Dallas Builders Association/Meyer’s Research April Housing Outlook
The Dallas Builders Association’s outlook for the area’s housing market is very good despite the state suffering the effects of low oil prices. The diversity of the North Texas economy enables it to overcome the challenges posed by the oil and gas market. According to Destination DFW, seven of the area’s 10 largest employers are in aeronautics, banking and healthcare.
The tech sector is one of the largest growing fields with a 384% job growth from 2012 to December of 2015. North Texas is arguably the second-largest technology business hub in the country, behind California’s Silicon Valley. “Homes are where the jobs sleep at night, and with thousands of jobs coming into the area from major players such as State Farm and Toyota, we are well positioned for a strong housing market into the foreseeable future,” said Dallas Builders Association Executive Officer Phil Crone.
The rise in employment has had a broad-based impact on the residential building industry. The housing demand has never been higher, leaving builders backlogged and struggling to keep up. Nearly all Dallas BA member builders are reporting delays caused by the lack of available labor and/or skilled trades.
Home prices remain high as a result of the industry’s struggle to meet such high demand. In 2015, the median closing price for a new detached home in the region increased 4.9% year-over-year to $295,506, while the median closing price for a new detached home increased 41.4% to $353,522 from the same year-ago period. The most popular price range for homes in the area is between $160,000 and $240,000. However, builders are struggling to supply homes in that price point.
“In nearly 40 years as a production builder in this market, I’ve never seen lot prices escalate as quickly as they have,” said Dallas BA President Donnie Evans of Altura Homes. “All of the economists are telling us that we need to do a better job supplying homes under $250,000, but in many places we just cannot deliver that due to lot prices.”
As a testament to the demand, permit activity increased 23% year-over-year. These numbers are figured based on the number of residential permits pulled in 2015, which increased to an annualized rate of 51,244 units in February (23,413 single-family and 27,831 multifamily).
The increase in activity is beginning to satisfy market demand as evidenced by a steady decrease in the Employment to Permit Ratio over the past few years. The E/P ratio is a barometer of the industry’s ability to supply market demand attributable to job growth. It is derived from dividing job growth by total permits. The E/P ratio hit 1.7 in January, an 8.5% decrease from this time last year.
“If we can avoid a repeat of last year, weather-wise, we might begin to catch up to demand and approach some sort of normalcy in the market by the end of the year,” Crone said. “We are looking for those who have lost their job in the oil fields to find employment in home building. That could alleviate the situation short term, but we are keeping a wary eye on the Presidential Election and its potential long-term impact on the supply of labor.”
The significant increase in construction activity has been driven by the large influx of people moving to the area for work. Last year, the Dallas area added nearly 100,000 jobs. Experts anticipate even higher rates of job growth in 2016.
*Unless otherwise noted, data included in this article is produced by Meyers Research, the real estate consulting partner of the Dallas BA, via their Zonda application. Zonda offers approachable and intuitive real time housing data across the United States.
*Article shared with permission from the Dallas Builders Association