Dallas-Ft. Worth Homebuilders Want To ‘Wheel And Deal’
The Dallas News reports on builder incentives in that city. “Sale. Price reduction. Limited-time savings. If it works for Wal-Mart, why not Centex Homes or Grand Homes? That’s what builders are hoping. Coming out of the winter slow season for home sales and with inventories edging up, some builders are spreading the word that they want to wheel and deal.”
“The supply of unsold new homes in the Dallas-Fort Worth area was up more than 10 percent at the start of 2006. There were about 8,751 completed, unsold new homes on the market at the end of December. While that’s a small number historically, it’s still more than double the unsold home inventory at the end of 2000.”
“The deals sound too good to pass up, and that’s what builders are hoping. Grand Homes is advertising new homes in Lancaster ‘reduced $30,000.’ In Allen and McKinney, they are cutting prices by $15,000 and $25,000 on some models. Mercedes Homes says it will give up to $14,000 in free options for buyers of its houses. American Legend Homes is offering ‘$10,000 savings’ at one of its McKinney subdivisions. And Centex is cutting prices up to $15,000 on some of its models.”
“‘I know Centex is hitting it pretty hard, their [fiscal] year end is March 31, so that might be part of what you are seeing,’ said housing analyst Ted Wilson. ‘There is a fair amount of speculative construction in the market right now, so I imagine the incentives will stay with us at the higher level through the summer.’”
“Builders had better be careful with the giveaways. Apartment landlords have offered so many freebies to attract renters in the last few years that they can’t get their prices up even though the market has tightened. And although it’s possible for builders to finagle their pricing to give homebuyers the lure of markdowns, it will be more painful for sellers in the pre-owned home market to play the price reduction game.”
The article doesn’t mention it, but $15k off a new house there is significant.
‘The supply of unsold new homes in the Dallas-Fort Worth area was up more than 10 percent at the start of 2006. There were about 8,751 completed, unsold new homes on the market at the end of December. While that’s a small number historically, it’s still more than double the unsold home inventory at the end of 2000.’
I can’t see how almost 9 thousand empty new homes in the area is a ’small number’. Were that many new jobs created recently?
I totally agree. We owned in Plano area, the sprawl I hear has gone waaaay past there and 8k homes - empty - in the D/FW area is huge! That also doesn’t include the preowned. So, no bubble there????
Austin still isn’t seeing reductions on that scale. Centex is offering a 3K gift card, and zero move-in. Not sure exactly how much that is worth. I see new planned communities going up all the way out in Leander, and wonder how all these people are earning a living way out there. They just keep building. Suspect will start seeing more impressive reductions by mid-year.
Ben
DFW is a HUGE area geographically, so in relation to the physical size, that amount of homes doesn’t seem so enormous. However, like the article says, historically it is large. And since I live here, I can tell you that they are building homes like there is no tomorrow. It is definitely a buyer’s mkt here and I would say time is on the buyer’s side. Who’s gonna buy all this stuff is beyond me?
Did you see the BS in this month’s D Ragazine? I’m convinced that was bought and paid for by local realtors and developers to send to “clients” or buyers in LA, LV, Miami, overseas, etc. so they can offload their inventory. There isn’t a buildable piece of dirt anywhere in the city that isn’t being torn up for some oversized piece of crap.
Wow, if I was someone that recently bought a home in these developments I would be livid. Imagine finding out that your home is worth anywher from 15,000 to as much as 100,000 overvalued.( as evidenced by the incentives various builders have thrown at people to induce a sale.
Yep, buying a $400,000 home and then seeing a “save $30,000″ on the same models would send me over the edge.
Same thing happened out in Las Vegas in Oct 2004, Pulte dropped their prices via incentives and just plain discounts on new homes. In developements where prices were 400-500K for new homes they cut back over 100,000 on their models.
Pulte and other builders were spooked by lack of walk in traffic so they took action.
There were all kinds of sob stories about speculators who were ruined. People who bought up all these homes to flip summer 04 and all the sudden prices dropped and they were left competing with the builder.
There were several lawsuits filed by speculators against Pulte over it. Google it, you will probably pull up something.
you’re right! i found a great article that is just the sort of “comedy” the readers of this blog like to see. like “we came hoping to buy 2 houses and left with 19″ that’s hilarious!
valley home buying fallout
I just had to respond when I saw that someone bought 19 homes. Un-frickin’-believable!!
“They call you and say ‘you are so lucky .. this just came across.. it’s going to be worth 100k before it closes,’”said Dyan Harmell. “We came with the hopes of buying two houses. We left the first day owning four. Within the next week, owning 6 — all the way up to 19.”
Dyan Harmell bought 19 homes with 4-million dollars in mortgage debt. Pulte’s in-house lender continued to sell her homes even as she showed a loss on her rental income . . . her sole income. As for Harmell, she’s trying to figure out how to make December’s payment of $30,000.
“For the last year I’ve had my whole family at risk. My mother, who’s 83, my daughter. It’s a lot of pressure on me. I thought I was being smart but they outsmarted me,” Harmell told FOX5.
How smart could she have thought she was, for Pete’s sake?? Yes, as it is being said over and over, the buyers have to admit to some responsibility. No one is holding a gun to your head to buy 19, 10…4…2 houses. You are the only one who knows (or should know and understand) your limitations.
BayQT~
Fools. I hope they go bankrupt.
I look forward to reading TxChic’s take!
Here in Houston I’m not noticing any “thickening” in the Saturday paper, when all the developers advertise. Nor am I seeing a glut of For Sale signs. In fact, I see very few signs. But like Plano, here in Katy the development is extending way beyond where I thought it would. When we bought in 1996 we thought we were on the fringe. Now the fringe is more than 10 miles west.
One trend I don’t like is they are stacking “patio homes” deep and cheap way the hell out. If we have a collapse in energy price like we saw in 1984, those developments will be ghost towns.
Ok, way out on the perceived lunatic fringe, but it won’t be a collaspe of energy prices that condemn those far-flung subdivisions. The reality of Peak Oil may finally make its self known to the world this summer, and the resultant boost to fuel prices will make long commutes a financial nightmare. IMHO.
Peak oil again, huh? I’ll bet you’ve seen The Road Warrior more times than I have. And that’s saying something.
Lou, I agree. The greater Houston area depends heavily on the energy industry for jobs and when those dry up so will demand for those far-flung communities. I know, when I lived there we had one near us that never got completed and became a playground for juvenile delinquents.
Hey! I was one of the jd’s.
Those abandoned subdivisions, with roads, utilities and no houses were great places to “park”.
“Peak oil” is a load. It may be hard to find CHEAP oil, but there is plenty of oil in the ground. I am old enough to remember the doom and gloom circa 1979. I still have a National Geographic special edition from that period. The fears then were identical to today. And we all know what happened - high prices encouraged lots of drillers and speculation, and within just a few years prices collapsed in a spectacular fashion. Anyone who says it can’t happen again is foolish. OPEC does NOT like competition, and if they think the tar sands and shale oil projects in Alberta and Wyoming are about to pay off, they will suddenly discover that they’ve been neglecting to develop their own fields.
Ha ha…you and me both
You are right about the doom and gloom. My dad worked for Shell Oil for 35 yrs and saw many cycles; told me the same thing. Plus, technology has advanced so much that they can tap more oil from “obsolete” fields and ones that were previously unusable. On top of that, there are many underdeveloped markets that have vast reserves (West Africa, Libya, Iraq) that Western oil companies will soon expoit (in good way, right? lol)
I have to agree this is very cyclical. You can practically stick a spoon in the ground and get oil in the middle east.
Of course eventually oil will become to difficult to extract to make it financially feasible and we will just move to next cheapest source of energy.
I sincerely doubt that is going to happen this summer.
Peak oil is a reality, but more importantly, all the “easy” oil is being used up. My best friend does reasearch for the oil and gas industry in Wyoming. I asked him when the world would run out of oil. His response was “never”. According to him, both oil and gas will get ever increasingly harder to extract. At some point, it will take more energy to extract the deep oil than will be gained from the oil itself. That’s when the game is over. There is more oil in the tar sands in the Rocky Mountains than in all of the Middle East. Unfortunataly, it takes massive amounts of energy to extract it. Right now, they’re using cheap natural gas to process it, but when that’s either gone or not so cheap, it will not be feasible to extract it any longer. It takes more energy to extract the oil from tar sands than can be gained. If you want to think there is no end to oil, go ahead. Some of us know better.
Exactly. The saudi water cut is now about 50% according to sources in the know. Of course saudi ARAMCO claims massive reserves, but this is not verified by independent sources. Mexico announced last month that it’s largest field is running dry. Checked the SEC filings for major oil comapnies lately? Royal Dutch Shell has 7 years of proven reserves, and most of the majors don’t have much more. Peak oil is real.
You guys should really read “Twilight in the Desert” by Matthew Simmons. Despite the dramatic title, he is no alarmist but rather an engineer who researched Saudi oil reserves and found them to be significantly less, and more problematic, than previously reported.
His take: oil will not run out in your granchildren’s lifetime or their grandchildren’s lifetime. But oil will soon become increasingly more difficult and costly to extract.
Also, new technology has largely been used to drain current fields at faster rates. OPEC has been running at full or near-full capacity for a long time now, and despite extensive exploration, no new giant or supergiant oilfields have been discovered in decades. Meanwhile, world-wide demand continues to increase.
Saying that oil will allways be cheap is like saying house prices will always rise.
Peak oil is very real according to some very reputable geological sources. It is off topic for this blog so I won’t post links. The saudis are using increasingly desperate measures to retrieve oil, and the water cut is increasing dramatically. Don’t believe what ARAMCO tells you; they won’t tell the truth about their dwindling reserves. Mexico announced last month that their largest field is being rapidly depleted. The major oil companies average proven reserve life is 7-20 years, as they disclose in their SEC filings.
Homes in the Dallas/ Fort Worth area are typically $150-$200K range. $15K-$30K reduction is huge - 10%-20% off.
cheap as sht there and people don’t buy used !
it’s considered lowbrow
when has dallas been a sellers mrkt ?
Virtually never.
And these houses they’re discounting are utter crap. Crackerboxes that will blow over in a stiff breeze. Even with the discounts, they’re way overpriced. Many also have a lovely view of the freeway.
I was up in Frisco last weekend and the number of development projects still under way is amazing.
What is even more amazing is the number of homes for sale in developments that have not been built out yet. Quite a few were occupied - and the rest are either spec homes or ‘flipper’ homes that no one has ever lived in.
The other thing that struck me as odd was how the housing developments will be surrounded by empty fields, but yet have a backyard the size of a postage stamp ( made even smaller by the rear entry garage ). Does no one want a yard any more??
The builders are doing the same shit here in Irvine. All these new communities with houses smashed together and no yards. I think in really high-cost areas they do the zero lot line thing to save money. I guess some people will take the extra square footage over the yard. Personally, I would like a nice yard.
Ugh. My post didn’t go through. Anyway, what I was trying to say earlier was that I see the same thing here in OC. I think the builders try to make more money by doing the zero lot line thing and because the land is so expensive. I guess they give you more square footage in the house but I’d rather have the yard personally.
I see this trend here as well. It’s not like land in Texas is expensive, but lot sizes are much smaller than they were just 25 years ago. My parent’s house in northwest Houston near the HP campus was built in 1978 and is on a nice-sized lot. Since then, nearly all lots are much smaller.
I like my yard. To me, having a yard is one of the key selling points of a house. If you don’t want a yard, go buy a condo.
I think a lot of people don’t like having to take care of a yard, but like being in a house so you don’t have anybody living over or under you. The way they back them in, though people are pretty much on top of each other.
I went from a new house in a big development with tiny yards to an older house with a big yard. Right now I’m trying to figure out what to do with all the “dirt” I have in the back of the house.
Unfortunately, I’m not seeing anything like this in OC. In Huntington Beach, there’s just not much room for big new developments (unless they start building in and around the oil pumps near the swamp–uh, wetlands). However, Hovnanian is still building a mess of $1m+ places down in South County (Ladera Ranch), where there’s still plenty of room to sprawl out. (Don’t really want to add 25 miles to my commute, for one, so we’re sticking here.)
Anyone else seen new OC development toward the north end? What’s your preferred source of info on new homes in OC?
media, a builder is breaking ground on a couple hundred homes in the wetlands near you. Also, in Seal Beach a new ‘hood called Heron Point near the naval station.
Didn’t they used to (or still do?) store nukes at Seal Beach?
Worse than nukes—poltergeists!
Mr. Whittenberg then formerly introduced Ms. Lorraine Willey, archaeologist for EDAW, who proceeded with a slide presentation and provided an update and responded to questions on the progress of the cultural resource mitigation and the excavation and reinterment process for the Native American burials found on the Heron Pointe Development site. http://tinyurl.com/gz9wt
I’m all for progress, but I wouldn’t live there on principle. Plus, you all saw what can happen…
I guess even TX can have a bubble, even if prices don’t go up much.
Prices have gone up exponentially inside the LBJ Freeway, as much as any place in California. It’s the suburbs and exurbs that are dead in the water and always will be. They’re weak in a strong market. What’s going to happen in a bad market?
Txchic you have hit the nail in the head. People are looking for weakness to start in the OC, SF or NYC. Those are prime areas and will always be prime. In fact, when those areas fall, you’re generally toward the mid/end of the cycle rather than the beginning.
Weakness will start in the outlying areas and workitself in.
It’s like crappy stocks. They go down in up markets and down in bad markets. The good stuff never declines that much. People don’t want to believe that but I doubt you’ll ever regret buying weakness in the residential markets of Southern California, Seattle, New York or Boston.
I don’t think this type of marketing will ultimately work. If the buyer psychology is the same for buying a home as it is for buying an umbrella at Wal Mart, it would. Even though people “say” that there home is a place to live and not an investment, I’ll bet just about every single homeowner in America living in one of the heated housing markets is aware of what has been happening in his housing market. The investor mentality is there, even if people aren’t conscious of it.
Whether the price of Wal Mart umbrellas drops or rises, in the normal scheme of things umbrellas aren’t treated as objects of speculation. Once I’ve purchased an umbrella, I don’t periodically go back to Wal Mart and check on umbrella prices. If I happen to be in Wal Mart later and notice the price of the umbrella I bought recently is marked down, I might think, “Gee, if I waited I could have saved a little money”, but then I don’t give it much thought after that.
On the other hand people get pissed when they’ve just bought a home from a builder and then the builder goes and marks down similar models in an effort to move remaining homes. This has already been reported as happening in Shanghai, where recent buyers are trying to sue the sellers. Recent buyers don’t want the “value” of the home they bought “undermined”. And I don’t think it’s because they thought they could have saved money, I think it is because they’ve lost major ground in potential house price appreciation.
TXCHICK57
Where is the best place to follow TX (Dallas) real estate. My family is moving there in Summer 07 (due to a job transfer). You seem to be well informed about the area. I want to know if I should buy next spring or just rent there and wait out the bubble. Are there any unbiased web-sites I can follow. I have been following this blog since October 05. We cashed out in June 05 from our LA home, moved to AZ and are sitting on a pile of $$$ just waiting and renting. Any advice would be appreciated.
Thanks, Kris (gonetoaz)
I wouldn’t buy in Dallas at all unless you plan to die here. There is a very ready rental market for all kinds of homes and you can negotiate. Personally, I think there will be far better places for investment dollars in that time period than Dallas real estate. Certainly, if you must buy, stay inside the LBJ Freeway. It will be more expensive but you will retain value better in a down market and have a better shot at selling. West of Central Expressway is better than east.
You are welcome to email me if you wish to tell me what part of town you will be working in, etc. I would not worry much at all that you will be able to find something suitable to rent while you’re here. I’ve been renting here for over 10 years without a problem.
Thanks for the advice. I know we would probably be better off renting but my husband really wants to buy. We have 4 children who will be in elementary school so we definetley need excellent schools. He works out of the house so it does not matter how close we are to Dallas CBD. I have been there a few times in the last year looking in Keller, Mckinney, Allen, etc.. (exburbs). This will be a long term move for us, we don’t plan on going anywhere and his job is secure. I truly can’t get over how much building is going up north of Dallas. I know I will have plenty of homes to choose from. I think within a years time sellers will be willing to negotiate…. I plan on throwing out a few lowball offers first. I may even be able to pick up a foreclosure seeing as how everyone is overextended there (financially).
Thanks again for your comments. I will pick your brain again sometime. We have a good 12-14 months before we need to start looking. If the market looks like it is really tanking I will rent for 6 mo or a year and re-evaluate.
Take care Kris (gonetoaz)
With regard to txchick’s comments, all I can say is that I lived in Frisco/Plano for eight years, and the two years I lived in Plano were some of the best of my life. The people are great, the local amenities were a perfect fit for us, there’s adequate infrastructure and (most important) living an upper-middle-class lifestyle was very affordable.
Yes, HP/UP are nicer…and it’s a hell of a lot more expensive. There’s also a known issue with home invasions, primarily because Texas is a southern state and southern states tend to have very high income disparity, which directly contributes to the overall high level of violent crime. Die-hard Texans won’t like me saying that but I’ve lived there and seen it.
Texas leads the nation in executions. There’s a reason…and this is part of it. The Civil War (ahem…the War of Northern Aggression) never really ended. The shooting stopped but the conflict itself is still going on.
Hi Kris! I lived in Dallas 9 years and would definately recommend West Plano as a nice place to live with very good schools. We lived by Legacy and Independance and loved it! It was only a job relocation that brought us to CA. The houses in that area are customs and are beautiful! They are on decent size lots and have lots of trees! I am listing my home there April 1st as my renters are moving. I truly miss the neighborhood and wish we could move back! We did not like the areas North - McKinney, Allen, etc. I hear taxes are higher there due to lack of businesses. I would highly recommend Plano. It is a great city! I am leasing my 2700 sq. ft. house with a pool/spa for $1695/mo. at a loss if that gives you any idea of rent. I plan on listing it for $245k. I wish you the best of luck!
Thanks LArenter. I appreciate the tip. I have a girlfriend who lives near the GBtoll and Midway. I know directly north of her are some very nice areas of Plano. Can you tell me about the homestead tax exemption in Plano. Is it 20% of assessed home value off your taxes? That might make a big difference for us as many of the outer areas only offer 10-15k off the assessed values. I think the taxes in Texas are ridiculous. Many of the flippers who are buying there are going to be in for a big shock when tax bill come. My husband’s aquaintance is an amateure flipper who is buying rentals in Austin. He is a nice guy but quite dim financially. I told him don’t do it. I am quite leary about the home values in Texas. We made a mint in LA (bought in 98 & sold in 05). I know I will never hae that kind of windfall again, but it is nice to sit back and watch this whole bubble play out!
Kris
If you have a windfall from your other house and don’t need to worry about commuting, I highly highly recommend either Highland Park, University Park, Russwood Acres or Preston Hollow. All well inside LBJ Freeway and only a few miles from downtown. All of these will retain value much much better than Plano or any of those northern suburbs. Plano, Frisco, McKinney, et al are places where money goes to die. There are some excellend private schools in the areas I mentioned and the Highland Park School District is excellent too. You can negotiate on houses (by the time you get here, I’m guessing you’ll be a great position to pick something up in one of those areas). You will also be much closer to the cultural activities available in Dallas.
If I were in your shoes and going to buy something in any of the subdivisions you mentioned, I would be a merciless bargainer. You do not have to pay what anyone is asking, or even close. Sellers of used homes are competing with builders who will never stop building and people in this city want new, even if new is crap compared to the older stuff.
Good luck.
txchick is right.
If you have to buy in DFW buy in the old established neighborhoods that have the top school districts like Highland Park or University Park. Since Texas cities lack geographical features to create exclusivity such as the ocean in California, or the views in Seattle, about all you are left with is artifical jurisdictional boundaries to create exclusivity. In Texas that is most often done through school district boundaries. Same thing in other Texas cities. Here in Waco you can actually see the school district boundaries from the air if you know where to look. All the new development is happening in only 4 of the best school districts even though there are about 15 school districts in the greater Waco area. The areas that will hold their value the most are the exclusive areas that are already built out with no real room for expansion. Like Highland Park in Dallas or West Lake Hills in Austin. Those areas will never crash because they are exclusive and full of old money such as it is in Texas. They have no where else to go.