Adobe Stock/Paul Brady
Everyone loves being No. 1. Tony Polito, regional director for Zonda in Tampa, Florida, constantly reminds our team that 2020 was the “Year of Tampa Bay” with the city owning professional sports bragging rights. The Bucs won the Super Bowl. The Lightning brought home the Stanley Cup. The Rays were AL East champs and advanced to the World Series. It was quite a year for the Tampa Bay sports fan, but wait until next year—everyone loves to beat the defending champs.
The Dallas-Fort Worth Metroplex has been the perennial champion of home building, holding the top spot since 2016. Since DFW took the top spot, new-home sales have grown almost 75%, and the region increased its lead over Houston by 5,900 starts. The market strength continues in 2021 with the average sales rate per project jumping more than 50% year over year in February. The demand is there for DFW to exceed 50,000 home starts in 2021, driven by the strong employment growth over the past decade, demographic trends, significant in-migration from out-of-state buyers, and record-low interest rates.
But can the Metroplex hold onto the top spot? 2021 is becoming the “Year of the Gap Out” in DFW. Since the start of 2020, builders sold out of 241 more projects than new projects were opened, with the gap-outs accelerating in the past six months.
With demand outstripping supply, builders are aggressively raising prices to slow sales. The strategy is having little success. Over 12,000 price increases were implemented in the month of January alone, yet sales rates jumped more than 50% YOY in February. Many have resorted to capping sales to match production capacity and lot availability with the sales pace. Although land developers have accelerated lot deliveries, they are struggling to get ahead of the demand.
Source: Zonda
Will the situation improve in 2021? Zonda is tracking 23,000 future lots in the late stage of construction, which should be delivered in the first half of the year. Zonda also is monitoring the progress on an additional 300,000 future lots through its satellite imagery service bird.i and research team. The future pipeline should allow the current starts pace to continue in 2021—barely.
Source: Zonda
For now, Dallas-Fort Worth’s top spot looks safe in 2021. However, for the market to continue to grow and to ensure DFW keeps its lead in 2022, new development activity and lot deliveries will need to grow beyond the current pace. We’ll see later in the year whether DFW will hold on to its No. 1 spot in home building.
