Dallas-Fort Worth builders can’t construct new single-family homes fast enough to meet the robust demand. But a fourth quarter surge in home starts last year gave builders a running start on 2018.

The 33,891 annual starts were not only a 20 percent gain from 2016, they reflected the highest volume of new home construction in the past decade. But comparing last year’s home starts to 2007 is only half of the market picture since the housing crash. Though builders started more than 52,000 homes then, median new home prices have since skyrocketed nearly 70 percent. So factoring in bankable sales significantly narrows the gap between 2007 and 2017. 

While economists thrive on analyzing comparisons, the constantly changing variables need to fit into the equation. But that’s easier said than done in a market that keeps charting its own course.

Today’s housing boom doesn’t compare to previous building booms in North Texas because it’s fueled by an influx of corporate relocations and housing demand for about 80,000 to 100,000 new residents a year. Though that’s a good problem for homebuilders and real estate agents to have, it stretches an already short supply of housing inventory and drives home values up.

As homebuilders look for strategic ways to raise their annual bottom line and keep productivity moving upward, they are perpetually reinventing the industry’s new normal.

The surge of new home starts at year-end is a prime example. By boosting the inventory of unfinished vacant new houses from 4,400 in 2016 to 5,750, builders started 2018 with a 2.2-month supply of new homes to sell as well as a 15 percent jump in sales.

Although escalating home prices go with the territory in a boom market, homebuilders are faced with higher costs for land, materials, and labor, which make the median price of a new home $335,000, while the average previously-owned home is $100,000 less. 

Because of the affordability factor, much of the growth in the new home market has shifted to price points beneath $500,000. Some builders have launched separate lines in the $250,000 and up range that are geared for first-time buyers. And builders are constructing more spec homes to meet the immediate demand of relocating buyers. 

The Labor Shortage Impact 

Despite the best strategies of homebuilders to overcome marketplace challenges, they are being hammered by an obstacle that’s out of their control — the housing industry labor shortage.

"We are 20,000 construction workers short in D-FW despite wages rising 35 percent for most needed trades," Phil Crone, head of the Dallas Builders Association, told the Dallas Morning News in an interview. "More than 92 percent of our members cite the lack of labor as having a significant impact on their business. In most cases that's adding a month and more than $5,000 to every home built in our area." 

According to Robert Deitz, chief economist with the National Association of Home Builders, the labor shortage is the most important constraint on the building market. And tougher federal policies toward immigration have made the housing labor shortage even worse because about a quarter of the industry is non-native born. 

Without this albatross, last year’s home starts could have been significantly more, and home costs could have been less. But industry leaders and analysts don’t see an end in sight to the labor shortage until Washington D.C. approves coherent immigration policies and a viable guest worker program. 

What to Expect From the Homebuilding Industry in 2018

After coming off the heels of the biggest housing year in a decade, North Texas homebuilders and analysts alike are upbeat about the prospects of 2018. Aside from rising construction costs, competition, and the market’s demand for more affordable homes, starts should grow even more this year though profit margins may be sluggish. 

According to Ali Wolf, a housing analyst with Meyers Research, Dallas and Denver are the strongest housing markets in the U.S.

“Dallas is arguably the hottest market in the country right now, with prices up 35 percent over pre-recession highs," Wolf told the Dallas Morning News in an interview. "They said prices would never go up in Dallas because they have all this land. [But] you have all these companies going there, and it's finally starting to inflate prices."