Building, Production Dwindle in Dallas Housing Market

Home builders hit the brakes in the first quarter, cutting Dallas housing market starts almost 35 percent.

Local housing production totaled less than 8,000 single-family units – the lowest quarterly total since 2001, according to a report released Monday by Metrostudy Inc.

Meanwhile, sales of both new and pre-owned homes fell in the quarter, along with Texas mortgage demand.

Pre-owned home sales dropped 5 percent, while purchases of new houses were down 7 percent from a year ago. The slowdowns in the Dallas-Fort Worth housing market are continuing a trend that started in 2006.

Inventories of homes for sale have been rising, forcing builders to cut prices and curtail starts.

“The builders are acting appropriately to the market,” said David Brown, who heads the Dallas office of Metrostudy, a homebuilding research and consulting firm. “It’s a significant pullback in starts but what needed to happen.”

Because of the cutback in building, the number of homes in the production pipeline – both under construction and completed – fell to 26,466 units, according to Metrostudy. That’s down from a recent high of 30,117 homes at midyear 2006.

Builders sold 9,917 homes in the first three months of 2007. It was the third quarter in a row that new-home sales have topped starts.

Demand is also falling.

“We’ve seen demand for new homes slow down a bit,” Mr. Brown said. “We’ve seen less investor activity, and with the [bad credit home loan] market tightening up, we’ve had some purchase cancellations.”

But Dallas-Fort Worth is faring better in the housing shakeout than many other major U.S. markets, he said.

“Although closings are expected to be down slightly in 2007, the area should perform favorably in comparison to housing markets on the East and West coasts because of the strong job growth and affordability,” Mr. Brown said.

Sales declines in the pre-owned home market so far in 2007 are on par with last year’s slight decreases.

In March, real estate agents sold 7,961 pre-owned single-family homes, 7 percent fewer than in the same month of 2006, according to statistics from the North Texas Real Estate Information System.

The median Dallas home price last month was $149,000, up 2 percent from a year ago.

There were 11 percent more pre-owned homes on the market in March than a year earlier, with more than 47,000 houses listed for sale in North Texas. That works out to about a 7 ½ -month supply.

“The 5 percent downturn in overall [pre-owned] sales for the quarter is not consistent across the city, ” said Bob Edmonson, a vice president with Allie Beth Allman & Associates. “There are several parts of town that are nicely ahead of last year’s numbers.

“I think we are back into a more normal sales pattern, with these negatives coming off an unusually strong market we experienced in 2005 and early 2006,” he said.

But housing analysts warn that the slowdown in home sales may still deepen in the months ahead.

“Builders are looking at another 10 to 12 percent decline on top of this,” said Ted Wilson of Residential Strategies Inc. “Some of the builders we have talked to have had well over 50 percent purchase cancellations in the last few months.”

In part that’s because mortgage lenders are tightening their requirements, he said.

“Buyers who had qualified for a home are coming in to close and they don’t qualify anymore,” Mr. Wilson said.

“We’ve lost 100 percent financing [of home mortgage loans], and the people with the lower credit scores are going to find it harder to get financing.”

Dallas appraiser Chuck Dannis said that the pullback in builder starts was a couple of quarters late and that home inventories are high. Near-record foreclosures have added to a glut of homes in some areas.

“The market needs the rest of 2007 to digest the foreclosures caused by loans that probably should not have been made in the first place,” Mr. Dannis said.

SOURCE: The Dallas Morning News