Will New Construction be the savior?

Have you noticed the lack of houses on the market? Have you started to wonder when this will come to an end? Are you wondering where you will move to in 2021 and what homes will be available to you? Yeah, I have been thinking about that too. Could new construction be the answer?

1 . Inventory is Down

Not a big surprise here. It has been a talking point for a few months and you can see my last article here where I went into a little more detail on different price points.

The short of the long is that we have nearly 1 months supply of homes currently on the market. This is for all price points and home types in the MLS system. One thing to note is that the spring market is just beginning (remember that snow storm?) and there are a lot of eyes looking for this spring to explode with more inventory. But will it? That is anyone’s guess.

2. New Construction Permits are Up!

According to HousingWire and the US Census Bureau a total of 1.881 million residential building permits were issued last month to U.S. homebuilders, roughly 1.2% above December’s tally but more than 22% greater than were issued a year ago. The Texas Real Estate Research Center suggests that the state of Texas will have a similar outlook this year with a predicted 15% year over year increase in new construction single family permits. The Research Center also points to the fact that home builders will continue to move to the outskirts of the metroplex to meet demand for starter home prices. This will be a fact of life for awhile as cheaper homes can only come from cheaper land. The good news for DFW is that a diverse economy and the increase in remote work can pair nicely with new homes built 30 to 45 minutes from the city center.

3. Construction Materials Cost

Do I have any DIYers here? Perhaps you have noticed that 8’ x 4’ piece of OSB plywood isn’t $12 anymore. Last week at my neighborhood Home Depot it was $36! Lumber prices have been hit hard by the pandemic. Mills being shut down, trade between Canada and the U.S. being hampered, and materials from overseas coming to a near standstill have all impacted the prices of construction materials here in Texas.

The demand is there for new construction homes around the country and the supply has desperately lagged behind. 71% of contractors surveyed are facing at least one material shortage. Lumber was the most-cited material shortage (31%), followed by steel or electrical supplies other than copper wire (11%) and lighting supplies (10%). The lack of supply increases the price and the demand in housing justifies the now higher priced homes. It can be a vicious circle, and it may be here to stay for awhile. The prices of $0.55 per board foot we saw back on October of 2019 are long gone and many experts expect lumber prices to stabilize at the “new normal” of $0.80 per board foot.

I saw this lived out just a few weeks ago when a client of mine bid out his duplex project. Normally he would expect a bill of around $45,000 for just the lumber based on the size. His bid last month….$150,000 for just the lumber! A 300% increase just stalled the project indefinitely. I know we all want a return to normal, but it may take longer than we bargained for.

4. Population Increase

Did you know that the Dallas/Fort Worth metroplex had the largest population increase last decade of any other metro area in the U.S.? We saw a population increase of 1.3M in the past ten years and that is expected to hold steady for the next ten years. Annual home sales on the MLS in 2020 were 145,000 (including some new construction). That is not much wiggle room when you consider 140,000 people moving into DFW every year for the next 10 years. It would be incorrect to assume 2020 was slow because of COVID. In fact, 2020 had the highest number of sales in the past 5 years.

5. Final Thoughts

New construction opportunities will become more numerous in the coming months as permits are approved and material orders continue to get filled. Stay flexible on your move in dates as delays can and will happen. The majority of developments will be on the outskirts of the metroplex where land is cheapest so time to ask your boss about remote work opportunities. The resale market is sluggish and prices are increasing rapidly to meet the demand for buyers in DFW. There isn’t any good metric to predict when this might end but rising interest rates could have something to say on that matter. However, the more I research and the more I experience this market, the more I am led to believe this hot market isn’t going away anytime soon.

Will new construction opportunities in the near future alleviate this housing crisis? I am not so sure. If it weren’t for the materials increase and delays in shipments then maybe, but I am not sure that DFW builders can keep up with the demand. We also have to think of the implications the materials cost will have on finished product pricing. Starter home pricing has been the demand for years but will we see those prices rise in line with the cost of lumber?

Do I need to wait for a market correction? If you know when it will happen, sure. If you do not, then I would suggest talking with me. At the end of the day people move when they are experiencing change in their life. It could be from a new job, a job loss, family growth, family loss, end of a lease, new marriage, empty nesters, outgrowing the space, desire to be closer to family, desire to be further from family, aspiration for a new lifestyle, and any other reason under the sun. Good reasons create proper motivation and proper motivation helps you be successful in any market conditions. So, that being said, make the move when it is right for you. If you’re not sure how to go through that thought process then schedule a free consult with me to get started.

- Austin Wyble, Realtor & Co-Owner

Schedule a free consult with me today and let’s reach your real estate goals!

I hope you enjoyed reading this article as much as I enjoyed making it! The opinions stated here are my own and it is important you form your own too. Feel free to drop a comment below.