Texas Homebuilders Anticipate Price Surge and Construction Growth in 2024

Texas Homebuilders Anticipate Price Surge and Construction Growth in 2024


Source: Ramzi Abou Ghalioum with Cody Baird's contribution
San Antonio Business Journal

Homebuilders across Texas are expressing optimism regarding the trajectory of new home prices and construction rates in 2024.

Presenting the company's findings for the final quarter of 2023 at the housing data firm's quarterly event on March 20, Zonda analyst Bryan Glasshagel highlighted insights gathered from a survey of homebuilder division presidents across Texas. Results indicate that 64% of respondents anticipate home prices to rise by 1% to 5% this year. Moreover, a significant majority, 75% of builders surveyed, foresee increased activity in 2024, with expectations of a 10% average increase in starts. "Consumer confidence continues to be a driving force behind builder activity," Glasshagel remarked to the audience gathered at the Greater San Antonio Builders Association headquarters.

This optimism marks a positive turn for a market where new home construction faced challenges due to rising interest rates in 2022, following consecutive years of explosive growth during the pandemic. Glasshagel noted that typically, starts should slightly outpace closings to maintain a healthy balance between supply and demand.

However, in Austin, closed sales have shown minimal growth, rising just 1.3% year-over-year in February, while new home construction has declined. Although the exact number of new homes delivered remains uncertain, city data reveals that Austin added only 5 million square feet of single-family housing in 2023, compared to 8.6 million square feet in 2022 and 10.4 million square feet in 2021.

Despite the relatively stagnant closed sales in Austin, there is potential for a surge. New listings in February increased by 44.9% year-over-year to reach 3,915, predominantly comprising homes priced under $400,000, as noted by Austin Board of Realtors and Unlock MLS housing economist Clare Losey.

For context, a home with a median value of approximately $400,000 requires a minimum annual income of about $98,000 for affordability, according to a Business Journals analysis of data from Zillow Group Inc. for November. In June, the median family income for a two-person household in Austin was $97,850, according to the city's Housing Department.

Builders surveyed by Zonda identified mortgage rates as the primary obstacle hindering sales and new home starts. While the industry anticipates that lower interest rates could entice homebuyers and sellers back into the market, Glasshagel cautioned that high employment rates might exert upward pressure on interest rates.

The decline in home starts has also led to a surge in the number of vacant developed lots (VDLs) in the city, surpassing the point of equilibrium. "To restore equilibrium, home starts must increase while VDL supply remains steady," Glasshagel emphasized.

Source: R. Ghalioum (2024). Austin Business Journal. Retreived from https://www.bizjournals.com/austin/news/2024/03/22/homebuilders-starts-prices-increase-2024.html

6 Properties
$469,000
Neighborhood: Paloma Lake Sec 19B
3
Beds
2
Baths
2,053
Sq.Ft.
2012
Year Built
6
Days on Site
3162254
MLS
$2,100 / month
Neighborhood: Rainbow Parke
3
Beds
2
Baths
1,847
Sq.Ft.
2008
Year Built
6
Days on Site
5853622
MLS
$295,000
Neighborhood: Chaparral Crossing Condo Amd
3
Beds
2F11/2
Baths
1,302
Sq.Ft.
2014
Year Built
24
Days on Site
1775165
MLS
$399,999
Neighborhood: MYERS, C. SUR
1
Beds
1
Baths
924
Sq.Ft.
1963
Year Built
56
Days on Site
2377530
MLS
$1,150,000
Condo: Marina Village At Lakeway Condo
3
Beds
3
Baths
2,226
Sq.Ft.
2008
Year Built
62
Days on Site
8948415
MLS
$1,400,000
Neighborhood: Burleson, Jonathan
89.44
Acres
152
Days on Site
2145268
MLS

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