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.
Rising mortgage rates are starting to take their toll on the nation's homebuilders, who are more concerned about affordability heading into the all-important spring housing market as mortgage rates surge.
Builders' sales expectations for the next six months declined a steep 10 points to 70, according to the National Association of Home Builders/Wells Fargo Housing Market Index. The index doesn't often see such large monthly moves. Builders' view of current sales conditions fell 3 points to 86.
Overall, builder sentiment in the market for single-family homes dropped 2 points to 79 in March. February's read was also revised lower. Last March it stood at 82. This is the fourth straight monthly decline and the first time the index has slipped below 80 since last September, when the delta variant of Covid-19 was spreading. Anything above 50 is considered positive sentiment. Overall sentiment is still good, but there are concerns for later this year.
Hundreds of sellers awaiting new builds will have to sell their homes another way after
Zillow canceled contracts for closings set for late 2022 through its defunct iBuyer, Zillow Offers
After vowing to honor outstanding purchase agreements made through Zillow Offers, Zillow has canceled 400 of approximately 8,172 contracts with homesellers nationwide, the company has confirmed. The news is the latest in the ongoing iBuying saga that began for the company in early November when it announced it would shut down its iBuying business. The homesellers will receive compensation for the canceled contracts, which includes earnest money and a varying bonus for agreeing to terminate the contract by Nov. 30. Over the past month, Zillow's stock has tumbled as the company faces continued public scrutiny and several securities fraud lawsuits due to Zillow Offers closure. The company opened on the Nasdaq at $53.61 per share on Tuesday, down from the previous day's closing price of $54.26.
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.
A faster than expected turnaround in demand following a sharp drop-off at the start of the coronavirus pandemic, has the nation's homebuilders bullish on their business again.
Builder sentiment jumped a striking 21 points in June to 58, the largest monthly increase ever in the National Association of Home Builders/Wells Fargo Housing Market Index. Any reading above 50 indicates a positive market. In April, it plunged a record 42 points to 30.
"As the nation reopens, housing is well-positioned to lead the economy forward," said NAHB Chairman Dean Mon, a homebuilder and developer from Shrewsbury, New Jersey. "Inventory is tight, mortgage applications are increasing, interest rates are low and confidence is rising."
The U.S. is short more than 2 million homes as building activity still lags.
Nationwide home mortgage rates are near record lows. Employment rates are near record highs. And demand for housing is strong in most U.S. metro areas. You'd think homebuilding would be booming. But you'd be wrong. Single-family home construction across the country and in North Texas is nowhere close to reaching the levels we saw before the Great Recession. And homebuilding is likely to lag demand through the next three years, according to a new report by Zillow.
The real estate marketing firm and Pulsenomics surveyed economists, investment strategists and real estate professionals who said that home construction will remain below historic averages through at least 2022. Zillow estimates that nationwide homebuilding has lagged by more than 2 million houses during the last decade. In the Dallas-Fort Worth area, we're short more than 40,000 homes from where we would have been if builders could have kept up with demand.
"Without new homes to meet population growth and replace an aging housing stock, homebuying is expected to move further out of reach," Zillow director of economic research Skylar Olsen said in the report. Zillow's findings are in line with what the National Association of Home Builders has been warning for the last few years — that builders can't produce enough houses.
In North Texas, the country's busiest homebuilding market, production for this cycle may have already peaked. Home starts in the area are down about 2,000 units this year from last year's peak, according to data from Residential Strategies. While homebuilding activity may catch up a bit, don't expect a D-FW building surge, Residential Strategies principal Ted Wilson said. "Even with the ultra-low mortgage rates restimulating the housing market, we are forecasting a similar flat market through 2020," Wilson said. "While the underlying demographics for D-FW remain very favorable, housing affordability continues to be the primary factor that controls for-sale housing growth." In other words, not enough North Texas buyers can afford the new homes builders are able to construct.
- Dallas Morning News, September 13, 2019
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."