Dallas-Fort Worth leads the US in new homes for sale. How high can prices go?

The homes being built in the master-planned Walsh community in far west Fort Worth are pricey to say the least — typically $450,000 to $750,000 — yet one builder reports that sales are up 300% compared to the first quarter of last year.

Layne Mitchell, a sales counselor for Highland Homes in Walsh, says many prospective buyers are coming to him after an exhaustive search for a place to live.

North Texas is in the midst of a historic housing shortage, and the prices for new and resale homes are at record highs. Residents are tired of engaging in bidding wars and overpaying for existing homes, and they’re frustrated by the lack of homes in the $250,000 to $350,000 range.

Walsh is expensive, but for those who are willing and able to pay, it’s less stressful than many other alternatives.

“I’ve got homes ready to go right now. I’ve got two, in fact, and I’ve got two more homes that are halfway done. The pressure just releases from people when they see that,” Mitchell said. “I have something for you here and there’s no bidding war.”

More homes have been built in the Dallas-Fort Worth area — 40,000 — than any other U.S. metro area in the past year, according to the data firm CoreLogic. The region is on pace for construction of about another 40,000 new houses in 2021, too.

And yet, those new rooftops are nowhere near enough.

The median home price in North Texas was $312,990 in February, up from $272,500 a year ago, according to the Texas A&M Real Estate Center. That’s roughly double the value of Metroplex homes a decade ago.

Economists and others who follow the residential housing industry say several factors are to blame — including construction of new homes not keeping up with population growth, a lack of existing homes being for sale during the pandemic shutdown and strong demand for housing from young adults looking for their first place of their own.

Also, in many instances prospective buyers are competing not only with other families looking for a home, but also pension funds and other entities that are increasingly gobbling up residential property as a commercial investment. The Wall Street Journal reports that in some areas up to a fourth of all home purchases are by investors, not individuals or families.

For example, D.R. Horton Inc., an Arlington company that is one of the largest home builders in the nation, built 124 houses in Conroe near Houston — then rented out the houses, and sold the whole neighborhood to an online investing firm for a hefty profit.

Housing relief on the way

The cost of a home in Fort Worth rose 9.8% in February, compared to the same month a year earlier, and likely will rise another 9-10% between now and February 2022, according to CoreLogic.

Many prospective home buyers report having to bid against 10-20 others for existing for-sale homes, driving up the cost by thousands of dollars. One real estate agent told WFAA she knew of some buyers who signed contracts for new homes without even knowing the final price, because of uncertainty about the price of construction materials such as lumber.

Economists say that, while prices are likely to continue to sharply increase in the short term, they do see relief on the way — eventually.

Nationally, 110,000 construction jobs were added to the U.S. economy in March, one of the highest monthly gains ever, said Lawrence Yun, National Association of Realtors chief economist.

“This raises the prospect for more home building and more inventory reaching the market in the upcoming months,” Yun said in an email. “The housing market has been hot with fast rising home prices but has been constrained by a lack of supply. By hiring more workers and building more homes, home prices will move to a manageable level to give more Americans a shot at ownership.”

Frank Nothaft, chief economist at CoreLogic, says that as more pandemic restrictions are lifted the price of homes will stabilize “perhaps to the pace of overall inflation.”

Interest rates also are expected to gradually rise, which will temper home buyer demand, he said.

And, he added, more existing homes will be listed for sale, giving prospective buyers more choices.

“Existing home inventory has been particularly limited during the pandemic as older prospective sellers postponed listings,” he said. “As older homeowners are vaccinated, we expect to see more existing homes listed for sale later this year.”

In the meantime, prospective buyers face a choice: postpone their purchase, or pay a premium for a home now.

Mitchell says he hopes to continue luring customers who are tired of what he calls “the Ebay process,” in which a prospective home buyer puts in an offer on a house, but also includes a best bid clause — agreeing to pay up to a certain amount over the highest bid submitted by others.

“I’ve got answers,” he said. “Come see me.”