It is no secret that residential and commercial real estate are booming in DFW. It seems there is a crane on every corner and a new subdivision development on every block. However, what you may not know is that residential new-builds in 2018 will fall massively short of the peak levels reached leading up to the most recent recession. In 2006, there were nearly 50,000 new home starts, whereas in 2017 the number was 34,000, and we are likely to see only a moderate increase of 35,000 to 36,000 by the close of this year.
So in an economy that has fully recovered from the down turn, and one where home buyers are bidding up homes all over the Metroplex, why are new starts lagging? Easy answer…a little bit of everything.
Inflation and demand have driven up the cost of land and lots for builders and developers. While builders require a steady flow of inventory throughout the year, the financial return has to make sense for them to move forward. With fewer deals fitting a profitable business model, new starts naturally lag behind historical numbers.
Historically the cost of concrete, the foundation of most new builds, has been a significant cost driver for home builders. However, as of recent, lumber has also been one of the contributing factors in driving up costs. The cost of lumber has increased over 60% since the beginning of 2017. The situation is likely to only get worse, as there is also some concern the recent tariffs imposed by our leadership, and thus back on the US by other countries, will lead to even higher costs to builders.
The construction industry is, and has been for a few years, experiencing a significant labor shortage. Nationally there are over 200,000 unfilled positions. When workers are in short supply, builders and developers must get more competitive with their pay, and eventually pass that cost along to the end buyer. No matter the compensation, there just are not enough laborers in the workforce to keep up with the demand.
Local municipalities’ regulations are also involved in the cost increase. Delays in permit approval and new building rules drive costs that are then passed along to the consumer. It is estimated that approximately 25% of the price for a new home is to cover risk associated with cost risk avoidance for regulation changes. Delays also cause longer lead times, slower turnaround times, and thus fewer new starts.
New builds at the entry level price point are taking the biggest hit. The cost to buy a lot, develop the land, and build a new home have become so expensive, builders struggle to provide affordable housing.
Whether you are looking to buy (new or existing), sell, or lease, call/text 817.475.5064 or email email@example.com for all of your real estate needs!
Author:Ryan Wilson Phone: 817-475-5064 Dated: June 20th 2018 Views: 159 About Ryan: Ryan was born and raised in Fort Worth, and, after short stint in West Texas obtaining a business de...
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Steve Rigely was born and raised in San Antonio, Texas. He moved to Dallas in 1998 to attend Texas Christian University. He graduated from TCU with a BA in History and a minor in Business.
Steve’s passion for helping people and his business savvy helped guide him to residential real estate in 2003.
“Real estate just felt right. After connecting all the dots, I knew that my career was in residential real estate. I loved the idea that I don’t have any limitations and every day is different than the last.”
Since starting his career, Steve has worked to build lasting relationships with his clients and prides himself in being resourceful in today’s evolving economy. Steve strives to treat each of his clients with the same consideration and revere.
Being able to see Dallas transform has been quite the experience for Steve. Being one of Victory Park’s first residents has given Steve a great platform when it comes time to try to win a potential client’s business.
“I’ve been fortunate to have lived in some of Dallas’ most unique neighborhoods. Uptown and Victory Park have been my home for quite a while now and I am still in amazement at the amount of growth and business opportunity that has been created in just a few short years. I have loved being in the heart of the action.”
Steve took his career to the next level when he joined Rogers Healy and Associates in 2009. Whether you are buying, selling, investing, or just need advice, Steve looks forward to working for you.