Jumps in new home development and construction costs have builders worried that their sales prices are outpacing buyer incomes.
Dallas-Fort Worth new home prices in the first quarter hit a record high of $244,113, according to Dallas-based housing analyst Residential Strategies Inc.
And with costs such as building lots, lumber and labor rising rapidly, the outlook is for more price increases in new homes throughout 2013.
“Builders are reporting that they have increased housing prices $20,000 to $50,000 in some submarkets,” Residential Strategies principal Ted Wilson said Thursday morning at a seminar for local builders.
“They are raising prices not to make more money but to keep up with the pass-through price increases they are facing.”
Wilson said that lot prices in North Texas are up as much as 60 percent and lumber prices are 30 percent to 50 percent higher than a year ago.
If it wasn’t for the near-record low mortgage finance costs, many buyers couldn’t afford the housing being built in D-FW, he said.
“The homebuyer can now purchase almost 31 percent more house today than he could three years ago because of the drop in mortgage rates,” Wilson said. “The drop in the mortgage rate is helping to mask the inflation many homebuyers are now experiencing.”
Residential Strategies reports that first-quarter new home starts were up about 30 percent from the same period of 2012. The analyst is predicting that local builders will start between 20,000 and 21,000 homes in North Texas in 2013.
That’s still less than half the number of houses that builders constructed in the area in 2006.
“The housing recovery is in full bloom this spring,” Wilson said. “Starts are up 46 percent from the market bottom” in 2009.
The biggest rise in local home starts has been in houses priced above $300,000.
“The $300,000 to $500,000 category continues to see what we think is astounding growth,” said Residential Strategies’ Cassie Gibson. “Year-over-year growth was about 40 percent in this price range.”
These more expensive houses account for about 1 in 4 homes being built in North Texas, she said.
Starts of homes under $200,000 have grown at less than half the rate of pricier properties. This price range once accounted for more than half of the D-FW starts each year, but it’s now down to about a third of total construction.
“Many submarkets are reaching historic highs in terms of the average and median home prices,” Gibson said. “The market will need help in the way of rising household income levels.
“There obviously is a ceiling to how high prices can rise, and in some areas the market may be close to reaching it,” she said.
Homebuilders worry about their ability to keep passing on cost increases to the consumer.
“It’s the biggest concern of all builders right now,” said Dustin Nelson, president of David Weekley Homes’ D-FW division. “I think when the lending market for residential developers opens up a little bit more, they won’t have to get the lot price increases they are asking today.