D-FW's Record Home Market Has Momentum Heading into 2021
Along with the rush of seasonal gift shopping, this December has seen a buying binge of homes. Housing activity usually wanes during the holidays as folks spend more time baking turkey and hanging mistletoe instead of house hunting. But with record low mortgage rates and an unabated appetite for homes, property buying has boomed in the final months of 2020. North Texas home sales were up by more than 20% year-over-year in both October and November, and December is on track for another month of double-digit percentage home buying gains.
Housing analysts don’t expect the property purchasing frenzy to slow as we head into the new year. “All indicators [say] we are going to have a good, strong, solid market,” said Dr. James Gaines, chief economist for the Real Estate Center at Texas A&M University. “I think for the first six to nine months of the year, there will be that momentum effect. And interest rates will stay down.”
Gaines said it’s not just low mortgage costs driving the surge in home purchases. Demographic changes and the pandemic have played a role, too. “The millennials are the primary buying age group buying houses,” Gaines said. “That’s a big demographic group in the Dallas-Fort Worth area. And the pandemic has spurred people to look for space and get out of an apartment if they can — if they’ve kept their jobs,” he said.
Even families who already own homes are hunting for more room in less dense neighborhoods. “The pandemic effect in the short to medium term is people will be stimulated to get out and into a larger single-family home — even if that means they go rent one,” Gaines said.
The unexpected 2020 flood of homebuyers has caused prices to jump and listings of homes on the market to dwindle. North Texas median home prices were up 13% year-over-year in November and are 9% higher for the first nine months of 2020. “Some of that price increase is being bumped up because the market share of D-FW homes being sold over $500,000 has increased,” Gaines said.
With lower home finance costs, buyers can afford more house — if they can find one. Home sales listings in North Texas are at a 30-year low. “If I’m looking to buy, my selection is so limited,” Gaines said.
More buyers are turning to new houses because of the lack of existing home inventory. D-FW new home starts were up 34% in the third quarter from 2019 levels. “Homebuilding is going great guns,” Gaines said. “Builders have a big backlog. They already have homes sold they haven’t even started yet,” he said. “They are going to be starting houses the first six months of the year to deplete their backlogs.”
D-FW homebuilders are already planning for a big 2021 market.
“With the huge backlog of orders our clients are reporting, we are expecting a fourth-quarter 2020 start rate of around 11,000 units that will push the 2020 annual start rate close to 45,000 units,” said Ted Wilson, principal with housing analyst Residential Strategies. That would be the best home start total for North Texas in more than a decade. “While we expect another strong year for sales in 2021, builders are confronting challenges with construction capacity,” Wilson said. “Factors that affect capacity include the size of the subcontractor and trade base, material supply chain and the ability for municipalities to process and inspect work...
