At Hanley Wood’s Housing leadership summit last month I spoke about how the housing recovery has been led by the move-up price points.  I also spoke about the supply constraints facing the Dallas-Fort Worth market and how it is rapidly driving up the price of lots and new homes.  Builders and developers have appropriately focused their new developments in the move up price ranges.  Starts are now back to the peak level of 2006 for homes priced over $300,000 and lot deliveries are exceeding the starts pace in the $350,000 to $750,000 price range.  It has to make you question if the market can support continued significant growth in these move up price points.  Will we begin to see the starts activity flatten in the coming quarters for homes priced over $300,000?

Conversely, only 2% of the lot deliveries in the last twelve months were for homes priced under $200,000, yet 25% of the starts in the last year were for homes priced under $200,000.  Lot inventory for homes priced under $200,000 has dropped from 55,000 lots in 2005 to 13,000 lots in 2013, and they aren’t being replaced.  At the current starts pace these remaining lots will be gone in a little over two years.  As time goes by it will become more and more difficult to replace these lots because of higher land prices and development costs.  Will homebuyers who can only afford an $180,000 home be forced to buy an existing home or stay in a rental?  Will we see higher density development or smaller home sizes and higher lot to home price ratios?

What are your thoughts?

View David Brown's summary of the Dallas-Fort Worth Housing Market from the 2014 Housing Leadership Summit here:

Learn more about markets featured in this article: Dallas, TX.