REAL ESTATE

Magnetic north: Area draws builders

Almost half of houses started last year were in swath above D-FW

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If you’re shopping for a new home in Dallas-Fort Worth, chances are that you’re driving north.

Almost half of the new houses started in North Texas last year were in the area between North Fort Worth and Denton County, stretching east to Collin County.

“Nine of the top 14 active submarkets today are located in this area,” said Brent Alexander of Dallas housing analyst Residential Strategies. “The U.S. 380 corridor remains the most active submarket.”

Builders along U.S. Highway 380, which runs from Denton to McKinney, started more than 1,638 houses last year.

“There are other hot spots for starts emerging,” Alexander said, including Kaufman County, east and north McKinney and West Plano.

But a map of home start concentrations last year shows that the lion’s share of construction was on the north side of D-FW. Builders ended 2016 with a spurt of new starts — more than 6,400, according to Residential Strategies.

“It’s the most active fourth quarter in terms of starts in 10 years,” Alexander said.

With continued strong job growth in North Texas, 2017 is likely to be another big year for homebuilding, said Ted Wilson, Residential Strategies’ principal.

“Some of the larger builders are gearing up for an active spring,” Wilson said Thursday at a housing conference in Dallas. “This may push our start rate above the 30,000 level in the coming quarters.”

Builders started 29,337 houses in North Texas in 2016 — the best showing since the recession.

Wilson said another spike in home finance costs could cloud his outlook for this year. Home mortgage rates have jumped more than three-quarters of a percentage point in the last few months.

“As builders enter 2017, many of them worry about how the higher mortgage rates eventually might impact their sales activity,” Wilson said. “Should the 30-year mortgage rate climb above 4.5 percent in the near future, the positive outlook might change.”

Fixed-rate 30-year mortgage rates across the country averaged about 4.2 percent last week. That’s up from around 3.5 percent before the November elections.

Wilson said the change in finance costs has added about $145 a month in payments on a mid-priced new home in D-FW. The higher finance costs come at a time when buyers are already struggling to deal with rocketing housing costs in North Texas.

“It is clear that housing affordability will remain the No. 1 issue in 2017,” Wilson said. “2017 is a year when housing prices really need to level out.

“Builders in D-FW have already been dealing with affordability concerns. Upward movement of mortgage rates compounds the challenge.”

New home prices in North Texas rose 12 percent in 2016, rising even faster than in the preowned house market.

Since 2013, the cost of a mid-priced new house in DFW has jumped from $260,000 to $345,000.

Wilson said payments on a median-priced new house in the Dallas area now average about $2,577 a month, requiring a household income of $110,444 to qualify for a mortgage.

“The growth of household income has clearly not kept pace with the inflation of housing values,” he said. “A household has to increasingly make more money to afford a new home.

“Rising housing prices mean an increasingly smaller percentage of households can afford to purchase a new home.”

Median new home prices in North Texas are now more than $100,000 ahead of the median price for a preowned home, one of the largest such spreads on record.

Twitter: @SteveBrownDMN

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