High-priced home start increases stall as buyers head down market

Dallas News - Steve Brown - 27 January 2017

More signs that Dallas-Fort Worth's high-priced home market may be running out of steam: Homebuilders are shifting gears to build more affordable houses and holding back on pricey ones.

"We continue to see a slowing of demand in the price ranges above $400,000," housing analyst Metrostudy reports in a new study. "With every quarter, demand for new homes above $400,000 wanes."

Metrostudy said overall home starts in North Texas rose about 11 percent in 2016, as builders started just under 30,000.

But a mismatch between what builders are offering and what customers want to pay is affecting the market, Metrostudy analysts say.

Paige Shipp of Metrostudy said she recently looked at the price of new houses in the booming Collin County town of Celina. In 2013, a 3,000-square-foot house in Celina cost an average of about $251,000.

"Today, that same house would cost you $389,000," she said. "It's amazing how prices have gone up."

Metrostudy says starts of houses above $400,000 are stalling. The sweet spot is now closer to $300,000.

Shipp said starts of homes priced between $300,000 and $399,000 had the biggest increase last year, almost 27 percent. "That's where everybody is building," Shipp said. "The key is to stay below $400,000.

"We are seeing a really strong line in the sand."

In the preowned home market, Shipp said 70 percent of all home sales are below $300,000.

Median new home sale prices in North Texas are more than $100,000 greater than in the resale market — close to an all-time spread.

"As builders and developers realize that the heyday of 2015 and mantra 'if you build it, they will come' is over, they grapple with how to address the mismatch of new home supply and buyer demand," Shipp said. "A few builders are taking the leap to provide new homes below $200,000 in less desirable school districts with no buyer options."

She said some builders have taken once "standard" home options off the table to roll back the base prices of their homes.

"They are taking things out of the house and making things more optional," Shipp said.