Building permit activity in Fort Worth dropped significantly during the first quarter of 2023 as developers grappled with higher interest rates, increased input costs, and decreased consumer demand.
Developers pulled 3,289 construction permits in the first three months of 2023 in Fort Worth, 27.3% fewer building permits than the 4,590 pulled during the same quarter last year, according to the City’s latest report.
Fort Worth’s Development Services Department (DSD) issued 949 single-family building permits, 71 multi-family and detached multi-family permits, and 235 commercial permits between January and March. This represented a 52% decrease in single-family permits, a 74.2% drop in multi-family permits, and a 14.7% decline in commercial permits compared to the same period in 2022, data in the report shows.
With Fort Worth’s development activity off to a rocky start and the Fed’s recent Summary of Economic Projections forecasting further tightening until 2024, builders may have to pull back on the number of new construction applications as they deal with development limitations and softening demand for both single-family and commercial projects.
Decreasing construction activity isn’t only confined to Fort Worth, though. National permit data also indicates a sharp downturn in construction activity during the first three months of the year.
During this period, the total number of single-family permits issued nationwide was 191,695, about 31% below the Q1 2022 level of 278,189, according to the latest National Association of Home Builders data. In addition, existing-home sales for the quarter were also down by roughly 22%, the National Association of Realtors recently reported.
High mortgage rates and persistent inflation at or above 5% have also contributed to the slowdown in construction permits. As of May 17, the average interest rate on 30-year mortgages was 6.6%, up from 6.58% the week prior.
Stricter lending practices for commercial developers following the recent banking turmoil could also be playing an upsized role in the current decline of commercial construction activity.
“With the barrage of news about skyrocketing and plunging home prices, inflation, rising and falling mortgage rates, buyer’s markets and seller’s markets, and the most recent banking debacle, it’s becoming increasingly difficult to see the facts and make any decision whatsoever about buying and selling,” said a report published by Point2, a leading provider of online marketing solutions for real estate agents.
Even though permit activity in Fort Worth saw an overall decline during the first quarter of 2023 on a year-over-year basis, single-family and commercial permitting increased 71% and 22%, respectively, in March compared to February, the City’s report shows.
Fort Worth isn’t the only city in North Texas to experience a drop in permit activity. Single-family permits were down 58% in Anna, 42% in Frisco, 30% in McKinney, 26% in Prosper, and 10% in Denton, as previously reported by The Dallas Express.
Under City Manager T.C. Broadnax, building permits in Dallas have been a frustrating topic for both residential and commercial developers. However, by the start of 2023, Dallas’ DSD had managed to resolve some of the issues that led to the Department’s infamous backlog.
Dallas has been unable to escape the broader cooldown in construction demand, though, receiving 69 fewer residential permit applications in April than the previous month, according to the latest data from the City’s Residential Permit Activity Dashboard.
This changing market sentiment was recently highlighted by Dallas-based market research firm Residential Strategies Inc., which noted a 39% drop in construction permits/new housing starts during the first three months of 2023.
“The current housing market is a mixed bag,” analysts for Point2 said in the report. “Trapped in the financial rollercoaster gripping the nation, homeowners and potential homebuyers are experiencing decision paralysis.”
Despite the softening demand for construction in Fort Worth, some large projects are still flowing into the city. The highest-valued commercial construction projects that were issued permits by Fort Worth’s DSD in March include the following:
- E.B. Alliance Corp. #801: Located at 3451 Heritage Trace Pkwy. This project entails the commercial construction of a new retail store valued at $40.68 million.
- Hughes’ House Phase 1: Located at 4830 and 4908 E. Rosedale St. This project involves new commercial buildings totaling 156 units, a fitness area, management space, and a clubhouse valued at $25.76 million.
- Blazing Trail: Located at 4101 N. Fwy, 2900 Mark IV Pkwy, and 4049 North Fwy. This project entails new commercial construction of office and warehouse buildings valued at $22.84 million.