The last month of building permit data for 2022 is in, and now that the totals have been tallied, how well did Dallas stack up against other major counties across Texas?
Dallas County continues to be one of the top real estate markets in the country. However, housing activity in the region appears to be decelerating, according to building permit data from Texas A&M University’s Texas Real Estate Research Center (TRERC).
Last year, Dallas County issued 5,649 single-family building permits, roughly 25% fewer than the 7,728 reported in 2021. During this time, the average monthly number of single-family building permits issued decreased from 644 in 2021 to 470 in 2022, a 21% decrease year over year, TRERC data shows.
The number of single-family permits processed by the City’s building permit department, the Development Services Department (DSD), dropped from 114 in November to 111 in December, a 3% drop month over month.
Builders all over Texas are facing similar conditions as in Dallas. Homebuilders and developers in Travis County (Austin), Harris County (Houston), and Bexar County (San Antonio) are reporting a major slowdown in permit activity, with each county’s permitting department issuing a record-low number of single-family permits in December.
Travis County issued 7,587 single-family permits in 2022 and 9,204 in 2021, a year-over-year decrease of 17.96%, according to TRERC. Permit activity in Bexar County was slightly worse, dropping 27.53% YOY. Harris County, which receives more robust permit activity than other counties in Texas, issued 18,155 building permits, down from 21,260 and a YOY decrease of 14.21%. Dallas County had a middle-of-the-range performance compared to the above counties, reporting a YOY decrease of 24.16%.
Building permits are only one element contributing to the decline in single-family home construction, according to Ted Wilson, founder and principal of Dallas-based Residential Strategies, which tracks new home construction and the build-to-rent segment of the market.
“I wouldn’t judge the slowdown in permit activity too quickly,” Wilson told The Dallas Express.
“The single-family home market is sort of divided between two segments of builders, the ones who did spec and release (S&R) and the ones who did build to suit (BTS),” he said.
The difference between the two is that S&R is built speculatively, while BTS is built under contract from the future owner.
Due to the “uncertainty around the direct construction costs with all the inflation that builders were experiencing, several homebuilders went with the (S&R) approach, so they could know what their cost would be and could lock in a strong margin,” Wilson explained.
Ultimately, “what we saw in the second half of 2022 is that builders really focused on working down the inventory of uncompleted homes,” he said. In addition, “many builders opted out of new home starts since they still had a backlog of unsold inventory.”
As inventory waits to be sold and builders construct fewer and fewer homes, this naturally slows down the number of permit applications filed within a given municipality’s permit department.
Dallas County in December reported its lowest permit activity since late 2018. Travis County reported its lowest activity level since November 2014, while Harris County hit lows last seen in January 2012. Bexar County saw its permit activity in December dip to lows last seen before COVID in January 2019.
In terms of breaking multiyear lows in December, Harris County had the worst performance, followed by Travis County, Dallas County, and lastly, Bexar County. In terms of the YOY change in permit activity, Bexar County ranked fourth, Dallas County ranked third, Harris County ranked second, and Travis County ranked first in terms of the smallest annual decrease.
With December’s permit numbers hitting multiyear lows, it is unclear what 2023 has in store.