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Local Construction Slowing as Mortgage Rates Rise


3d illustration of real estate, interest rates. | Image by Microstock3D, Shutterstock

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Dallas-Fort Worth builders have slowed down on construction in the last quarter as potential home-buyers complain of high mortgage rates.

Dallas-based housing analysts Residential Strategies confirmed that single-family home starts in Dallas-Fort Worth fell by more than one-third from the third quarter of 2021. It is the greatest year-over-year decline in almost a decade.

“With mortgage rates now topping 6%, housing affordability has become increasingly challenging,” Residential Strategies’ Principal, Ted Wilson. “Monthly payments on houses are now over 50% higher than they were in January of this year,” he said

The unexpected falloff in the Dallas-Fort Worth home construction is happening after several years of great profit in North Texas housing construction and sales.

With fixed-rate 30-year mortgages averaging near 7%, the result is that payments on a $300,000 loan have jumped by over $700 per month, discouraging a lot of prospective home-buyers.

Despite the cutback in new residential construction, the sales of new homes in the third quarter were up more than 9% from a year ago. Many of those buyers had locked in their mortgage rates when they contracted to buy – thus protecting them from the recent increases.

“The unfortunate reality for many first-time buyers is that for-sale housing is now out of reach for their budget,” Residential Strategies senior vice president Cassie Gibson said. “Furthermore, many would-be move-up buyers are now concerned about the economy and are likely house-locked, unwilling to walk away from their favorable ultra-low mortgage rate to purchase a new home with a 7% mortgage rate.”

Despite the challenges, Dallas-Fort Worth builders have sold more than 49,000 new single-family homes during the 12 months ending in September, setting a record.

Thanks to low mortgage costs and increased demand, Dallas-Fort Worth builders started a record 58,140 D-FW single-family homes last year. 

As the prices of homes have skyrocketed and interest rates on loans have spiked, some builders have been left with no choice but to reduce prices in a bid to keep up sales.      

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