ted Wilson said builders reported positive sales and traffic trends that started in the spring and continued through the summer but at a more typical seasonal pace.
Sales of existing homes have slowed as homeowners in D-FW and nationwide have chosen not to put them on the market in response to higher interest rates that dramatically increase the cost of taking out a new mortgage loan. Meanwhile, builders are offering incentives such as rate buydowns to draw in buyers.
Builders started construction on 13,348 homes in the third quarter, according to the firm. That is a slight decrease from 14,637 in the second quarter but 39.2% more than a year ago.
The number of homes under construction stayed almost flat from the second quarter at 28,548, and inventory levels for vacant homes from builders were at a balanced level, according to the firm. Wilson said the time it takes to build a house has receded over the past year, and construction costs are generally flat or slightly down.
Home construction activity varies across D-FW. Cassie Gibson, a senior vice president for the firm, said many of the northern suburbs with an influx of movers from out of state continue to show strength, but neighborhoods with lower household incomes have seen the biggest declines in sales and are still wrestling with housing affordability.
This has been especially prevalent with higher-priced homes in southern-sector cities such as Waxahachie, Cleburne and Godley, according to Wilson.
On Oct. 5, the average rate for a 30-year fixed rate mortgage reached 7.49%, its highest level since 2000, according to Freddie Mac. Because of that, Wilson said, “we would not be surprised if traffic and sales moderate further.”
In the final three months of 2022, when mortgage rates surpassed 7% before they fell back into the 6% range, builders saw a slowdown in traffic and sales.
“Most builders are performing stress tests on their sales backlogs and are vigilant of increases in cancellations in light of the recent run-up in rates,” Wilson said. “The bigger concern among builders is that higher mortgage rates could persist into first-quarter 2024 and curb the spring new-home sales season.”
