Interest rates

Rising interest rates put pressure on Dallas-Fort Worth homebuilders, but is the market bottoming out?

Business for Dallas-Fort Worth homebuilders has changed dramatically since the onset of the COVID-19 pandemic. As demand for new homes created market conditions that caused builders to cancel contracts with buyers and cut agents, a new report from the National Association of Home Builders shows a sharp decline in the outlook for builders. of houses in the country.

According to the NAHB/Wells Fargo housing market index, builder confidence has fallen for the ninth consecutive month to its lowest level since May 2014 – except for the spring of 2020, when we were all terrified of a microscopic virus that would decimate our economy. The report attributes the slowdown in the housing market to a combination of factors: high interest rates, continued disruptions in the construction materials supply chain and high house prices.

“Buyer traffic is low in many markets as more consumers sit on the sidelines as high mortgage rates and house prices put buying a new home out of financial reach for many households,” said NAHB President Jerry Konter, a builder and real estate developer. from Savannah, Georgia. “In another indicator of a weakened market, 24% of builders said they had cut home prices, down from 19% last month.”

To combat the slowdown, NAHB chief economist Robert Dietz said more automakers were resorting to tactics such as “using incentives to support sales, including rate buybacks mortgages, free equipment and price reductions”.

Dallas-Fort Worth Homebuilders

While builder confidence may be at an all-time low for larger production builders who rely on scale to maintain profitability, that’s certainly not what luxury builder Tom Cusick sees.

Tom Cusick

“That applies less to us,” said Cusick, director of Thomas Cusick Custom Homes. “But it’s a niche market. I’m not trying to build everywhere in Dallas or everywhere in Fort Worth.

Although he was not asked to respond to the NAHB survey, Cusick says the report is likely only relevant to major production builders such as DR Horton, Taylor Morrisson, etc. His colleagues, some of whom are project managers for large-scale production builders, are seeing more and more contracts canceled due to buyers who, whatever the circumstance, are no longer eligible for the new home on which they cared.

The market is very tough for first-time buyers, said Cusick, who have very little wiggle room when putting their homes on contract. Many new homes start at $425,000, and with interest rates driving up the cost of new homes, fewer and fewer will qualify.

Thomas Cusick Custom Homes is a custom luxury home builder in Dallas. (Courtesy picture)

The company is coming

“As long as businesses continue to move to Dallas, there will be a demand for housing, and because of that, I think our housing market is going to fare better here than anywhere else,” Cusick said.

Dallas Builders Association general manager Phil Crone agreed. Until more businesses find Dallas-Fort Worth a favorable location, demand for new homes is not going anywhere.

Phil Crone

“Our region is on track to add an additional 615,000 people and 430,000 jobs over the next five years, so it’s imperative that we keep building,” Crone said. “Of course, that’s easier said than done as we face a massive affordability crisis compounded by rising interest rates. If D-FW is to remain the epicenter of our nation’s growth, we must work even harder at the local and state levels to ensure everyone has a roof over their head and an affordable place to call home. .

Adapting to the new normal

Part of the problem with building homes is the delay in the supply chain. Although the horror stories of paying the nose for lumber and months of waiting for basic items such as garage doors haven’t lost their bite yet, there are ways for automakers to work around the problems, Cusick found.

“We are still going to see supply chain issues. We’re going to have to learn to order things differently in a post-COVID world,” he said. “When we receive a set of plans, some of the first things we order are garage doors, appliances and windows.”

Also, the wait for paint-grade bricks is about 60 weeks, or more than a year. While Cusick was able to build a house in a year, the process became much longer. To make it less painful, Cusick learned to adapt.

“To make things easier for our customers, we provide free storage for all their materials,” he said. It’s not a service commonly offered by builders, he added, but because it has the ability to offer it, it does. Now when Cusick builds a luxury custom home, he has everything he needs on hand to speed up the process.

Well, as long as the garage door arrives on time.