Strong demand for new North Texas homes caused builders to increase starts by 50% in the final months of 2023.
Builders started construction on 12,173 single-family homes in the fourth quarter — a jump from just 8,107 starts in fourth quarter 2022, according to the latest estimates from Dallas-based Residential Strategies.
The fourth-quarter increase pushed total starts for 2023 to 50,244 houses, up almost 3% from 2022′s housing production.
Last year was the second best year for Dallas-Fort Worth home starts, even with higher mortgage rates, Residential Strategies’ principal Ted Wilson said.
With mortgage rates moderating, North Texas builders are starting houses to have product for the typically busy spring and summer housing markets, he said.
“It was a really good year for the builders,” Wilson said about 2023′s housing performance. “The drop in the 30-year mortgage rate has renewed enthusiasm among our builder clients about the prospect for a solid spring housing market in 2024.”
Builders in the D-FW area sold more than 52,600 houses last year — up almost 4% from 2022 to an all-time high. “On an annual basis, it was a record year,” Wilson said.
Sales were strongest in communities north of Dallas and Fort Worth.
“The northern suburban markets have displayed incredible resiliency to the higher mortgage rate environment,” Cassie Gibson, Residential Strategies’ senior vice president, said in a statement. “Many of the buyers in these areas are relocation buyers with strong incomes and down payments. These households have been less affected by higher interest rates.”
Wilson said builders selling houses at lower price points in southern and eastern suburbs saw their business fade when mortgage rates went up.
“You talk to builders down in the south and they saw a slowing in the market in the summer as rates climbed over 7%,” he said.
The 30-year fixed mortgage rate rose above 8% in October, but has since dropped to around 7%. That’s roughly a $300 savings in mortgage payments on a $400,000 home purchase.
But rates remain more than twice what they were a couple of years ago.
Still, builders are hoping that the moderation in home financing costs will cause sales to increase in 2024.
Because of tight resale inventories, new home sales in D-FW have grown while purchases of existing houses declined.
“Homeowners remain reluctant to walk away from a 3%-4% mortgage rate, thus we are not seeing the normal transaction volume among existing homes,” Wilson said. “Interestingly, new home sales activity continues to garner an increasing share of market of all home sales.”
Only 8,282 finished, vacant new houses were available in North Texas at the end of 2023 — about a two-month supply.
