DALLAS — Dallas-Fort Worth has lost its spot as the No. 1 new home sales market in Texas, according to a new report.
DFW, which led all Texas metros in sales of newly built homes for much of 2023, has been No. 2 to Houston every month in 2024, according to data from Dallas-based HomesUSA.com.
New home sales in Dallas-Fort Worth posted a three-month moving average of 1,848 in September. That compares with 1,943 sales in the Houston metro area, 1,067 in the San Antonio area and 864 in the Austin area.
The HomesUSA.com New Home Sales Report uses multiple listing service data from Realtor associations in North Texas, Houston, Austin and San Antonio.
Although the Houston area is outpacing DFW in number of new homes sold, the Metroplex still leads in dollar value of sales, said Ben Caballero, founder and CEO of HomesUSA. That speaks to the relatively higher prices in North Texas — good news for homeowners but a reminder of DFW’s affordability challenges.
The average sale price of the DFW’s 1,848 new homes sold was $492,129, for a total value of more than $909 million. In Houston, the average price of the 1,943 homes sold was $397,318, for a total value just shy of $772 million. So homes are selling for almost 18% more in the DFW area than they are in and around Houston, said Caballero, who authored the HomesUSA report.
Reasons for the home price difference between the state’s two largest metros include land costs, zoning and the number of municipalities in each metropolitan statistical area, Caballero said.
The Dallas-Fort Worth MSA has 126 municipalities, compared with 89 in Houston’s MSA, he said.
“The more cities, the more regulations, more permit approvals and more inspection delays that add to the construction cost of a home,” Caballero said.
In some DFW cities, zoning can be found that limits the supply of new homes by restricting where they can be built and the types of homes that can be developed, he added. This constrains the housing market and can drive up land prices in North Texas.
“In contrast, cities without zoning, like Houston, often allow for more flexibility in development, potentially increasing the supply of housing and keeping prices lower,” Caballero said.
Homebuilders in North Texas say they’re feeling the pinch of higher costs up and down the line.
Jennifer Johnson, CEO of Plano-based homebuilder Olivia Clarke Homes, said the lending environment for developers of residential communities in North Texas has gotten tougher as interest rates have risen, making it more costly for developers to carve out the lots on which new homes are built. Those costs get pushed down to builders, who pass the increases on to buyers in the form of higher home prices, she said in a recent podcast interview with Dallas Business Journal .
The steady stream of people into an already tight North Texas housing market exacerbates a growing affordability crunch, Johnson added. Olivia Clarke Homes builds in high-growth pockets including Frisco’s massive Fields community, westward toward areas in Denton and eastward to McKinney.
“The migration that we’re continuing to receive — we’re already undersupplied [with housing],” Johnson said in the podcast. “We just need to catch up from being in a deficit position and we’re not seeing any let up. We’re seeing even more regulations from the local cities and municipalities, which adds cost, so I don’t, unfortunately, see any relief in sight.”
Drilling down on DFW’s data
Although builders are selling fewer homes in DFW than Houston, North Texas home sales rose more than 5% from a year ago, according to the HomesUSA report.
Prices are down year over year: the three-month average price of $492,129 in September was more than $8,000 lower than in September 2023. But last month’s average price ticked up slightly from the three-month average of $489,762 in August.
DFW new home inventory in September continued to rise — the three-month average of active listings climbed to 7,939 compared with 7,686 in August. Year-over-year active listings in DFW were up more than 26% from 6,277 in September 2023.
The new home sales pace slowed ever so slightly as the overall three-month average of days on market was 122 versus 121.14 in August.
“Dallas-area new home sales signals are mixed due to seasonal impact and the continued uncertainty of mortgage rates,” Caballero said, “but the silver lining is that sales compared to the same time last year are up 5.2%.”
Pending sales, a key indicator of future sales, were essentially flat last month. The average three-month pending new home sales in DFW in September was 2,266 versus 2,281 in August — a difference of 15 homes. It is the fifth straight month that the average pending sales number was lower.
One reason, Caballero said, is that mortgage rates remain persistently high.
When the Fed lowered interest rates by half a percentage point in September, many expected mortgage rates to follow suit. But the opposite happened, with mortgage rates rising about three-tenths of a percentage point in the past couple of weeks, pushing the average rate for a 30-year mortgage back above 6.5%.
It’s going to take more than a half-percentage-point rate cut to stimulate the housing market, Caballero said.
“It’s not enough to make a difference, at this point,” he said. “If we go two or three points lower or something like that, we will see increases [in home sales].”
The statewide picture
Pending new home sales continued to decline in September in three of the four largest new home markets, including DFW. The combined four-market pending sales in September totaled 6,543 versus 6,575 in August.
In the Houston area, pending new home sales in September were 1,926 compared with 1,957 in August. In San Antonio, pending new home sales dropped last month to 1,080 versus 1,093 in August. Austin was the exception, as pending new home sales in September rose to 1,271, up from 1,244 in August.
The average prices of new homes dropped in three of the four major new home markets in Texas last month, with DFW’s 5% rise being the exception.
In Houston, the average new home price in September fell to $397,318 compared with $402,741 in August. In Austin, the average price in September dropped to $483,408 versus $494,920 in August. San Antonio’s average new home price was also lower in September at $338,620 compared with $340,775 in August.
Building permits mixed
On the front end of the new-home process, the number of building permits issued through September for single-family homes varied widely compared with year-ago levels in many of the suburbs north of Dallas, according to survey data compiled by Addison-based Tomlin Investments.
Year-to-date building permits soared in McKinney, Frisco, Anna, Celina, Sherman, Little Elm and Van Alstyne. But permits in Denton, Prosper, Melissa, Krum and Sanger plunged by double-digit percentages.
In McKinney, the Collin County seat, for instance, the number of single-family permits shot up 36% in the first nine months of the year. The city issued 1,709 permits through September of this year, compared with 1,259 in the same period last year.
However, in the Denton County seat of Denton, permits fell 27%, from 848 in the first nine months of 2023 to 619 so far this year.
Other single-family permit totals for the first nine months of 2023 compared with the same period this year, in cities tracked by Tomlin’s data, are as follows:
• Anna: 798 permits in 2023; 1,082 in 2024; up 36%
• Celina: 1,879 in 2023; 2,207 in 2024; up 17%
• Frisco: 793 permits in 2023; 1,015 in 2024; up 28%
• Krum: 59 in 2023; 23 in 2024; down 61%
• Little Elm: 624 in 2023; 1,043 in 2024; up 67%
• Melissa: 799 in 2023; 476 in 2024; down 40%
• Princeton: 1,368 in 2023; 1,501 in 2024; up 10%
• Prosper: 732 in 2023; 629 in 2024; down 14%
• Sanger: 91 in 2023; 44 in 2024; down 52%
• Sherman: 212 in 2023; 554 in 2024; up 161%
• Van Alstyne: 126 in 2023; 410 in 2024; up 225%.