The numbers: Sales of new homes in the U.S. fell in April for the fourth month in a row to the lowest level since the pandemic owing to high prices and soaring mortgage rates.
New sales slowed to a 591,000 annual rate from 709,000 in the prior month, the government said Tuesday. That's how many homes would change hands in a full year if the number of sales were the same in every month as they were in April.
Big picture: The red-hot housing market was bound to cool off after mortgage rates jumped from just 2.75% in the fall for a 30-year fixed to more than 5.25% in mid-May. Low mortgage rates had made it easier for buyers to purchase a home despite record prices. Builders, for their part, still aren't producing enough homes to meet demand. High material costs, supply and labor shortages and lack of cheap lots are among the constraints holding back construction. A slower housing market is also likely to weigh on the broader economy. When people buy homes, they also need to buy lots of stuff to furnish it.
Key details: Sales fell in all four major regions of the country, but the largest decline occurred in the South, where about half of all new homes are built. Sales sank 20% in the South.
reverse the upsurge in prices over the past few years.
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Building permits fell sharply in January in Celina, Frisco, Prosper and Little Elm — some of the hottest markets in North Texas and the nation for new home construction last year. Celina, the top residential construction market in North Texas last year, dropped 51% in the number of homebuilding permits issued in January compared to the same month last year. Frisco's building permits fell 48% year over year in January. Prosper dropped 44% in homebuilding permits issued in January. The January permit plunge was similar in Little Elm which fell 56%. Homebuilding permits also fell in McKinney, which posted a 22% year-over-year decline in January.
The downturn in some of North Texas' hottest homebuilding markets isn't a sign of diminished demand as much as it is a reflection of higher construction costs. The costs of construction nationwide are the highest seen in 50 years with contractors and homebuilders feeling the effects. Homebuilding costs jumped by 17.5% year-over-year from 2020 to 2021, the largest spike in this data from year to year since 1970, recent data from the U.S. Census shows. Homebuilders in North Texas last year were hit by an unprecedented swell of housing demand that prompted the industry to boost its production pace, said Ted Wilson, principal with Dallas-based housing analyst Residential Strategies Inc. But a shortage of labor and materials has driven up costs and stretched out average building timelines, according to Residential Strategies' most recent quarterly market update.
Dallas-Fort Worth new home sales and median prices are running at record levels, but a disrupted material supply chain and limited construction labor pool are causing it to take longer to get houses built and closed. North Texas homebuilders initiated housing starts on 14,216 units in the most recent quarter, eclipsing the third-quarter 2020 pace by 1,277 units and up 9.9% year over year, according to statistics released today by Dallas-based Residential Strategies Inc. The annual start rate, which includes the fourth quarter of 2020 through third-quarter 2021, has now climbed to 58,625 units — up 35% year over year, according to the housing market analyst.
"Even with higher prices there continues to be solid demand for new houses," said Ted Wilson, principal with Residential Strategies. "The biggest challenge for builders today is that, with limited construction labor and a disrupted material supply chain, it is taking much longer to get houses built and closed." Despite the delays, builders set a record for closings in the most recent quarter at 11,985 units, up 3.5% year-over-year. The annual closing rate stands at 45,574 units, up 13.7% year over year.
The cost and shortage of construction labor has been problematic for builders, said Cassie Gibson, Residential Strategies' senior vice president. Lumber future prices peaked in May 2021 and have subsided since, but supply chain issues persist for many other components used in housing construction, causing higher prices to persist for builders as they determine their true input costs, Gibson said.
New home demand in North Texas has soared over the last year and a half because of a shortage of existing homes and surplus of people moving to the area.
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The planned office project would be constructed overlooking the Dallas Cowboy's practice fields in The Star development in Frisco.
The City of Frisco is poised to provide the land for construction of a new corporate office building at the Dallas Cowboys' Star development that's expected to become the new home of Keurig Dr Pepper. Frisco City Council plans to vote Tuesday to contribute the land overlooking the Cowboys' practice field for a 300,000-square-foot or larger building. To entice the move, the city will sell the 2.49-acre site at a reduced cost, according to the council agenda. The land, valued at $2.7 million, will be sold to Dallas Cowboys owner Jerry Jones' Blue Star Land for $597,912. The reduced price is described as a $2.1 million grant to assist the project's development. "City council has investigated and determined that the company meets the criteria for providing the grant," according to the agenda. "The company shall be required to commence construction of the office building on the property on or before August 30, 2019, and complete construction ... within 24 months."
International telecom firm Nokia is bringing more than 2,000 workers to the Cypress Waters development. Nokia will relocate its North American headquarters and workers from Las Colinas and Plano to the development north of LBJ Freeway near Belt Line Road. "They've leased 350,000 square feet in two buildings," said Cypress Waters developer Lucy Billingsley. "They are taking one whole building with 250,000 square feet and 100,000 square feet in another." Nokia's new office will be the biggest job center in the 1,000-acre Cypress Waters, which is one of the Dallas-Fort Worth area's most successful developments. "They will be moving into the 100,000 square feet in January and the next 250,000 square feet in June," Billingsley said. The new buildings at 3100 and 3201 Olympus Boulevard are on the south shore of North Lake in a mixed-use project called The Sound.
McKesson Corp., the nation's largest pharmaceutical distributor, announced last week that it will relocate its headquarters from San Francisco to Las Colinas in April. The company, which delivers prescription drugs and medical supplies, has more than 75,000 employees globally and had revenue of $208 billion last year. It ranks sixth on the Fortune 500 list, behind only Walmart, Exxon Mobil, Berkshire Hathaway, Apple and UnitedHealth Group. With its move, McKesson will become the second-largest company by revenue to be based in North Texas, surpassing AT&T Inc. The largest, Exxon Mobil, is also headquartered in Las Colinas. Dallas-Fort Worth had 22 Fortune 500 company headquarters this year. That'll grow next year with the addition of McKesson and another California transplant, San Francisco-based Core-Mark Holding Co., which is relocating to Westlake.
The PGA plans to move from its longtime home in Florida to a newly built campus at the northern edge of Frisco in a deal that could cost more than $500 million, three sources familiar with the project told The Dallas Morning News Friday. The project would include a new 500-room resort by Dallas-based Omni Hotels & Resorts, the new 100,000-square-foot headquarters building, two championship-level golf courses and a 9-hole practice course. It will also include a guarantee that two PGA Championships, two Women's PGA Championships and multiple men's Senior PGA Championships will be played in Frisco, sources said. The PGA land is located "south of US 380, north of Panther Creek Parkway, east of Teel Parkway and west of Preston Road."