Home construction continued to boom in Central Texas in the first quarter, with builders starting work on 13 percent more houses than in the same quarter last year, the latest figures show.
“Austin continues to ride the wave of buyer demand into the spring selling season,” said Vaike O’Grady, Austin regional director for Metrostudy, which tracks housing markets locally and nationally. “There’s no evidence of any slowing in demand, especially for homes with base prices below $300,000. At the same time, it’s becoming more challenging for builders to provide housing in that segment, due to rising construction costs for both materials and labor.”
The 4,064 home starts in the first quarter was a 13.1 percent increase over the first three months of 2017. The pace was in line with the first-quarter starts in the previous two years, which were in the 3,500 to 4,500 range, O’Grady said.
On an annual basis, builders started construction on 16,457 houses during the 12 months that ended in March. That was the second-highest level since the end of 2006, when starts totaled 17,784.
On a year-over-year basis, the 16,457 starts were a 4.5 percent increase over the 12 months that ended a year ago March.
For several years running, the Austin-area housing market has benefited from the region’s robust job and population growth. But its supply of housing has not kept up with demand, experts say, leading to sharp home-price increases.
“In order to find homes within their budget, people are having to look farther and farther out, or make the choice to move to a townhouse or condo,” O’Grady said. “Incomes are still not growing as fast as they need to to keep up with home prices. And if mortgage rates shift upward significantly, it could dampen demand.”
The median price of a new home in the Austin metro area was $288,489 in the first quarter, up from $287,161 in the same quarter last year.
“New home median pricing has remained fairly flat over the past few years,” O’Grady said. “Builders are responding to the demand for more affordable homes by creating ‘value’ product lines with smaller, more efficient home designs.”
Allie Wasilko, internet sales director for Scott Felder Homes in Austin, said the homebuilder had a strong first quarter.
“We’re seeing a lot of interest because of the low inventory in resale homes — that certainly helps us,” Wasilko said. “We’re seeing a lot of empty nesters and retirees from out-of-state, as well as move-up buyers from Texas.”
She said the Cypress Forest subdivision in Kyle, where Scott Felder is selling homes from the low $300,000s to the high $400,000s, has seen especially strong sales.
Sales also are going well at Whisper Valley, a subdivision being built by Taurus of Texas in northeastern Travis County, east of the Texas 130 toll road near Manor. The subdivision, to be built in phases in coming years, is planned for a total of 7,500 homes, all with energy-saving features.
“Austin homebuyers want to live an eco-friendly lifestyle and do it affordably,” said Douglas Gilliland, president of Taurus of Texas. “Homes in Whisper Valley begin at about $220,000 and average in the mid-200s. That includes all the high-tech, sustainable features that use renewable energy sources. In fact, the resale value of these homes will be higher because of the features already built into them.”
The Resmark Companies, a Los Angeles-based real estate investment group, plans to build and sell 235 homes valued at more than $60 million over the next three years in its Central Texas communities. Resmark expanded into the Texas housing market this year.
“The Austin market remains resilient with solid activity in new home starts fueled by continued job growth,” said Michael Zarola, senior vice president of investments for Resmark who leads the Austin office.
The good news, Zarola said, is that builders are moving their inventory homes, reducing the chance of the market being oversupplied in the near future.
“The not so good news – labor and material cost increases combined with extended entitlement and development timeframes have impacted builders’ ability to deliver homes in a timely fashion within their existing communities, further fueling upward pressure on home prices,” Zarola said. “Projects that have been able to deliver relatively affordable new home product within submarkets that are in commutable distance to employment centers have performed the best.”