North Texas homebuilders eased off construction in the fourth quarter as some buyers took a break from the housing market.
"We had a downtick in the home start activity," said Ted Wilson with Dallas housing analyst Residential Strategies. "Our starts for the first time in some time were off about 750 units compared to a year ago.
"It doesn't surprise me — it's kind of what I was expecting."
Wilson said the higher mortgage costs and more uncertainties about the U.S. economy caused new home buyers to pull back from the market in the final months of 2018.
"The builders said that the higher mortgage rates were making the affordability issue more pronounced," he said. "Some builders said their sales were off 15% to 20%.
"And our finished home inventory numbers were up a bit."
DFW builders started 7,221 homes in the fourth quarter, bringing the total for the year to 34,992 home starts — 3% more than in 2017, according to Residential Strategies.
Home starts in 2018 were higher for the seventh year in a row. Even so, DFW home starts last year were still almost 30% below where they were before the Great Recession.
"The builders have kind of throttled back construction," Wilson said. "They are being more cautious when it comes to how many speculative homes they are starting."
Builders sold 7,894 homes in the final three months of the year. That's 213 less than a year earlier.
"Looking ahead into the spring 2019 market, we are hopeful that buyer activity picks back up again," Wilson said. "Since November 2018, the 30-year mortgage rate has fallen, returning to the 4.5% level.
"This bodes well for consumers that are facing affordability challenges."
Wilson said most of the demand in North Texas is for homes priced under $350,000, and builders are shifting production to that range.
"While the overall market grew by only 3% in 2018, activity in the $250,000 to $350,000 price segment increased by 15% — that is the portion of the housing market that continues to perform well," he said.
About 6,400 finished and vacant new houses were on the market in the DFW area at the end of the year, almost 8% more inventory than in December 2017.
"Many builders have experienced a slight increase in unsold housing inventory toward year end, and prudently have taken a less aggressive approach to speculative homebuilding," Wilson said. "The slight slowdown in new home start activity is reflective of the disciplined approach toward construction that most builders manifest today."
The slowdown in DFW home starts in the fourth quarter came at the same time sales of preowned single-family homes fell in North Texas.
Real estate agents sold about 8% fewer homes in the area in the fourth quarter compared to the same period in 2017.
And for all of 2018, home sales by real estate agents were 1% lower than in 2017, according to the latest numbers from the Real Estate Center at Texas A&M University.
