Despite the reduced housing demand, the market share of new construction sales ballooned. Within a year, the share of new construction sales rose from 15.2 percent to more than 20 percent, indicating every five closed listings is now a new home. Both demand and supply factors contributed to the increasing trend for new homes. The shortage of existing homes is due to current owners’ reluctance to give up their current homes. For more information on Austin’s new construction, read “Austin Home Price Illusion” at https://www.recenter.tamu.edu/articles/tierra-grande/Austin-Home-Price-Illusion-2378.
Texas’ average days on market (DOM) stayed at 56 days for the second straight month, deviating from the steep rebounding trend that lasted for over a year. The current reading is merely three days short of the five-year average before 2020, which stood at 59 days. The consistent reading suggests that the housing market may have reached a state of equilibrium. Among the major metros, Austin and San Antonio reported a longer-than-average DOM of 69 days, while Dallas and Houston had DOM figures of 46 days and 49 days, respectively.
The number of active listings rose to 2.3 percent, reaching just above 85,000 listings. All four of the major metros posted positive monthly gains with Dallas accounting for the largest gain at 5.7 percent MOM while Houston remained at last month’s level with a 0.4 percent MOM game. Conversely, the state’s new listings dipped by 12.7 percent to 36,880 units, with Dallas contributing significantly to this double-digit decline by registering a decrease of 1,800 units in July. Amid the rise in active listings, months of inventory (MOI) had a marginal gain to 3.3 months.
Since the Fed hiked interest rates by another quarter point, both treasury rates and mortgage rates increased in July. The ten-year U.S. Treasury Bond yield grew 15 basis points, reaching 3.9 percent. Likewise, the Federal Home Loan Mortgage Corporation’s 30-year fixed-rate increased to 6.8 percent, up 13 basis points. The inflated mortgage rate is expected to further raise the cost of home ownership and decrease mortgage applications.
Single-Family Permit Levels Continue to Drop
Texas’ single-family construction permits shrank to 12,240 applications in July after seasonal adjustment, marking a 3 percent MOM decrease. Houston’s (4,070 permits) contribution to the monthly shrinkage was prominent, as permits plummeted 17.8 percent MOM. Although Austin (1,380 permits) reported the largest rebound of 34.3 percent MOM, the gain was not enough to cover half of Houston’s loss. Dallas (3,540 permits) and San Antonio (760 permits) maintained their activity levels like June.
Construction starts had not yet reflected the decline in construction permits. After three consecutive growths, single-family construction starts in Texas balanced at 11,450 units. Both Dallas and Houston led with over 3,200 houses breaking ground, surpassing the combined total of other metros outside the “Big Four.” The ratio between home projects in Austin (1,580 starts) and San Antonio (810 starts) remained at approximately 2:1.
The state’s total single-family starts value reached $18.8 billion, up from $15.9 billion in June. While the current starts value fell short of the peak during the pandemic frenzy in 2020-22, it aligned with construction activity levels observed in 2019. Notably, Houston and Dallas remain pivotal players, contributing to more than half of the state’s construction activity values. Dallas’ market share rose to 27.6 percent, closely trailing Houston’s 27.7 percent share.
Steady and Modest Price Gains Amid Sales Decline
The low supply of homes had supported price gains, and the steady uptick in Texas’ median home prices, including both new and existing homes, moderated from 0.4 percent in the first five months to 0.2 percent in June and July. Three of the Big Four metros reported monthly changes of less than 1 percent, indicating price stability for the state’s housing market. Austin’s median price remained more elevated than all other metros at $454,000 (Table 2). Dallas followed with $398,300.
