Surging home buyer demand and a limited supply of quality homes have resulted in multiple offers and soaring home prices in the Dallas – Fort Worth metro. In fact, CoreLogic said that single-family home prices rocketed up 7.3% year-over-year in February. As a result, many Dallas – Fort Worth home builders are selling new homes as fast as they can build them. The only problem? There’s not enough ready-to-go home lots, particularly in demand areas with A-market lots. This scarcity of ready-to-go home lots is driving lot and land prices higher, with those costs likely to be passed on to new home buyers.
After new home permits fell off a cliff in 2009 – to only 9,814 – experts expect 20,000 new homes to be built in DFW this year. That’s still well below the 30,000+ levels reached in 2004 and 2005. (To see the annual Dallas – Fort Worth new home permits totals, we’ve chronicled them back to 1991 in our new DFW home starts historic chart.)
As the recession peaked, many custom home builders fell out of the market as financing got incredibly tight. That allowed the largest well-capitalized home builders to scoop up land and lots on the cheap. Luxury home builder Toll Brothers, for instance bought 1,400 lots. Now smaller custom home builders are having to fight over the scraps or purchase ready-to-go lots from larger home builders. According to Dallas-Fort Worth research firm Metrostudy, their latest report indicated that there were only 3,182 vacant finished homes in the DFW metroplex. Considering U.S. Census data indicated that Dallas – Fort Worth added 132,000 people in the past year, you can see why demand is exceeding supply.
Dallas Builders Association Executive Officer Phil Crone exclaimed, “If there is going to be a shortage anywhere in the country, it’s going to happen right here in Dallas – Fort Worth because we are the fastest-growing Metroplex in the country. Our inventories are so low that it could manifest itself as a shortage in the next year to 18 months.” He went on to say the cities and developers can’t turn raw land into ready-t0-build home lots fast enough.
Nationally, land values rose an average of 13% in 2012, according to Zelman & Associates, which was the first gain since 2005. Toll Brothers division president Rob Paul said that they’ve seen a 30% increase in A-market home lot prices over the past 24 months. As a Dallas Realtor specializing in lots and land, I can tell you the phone rings much more often now than a year or two ago.
If you’re paying taxes, insurance, lawn care or maintenance fees on non-income producing buildings or vacant land in DFW, there’s never been a better time (at least in the last few years) to turn it into cash. If you would like some help, or free advice, feel free to reach me at 214-690-9682. I’d love to help.