Central Texas home starts hit highest level in a decade


Annual total highest since mid-2007.

Builders: Prices rising amid strong demand, short supply, rising construction costs.

With no letup in housing demand, Central Texas builders kept up their swift pace in the first quarter, starting construction on homes at the fastest rate in a decade, according to new figures.

Austin-area builders started work on 3,487 homes in the first quarter, a 1.3 percent increase over the same period last year, according to Metrostudy, which tracks the housing market locally and nationally. The new figure was the highest level for a first quarter since 2006, when starts peaked at 4,387, Metrostudy said.

For the 12 months ending in March, home starts soared nearly 15 percent, with 14,392 starts recorded. That’s the highest annual total since the second quarter of 2007, when Metrostudy recorded 14,604 starts. The peak was reached in the third quarter of 2006, with 17,164 starts, said Vaike O’Grady, Austin regional director for Metrostudy.

The latest annual total was bolstered by a significant increase in the supply of new, shovel-ready lots and mild winter weather, O’Grady said.

As has been the case in the recent past, new homes priced in the $200,000 to $300,000 range continued to make up the strongest segment of the market, accounting for 47 percent of the annual starts total through March, according to Metrostudy.

Five areas — Cedar Park/Leander West, Pflugerville, Kyle/Buda, Hutto; and Del Valle — made up 43 percent of the annual total, the firm said.

Mark Sprague, a longtime Central Texas housing expert with Independence Title, said the metro area is experiencing “one of the best markets in Austin’s history.”

“Strong, long economic run for Austin. Longest on record,” Sprague said. “Residentially we are in the 9th inning.”

Sprague characterized the resale market as strong, and the new-home market “edging toward the robust.”

“Not many markets nationally nor regionally can claim this,” Sprague said.

Jason Palos, a real estate agent with JB Goodwin Realtors in Austin, said: “It’s a seller’s market and that includes builders. Heavy demand allows them to offer fewer incentives and have scheduled price increases.”

It’s not uncommon for builders to raise prices every three or six months, Palos said. “For communities (with homes priced) under $300,000 that increase could be $10,000 or more — and higher increases for higher- priced communities,” Palos said.

Tom Grant, president and principal with Centerra Homes, said that “affordability is an issue, and we continue to experience inflation in labor and materials.”

“We are selling smaller homes at a higher price per square foot compared to 2016 as a result of construction cost increases,” Grant said. At Goodnight Ranch in South Austin, Centerra’s homes range in price from the low $240,000s to the high $270,000s.

O’Grady said many builders in Austin are doing their best to find ways to bring home prices down, either by downsizing their product or moving to what were previously thought of as remote suburbs. But they face challenges.

“It’s hard to find inexpensive, smaller home sites that are close enough to employment centers,” she said. “Well-intentioned municipalities also are adding costs by seeking to increase regulations on builder designs. Add in strong demand and low resale supply and there is a lot of upward pressure on new home pricing.”

“Continual year-over-year increases are likely shrinking the buyer pool, and may be tamping down growth overall,” O’Grady said. “While Austin is still affordable as compared to California, we also compete for jobs with other cities in Texas. When we compete against Dallas, Houston, or San Antonio, the Austin market is much more expensive,” she said.

Myra Goepp, vice president at Benchmark, which is developing Goodnight Ranch with the Goodnight family, said rising prices don’t seem to be dampening sales, at least for now.

“It doesn’t appear that we have hit a tipping point, as prices are continuing to creep up slowly and we saw no clear decline in home sales,” Goepp said. “Over the last nine years we have experienced significant shortfalls in meeting the demand for housing and it may be that during 2016 some catch-up to the undersupply may have occurred.”

Joseph Kirchner, senior economist with Realtor.com, said the Austin-area housing market “is seeing prices increase and affordability decline faster than the rest of the nation.”

And even though the region’s job growth has cooled a bit, housing supply still lags demand, Kirchner said.

“My best judgment is that in 2017 we’ll see sales come in at 2016 levels, while prices will continue to soar,” Kirchner said.

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