Should You Buy a New Construction Home in DFW Now?

You've probably seen it everywhere: buy now, wait until 2024, keep renting, live in a van down by the river. The advice is all over the place, and if you're looking at new construction homes here in Dallas-Fort Worth, you're probably wondering what the right move actually is. I want to give you some real data, some honest opinion, and help you make an informed decision about whether the end of 2023 is the right time to buy or if the better opportunity is coming in 2024.

I'm Zak Schmidt. I sell real estate here in DFW, and I specifically love helping people buy and build brand new homes. If I can help you do that, my contact information is right at the bottom of this article. Reach out, and let's get you into that new home so you can spend the holidays in a place that's actually yours.

Here's the thing: a lot of people look at the end of the year and think it's a bad time to buy. Football season starts, Halloween hits, then Thanksgiving, then everyone starts decorating way too early for Christmas and playing Christmas music before it's even appropriate. Side note: Christmas music should not exist until after Thanksgiving. My wife and I argue about that all the time. She would start playing it today. I say it lives from the Friday after Thanksgiving till the day after Christmas. But anyway, people get caught up in the holidays, work slows down, and then you blink and it's 2024. A lot of people say maybe we should wait, maybe it's just not the right time. I would say I think we should take the opposite approach, specifically in the new construction space.

Table of Contents

• Why Builders Are Motivated to Sell Before Year-End
• How Election Year Volatility Could Impact 2024 Buyers
• Current Builder Incentives You Won't See in 2024
• New Construction Market Data Across DFW Counties
• Inventory Homes vs. Build Jobs: Where the Best Deals Are
• When Waiting Actually Makes Sense

Why Builders Are Motivated to Sell Before Year-End

Builders are in the building game to make money. Shocked, I know. They're trying to create profits. That's what happens when we live in a capitalistic society. Most of them have stockholders or shareholders or business partners, and like any business, they want to close out the year on a strong push. The more homes they can sell from the end of 2023 into the start of 2024, the better their outlook is going into the next year.

What that means is twofold. You'll see builders manipulating the market a little bit. On the one hand, if they have homes that are on the cusp of closing in January or February, a lot of times you're going to see them do everything they can to pull that back and get them closed by the end of the calendar year. On the other side, if they have homes that they might could get there but don't have a buyer, you're going to see those get pushed to the back of the line. That's a 2024 problem. They're going to worry about the 2023 problem first.

Here's an example. Last year, 2022, I had a buddy who worked with a builder and he said they were going crazy in December. I asked how crazy. He said they were trying to close 22 of their 30 available homes. I was like, holy cow, what does that mean? He said that means all of our vacation just got canceled, I have to do everything I can to get my trades in, we're slashing our prices, we're doing crazy incentives, we're doing what we can to get as many of these homes sold as possible. And they did it. Twenty homes in December. It was nuts. They did that so they could look really good, finish out the year strong, and make a strong push coming into this year.

I think a lot of builders going into the fourth quarter are going to do the same thing. They want to continue to push sales, they want to continue to move product, they want to continue to get people into homes. Builders are looking at the same data you are and saying, are people going to start waiting? What are we going to do? What's going to happen? So it's like, let's get it while the getting is good and make as much money and get as many people in homes as possible. When we understand that, and we understand supply and demand, and we still have a national shortage of homes plus a shortage here in the DFW marketplace, homes are still moving relatively quicker than builders can produce them. It is still going to be a good time to continue to look to buy.

That means there are going to be good deals to be had going into the end of the year. Here's my caveat to that: I think the better deals are on inventory homes. If you're looking at a home and you start talking to the builder and they start giving you 2024 numbers, and they're like, hey, this one might close February, March, April, May, don't get me wrong, I already have people writing contracts for 2024. We already have clients looking at build jobs for 2024, and they're getting great deals. However, the best deals are on those ones that can close quickly.

Why? Because they know what the interest rate's going to be with somewhat certainty within the next 30, 60, 90 days. It's pretty relative to predict what that interest rate's going to be, what the supply cost is going to be on that home because it's already been bought, what their profit margin needs to be so they know, here's what we need to give in closing costs to make this make sense so that this deal doesn't bust. Those long-term deals, those ones that are going to push past 2023 into 2024, they're still getting good deals, but the builder is not as concerned about those as they are the ones in 2023. In a weird roundabout way, they're kind of manipulating the market a little bit. For some of them it's like, let's go ahead and push and punt to the next year, let's hold these back. I know some builders right now who are saying, hey, we're actually limiting our sales through the end of the year. I was like, excuse me, what? They said, yeah, we're kind of pulling back because we have done enough. We're reshifting our focus into 2024, so we're going to even be more limiting on what we're going to sell. Interesting. So I think you have both sides of that playing out in front of all of us.

How Election Year Volatility Could Impact 2024 Buyers

The other thing I think you have to consider is we are coming into an election year. This is not a political thing whatsoever. This is just an observation. I think we always have a little bit of volatility in the market every election cycle. I believe we will have even more volatility in the market with this election cycle. I also believe that the parties in power will not be able to stay in power with inflation and interest rates where they currently are. There is going to have to be a shift in order for them to run sustainably for reelection. I could be wrong. That is my educated opinion.

With that being said, if they're going to lower the rate, think about the competition that that's going to cause. Let's just say market rate for today is starting in a 7. I don't know how many buyers that eliminates out of the market, but it eliminates a lot of buyers. When those rates start to fall back down and pricing on homes levels out a little bit, what you're adding is you're adding competition back into the market, which means it's going to be more difficult to continue to buy homes.

Also, as we come out of the winter and into the first of the year, you naturally come into heavier buying seasons. You think about people with kids and they're like, oh, we're coming up on the end of the school year, I want to be in a new school district by the time school starts. School starts in August. You're like, August, that's so far away. You start stepping it back and it's like, okay, well, we want to be in by May so we can take summer vacations, or we want to be in, all of those things. So add more competition, lower the interest rate, probably flatline on prices, and you get to a competition point. Would you rather be in that space competing with those people, or would you rather have less competition and know how to get the best deals? That's what you have to decide.

Current Builder Incentives You Won't See in 2024

Here's the other thing that's true right now. I have seven different emails today from builders doing various buying incentives in DFW. Let's see, this first one is permanent 5.99% buydown plus closing costs. $15,000 to close on anything by the end of the year. 3% of purchase price and $30,000 in price reductions in some communities.

Here's what I think: the moment that there is more competition and builders recognize there's more competition, and we also have a shortage of homes, they're not going to have to incentivize buyers like what they are now. Sure, are they going to give you a little bit? Yeah, you know, $5,000, $10,000, maybe $5,000 or $6,000 buydowns, but $15,000 and $30,000 price reductions, those are going to go out the window. So you're going to be competing, you're going to have less availability, and you're going to have less incentive to make something happen that you want to make happen. All that to be said, waiting might not be the best option.

Flip side of that, if you are in a situation where you're like, hey, our lease is not up until 2024, then yeah, it probably makes sense to wait. Actually, truthfully, it probably makes sense to get on contract for something that will close about the time your lease is done. That's the real truth of the matter. Maybe you're changing careers. Maybe that's probably when it makes sense to wait. Maybe you're working through having kids, or whatever it is. You've got to decide for yourself what are the immediate goals, where do we want to get to, what do we want to accomplish.

Maybe you're looking at your house and you're like, hey, we refinanced in 2020 and we've got a 3.9% rate. What should we do? Well, you probably shouldn't sell it. You should probably look at making it a rental property and figure out how to pull your equity out to buy a down payment to build another property. That's probably what you should do. So those are the things that kind of at play that make sense.

My job as a realtor is not to force you one way or the other, buy, sell, don't buy, don't sell. My job is to give you information. My job is to provide data so that you can make the best decision possible for you, your family, your circumstances, and what you want to do in your situation.

New Construction Market Data Across DFW Counties

What I have here is data trends from the MLS on new construction homes in four major counties here in DFW: Rockwall County, Collin County, Tarrant County, and Dallas County. This is showing only new construction homes, so the caveat I have to give you is they're missing data points. There are new construction sales that happen that aren't reflected in the MLS, whether they're homes that were built from the ground up, or just some builders don't put information in MLS. So there's missing data, there's a skew of what we're missing, but this still gives us a relatively good idea of what's gone on in this space and what we can see the trends that are happening in new construction homes.

Let's start with sale price. This is new construction sale prices June 2023, back in the summer. Average sales price in Rockwall, $539,000. Collin County, $574,000. Tarrant County, $438,000. Dallas County, $687,000. You're like, Dallas County, why is that so high? Because you have to understand, a lot of the new construction in Dallas County itself is actually Dallas proper, and it's smaller builders that are doing higher-end homes. So that's why you see that one number skew a little bit.

There's July, and then here we are in August. We don't have September yet, but we'll get there soon. You're seeing these numbers, they've kind of, for the most part, Dallas is kind of this outlier with some of the new construction things because again, there's a lot of higher-end homes in downtown Dallas area in those neighborhoods that are single one-offs that are not big production type builds. If you look at the other ones, we're $438,000, $574,000, $539,000, and trending down a little bit, but also kind of trending back up. I think we're going to stay online with this for the fourth quarter. I think that's kind of the trend we're on, is we're seeing these prices dip a little bit, but truthfully, we're seeing more in terms of closing costs added versus price reductions happening over the long term. Closing costs are being taken into account and they're getting hidden in transactions where we can't really track that because of how it gets reported, but they're there.

I think here is an interesting data point to track. This is a percentage of original list price. Again, we're focusing specifically on new construction, so the data gets skewed a little bit based on when those get listed and how the pricing goes out. But this is what they're getting in terms of percentage comparative against the original list price. We're looking at 97%, 98%, 98%, 97%, 95% of original list price is kind of where we're seeing those hit.

Price per square foot-wise, we are tracking in that between $185 to $205 potentially a square foot. The Collin County one is interesting to me because you can kind of come back to September a year ago, and it was the height of the market, $225 a square foot in Collin County. We've seen that take a significant dive and then kind of level back off here. I think that's where we're going to continue to stay.

If we look at months supply, so this is if everything on the market sold, how long would it take us to get rid of all of that? July, you know, 3.4, 2.7, 3.2. August, we're still in that kind of 3 range. Dallas is the outlier here with the 5. So we're still seeing that move on trend.

Closed sales, this is month over month, how many of these homes are closing. We're still seeing it kind of stay on the same trend, moving back up again. I think we're going to see this continue to go up as we get toward the end of the year. So it'll be fun to track that and see how much more this grows as we get toward the end of the year.

Last piece on the stats: homes currently listed for sale. Rockwall County, 216. Collin County, 960. You've got to think Collin County, massive piece over the north, so there is a ton of growth happening up there. Same thing in Tarrant County and how much land that area covers. Tons and tons of growth. Those are the places that I would tell you, hey, let's look at that outer rim. If you think about the circle of DFW, those outer rim spaces are the places that I would say let's look. Those are the best deals that are growing in areas quickly that you're probably going to do really well on. Going north, we all know that going north has gotten expensive really, really quick, but there's still opportunities there to get in and allow your home to appreciate in value as it goes.

Inventory Homes vs. Build Jobs: Where the Best Deals Are

Let's take a look at a couple of different builders' websites. If we go to Highland, we're looking at homes under 3 months, we're at 84 homes that could close. If you wanted something now, we've got 35. Anything under 6 months, we're at 190. You're seeing them advertise Save Now Big with $15,000. They're also one of the builders that are potentially offering an interest rate lock depending on the neighborhood, the community, 5% rate. So we've got 84 within 3 months, kind of a good spread there.

Perry, another favorite builder of mine, we've got 126 that are listed in either move-in ready now or move in in the next 6 months. So 126, and they're going to keep adding to that.

Meritage is showing 418 across 30 different communities. We've got everything from the mid-3s up to the 6s, 7s, 8s, depending on where you want it. Sales event, this is their Save Timber. Obviously you're seeing this article after September. It's a different savings thing, but they are doing something to get you into these homes.

Lastly, the one we'll take a look at is Trophy. Homes starting $314,499 in Allen, $369,379 in Princeton. November, November, November. There are options out there if you want to make it happen. I'm looking at the Trophy one now. It says flexible savings, receive up to $25,000 and use it your way. Guys, $25,000 is closing costs and it's an interest rate buydown, and that's saving you hundreds every month. It gets you into a place where you are starting to build equity. Equity grows year over year as a whole, but it always usually grows at a faster rate in new construction spaces than it does in resale spaces because of the appreciation and because of the development that's happening around you.

When Waiting Actually Makes Sense

I don't know what 2024 is going to hold. I don't. Nobody does. I don't know what's going to happen in terms of interest rate. I don't know what's going to happen in terms of inflation. I just know if you are on the cusp and you're like, I'm not sure which direction I should go, should I look at waiting, should we renew our lease, my challenge to you is let's have a conversation. Let's just lay it out and just see, hey, if we can make something happen, what does this look like for us? Hey, if we've got a baby on the way, we need to upgrade and we need more space, let's have a conversation. I'm happy to sit down with you. We'll sit down over Zoom and we'll just hash it out. We'll see what makes sense because there are deals to be had.

If it were me, I would not wait till 2024, even if I wasn't going to close on that house until 2024. Even if we were going to say, hey, we're going to close in the spring and we want to build, I would try and get myself under contract now on something and then figure out everything else I need to do to get into that space. Even more so, if I could and it made sense, I would try and close something before the end of 2023. Take as much advantage as possible of these incentives that the builders are offering.

I'm here to help. I'm here to answer questions. I'm here to try and make that happen for you. Call or text me at 469-707-9077 or book a FREE consultation here. New construction is my bread and butter. It's what I love to do. So I'm happy to have a conversation with you. If you have questions, you can leave them in the comments. If you're not sure what to do next, there's a link in the description to start browsing homes. You can take a look, see what's out there, see what's coming. Find that home and let's start a conversation. If you want to go ahead and book time in my calendar, you can do that as well.