Do you know how I can tell the housing market in Fort Worth is still balancing? It’s not the increase in inventory. It’s not the increase in days on market that homes are showing. It’s the nearly 50 emails per week that I receive from new home builders.
Ask any Realtor and they will tell you that their email, text, and paper marketing from new home builders has skyrocketed in the past months versus the previous 20.
When the market was red hot, builders not only slowed their marketing efforts toward the real estate community, many took an aloof attitude toward buyers as well.
Certainly, I’m not speaking of every new home construction company, but there were definitely many in the area that felt it was a good time to reduce Realtor commissions, stop incentives for buyers, develop poor communication habits, and literally invite contracted buyers to walk away from their contract — knowing they could get the home back under contract quickly and for a higher price.
Now that the real estate market is cooling and the pool of eligible home buyers is shrinking, builders are rolling out the red carpet to prospective buyers and Realtors in hopes of keeping their projected sales numbers high and their shareholders and bankers happy.
Inventory is Increasing
A quick search of the Multiple Listing Service data for the City of Fort Worth shows there are roughly 3,800 homes now available for sale. Of that, more than 700 of them are new homes completed or under construction in 2022.
Nearly 20 percent of listed homes are new homes. This can explain why the overall number of homes on market has increased to nearly two months of supply in the past few months. When the market was good, new home companies didn’t need to use MLS or the Realtor base to advertise their homes.
The health of the United States economy starts with the success of new home construction. Not vehicles, not electronics, not anything can compare to what new home sales do for the economy. While it’s one thing for 20 percent of listed homes to be new inventory homes, is that what the market needs to keep it churning?
What is Affordable Inventory?
Ask anyone what “affordable” is and you’ll get plenty of definitions According to Google, “affordable housing” is anything that is under 30 percent of total monthly income. If that’s true, then affordable housing can be just about any priced home.
Looking at the most recent housing inventory report from the Greater Fort Worth Realtor Association, more than 50 percent of homes sold in July 2022 were priced at $400,000 or under. Therefore, Tarrant County Tuesday is going to consider “affordable housing” as the same. Maybe that’s not your definition, but this is my article so you have to play by my rules.
What this report is showing us is that the majority of new inventory homes on the market today need to be priced under $400,000. So what do the numbers show?
Going back to the over 700 new homes available on MLS, less that 30 percent of those homes are priced at $400,000 or under.
What that means is that over 70 percent of new homes don’t meet the budget needs and demands of the majority of buyers in the market. While it’s great to boast how the available inventory of homes is growing and growing, data is showing that it’s too expensive for those looking to purchase a home.
We have a problem. Buyers are out there. Inventory is out there. However, their criteria don’t align.
Builders can keep on building and building, but if they continue to out-price their homes from the majority of buyers, what’s going to happen?
In a real estate market with low inventory and high demand (like we’ve enjoyed for past 20-plus months) builders have been able to put a price on a home and get it with little hesitation. In a real estate market where buyers are tightening their budget and interest rates are limiting their buying power, homes aren’t going to fly off the shelf.
So what’s going to happen?
We are already seeing builders groveling back to buyers and Realtors, offering bonuses and incentives and discounts on homes. Prices are being slashed by the tens of thousands on completed or nearly completed inventory homes.
Builders are feeling the squeeze and doing all they can to make their homes attractive to the shrinking pool of eligible buyers. But that’s not going to work for all new home builders.
For the past year or more builders have increased, increased, and increased prices. Not solely their fault, but they kept on building nonetheless. If all they can do to move inventory is slash prices — or profit — eventually there will be many new home builders going belly-up.
In a perfect world, land owners would reduce their pricing demands, contractors would work for less money, and building materials would come down to a price where builders could make money and still build quality homes under $400,000, but those days are long gone.
What is going to happen is that new home sales will become stagnant. Building companies will go out of business because they can’t sell their homes, and we will find ourselves in a situation like 2008 all over again.
Big box builders will scoop up properties and contractors of local, little builders, money will be made, money will be lost, the land won’t be as developed quickly enough, and then in a year or three interest rates will be lowered, demand will increase and we will all be complaining how there’s not enough quality inventory out there.
The more things change, the more they stay the same
