Dallas Building Slowdown Spreads to Suburbs


New home under construction | Image by ThomasPhoto/Shutterstock

Homebuilders are slowing new project activity in several North Texas cities.

New home construction has paused in suburbs in the north of Dallas-Fort Worth, with permits for single-family home construction in January falling more than 60% annually in McKinney, Frisco, and Prosper, according to data from Addison-based Tomlin Investments per WFAA.

While commercial construction demand throughout North Texas has stayed consistently strong among developers, single-family construction among homebuilders has basically slowed to a stop — and with it, builder sentiment — as previously reported by The Dallas Express.

At the start of 2023, McKinney reported a 65% year-over-year (YOY) drop in the number of permits pulled for new single-family construction projects, according to Tomlin Investments. Frisco saw a 64% YOY decrease in new home construction activity, and Prosper reported a YOY fall of 63%, according to WFAA.

With U.S consumers burdened by inflation and high mortgage rateshome demand in North Texas has fallen by the wayside, as The Dallas Express has previously covered. Without consistent demand for new home projects, many homebuilders are focusing their attention on unfinished projects.

Following the shakeup from the pandemic lockdowns and the transition to remote work, many people chose to uproot themselves and relocate elsewhere. With interest rates so low at the time, demand for single-family homes exploded between 2020 and 2021.

But after the Federal Reserve approved its first interest rate increase in March 2022, demand for homes had essentially reached its peak.

Throughout 2022, permits for single-family home construction fell 27% in McKinney, 30% in Frisco, and 24% in Prosper, according to reporting by WFAA. The slowdown did not just hit popular North Texas suburbs like Frisco and McKinney but stretched to Princeton and Anna, which saw respective YOY decreases of 41% and 23%, according to Tomlin Investments.

Not all cities in the metroplex reported a drop in 2022, though. Denton, for instance, saw permits rise 28%, while Melissa saw a 13% increase.

Indeed, the department responsible for issuing single-family permits in Dallas only had a couple of months of decent permit activity in 2022, according to the City’s Development Services Department (DSD) single-family dwelling dashboard.

Besides small spikes in March and October, most of DSD’s 2022 permit activity fell below 2021 levels.

In addition to higher interest rates, another contributor to the slow project activity in Dallas is its difficult building permit process. Single-family permit turnaround took DSD between 30 and 50 days in 2022, permit data found in the department’s newsletter showed. Prior to the pandemic, DSD was capable of issuing a single-family permit with a same-day turnaround.

DSD and its director, Andrew Espinoza, have launched a number of initiatives intended to reduce these long permit cycle times, but little discernible progress has been made.

Although the demand for home construction permits fell in Dallas — as was the trend nationally — DSD still made little progress toward chipping away at the existing single-family permits that were stuck in the queue.

The current state of affairs and early forecasts for 2023 suggest City Manager T.C. Broadnax failed to deliver on his promise to fix Dallas’ permitting process in 2022.

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