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Discounting And Incentives Are Coming Back

A report from the Dallas Morning News in Texas. “North Texas home sales dropped in September by the largest percentage in more than seven years. Preowned home sales in the area fell by 7 percent from September 2017. That was the biggest year-over-year sales decline since early 2011, according to data from the Real Estate Center at Texas A&M University and North Texas Real Estate Information Systems.”

“Home sales by real estate agents have been down in three of the last four months. Mortgage rates on average are currently about 4.7 percent — the highest level in seven years — and are expected to go higher in 2019.”

“‘If goes up to 5.5 percent by the end of next year, is that going to be the end of the world? No,’ said Dr. James Gaines, chief economist with the Real Estate Center at Texas A&M University. ‘But it is affecting buyer psychology.'”

“The Dallas-Fort Worth housing market has cooled significantly since early in the year when sales were still up by double-digit percentage rates from 2017 levels.”

“With sales declining, the number of houses on the market in North Texas has growth to 25,895 preowned single-family homes listed with real estate agents at the end of last month. That’s 16 percent more homes for sale in the area than a year ago.”

“New home sales were up almost 8 percent in the third quarter in Dallas-Fort Worth compared with a year ago. Builders closed sales on 8,676 new houses in the just-completed quarter, according to the latest data from Residential Strategies Inc. That was the highest third-quarter sales total for North Texas in more than a decade.”

“But builders don’t expect new home sales to keep rising at the rate they have in the last few years, said Ted Wilson, principal with Residential Strategies. ‘Very clearly what the builders have shared with us is the sales activity beginning in mid-July has been down,’ Wilson said. ‘It’s been a much more challenging market for them this summer. A lot of builders are complaining traffic is down and the cancellation rate is up.'”

“Even with the slowdown in buyer traffic, builders started 8,973 D-FW homes in the third quarter — 2.7 percent more than in third quarter 2017.”

“‘It’s very evident to me — especially in the northern more expensive suburbs — there is a general absence of new foundation slabs being poured,’ Wilson said. ‘Builders are obviously tapping the brakes.'”

“Many North Texas builders are also seeing smaller returns. ‘Builder margins are coming down pretty dramatically,’ Wilson said. ‘A couple of years ago, they were making record profits. Now discounting and incentives are coming back’ at the upper price ranges, he said. ‘They are not making as much money as they have in the last couple of years.'”

The Laredo Morning Times. “If you’re on the market for a million-dollar home equipped with a plethora of amenities, this Laredo mansion may pique your interest. Standing at over 7,000 square-feet, a $1.2 million home is looking for its new owner, according to Realtor.com. Included in the asking price is five bedrooms, five bathrooms, a wet bar and a swimming pool.”

“Perhaps the biggest selling point is the recent $175,000 price cut, a nearly 15 percent reduction.”

This Post Has 8 Comments
  1. ‘Builders closed sales on 8,676 new houses in the just-completed quarter…builders started 8,973 D-FW homes in the third quarter’

    Wa? You mean they started more than they sold? I was told this is unpossible!

    ‘A lot of builders are complaining traffic is down and the cancellation rate is up’

    Cancellation? You mean they walked away from their dream shack? And that would mean some of these closings will get cancelled too!

    Oh dear…

    1. Closings for a builder are typically 4 to 6 months after contracts are signed with the exception of inventory homes which, being already built, can close much quicker. So yes, you can have wide variations. Building starts data is likely taken from numbers from permits. # of sales recently closing will be an entirely different set of data as uildi g starts. A telling sign of market shift would be high recent closings and far fewer starts. Closings typically occur after the CO is issued unless the financing was via construction perm loans. When this applies, the ownership of the property is transferred to the buyer first, and construction commences afterward.

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