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allas-Fort Worth home builders reported a slower third quarter this year, due in part to higher mortgage rates and slower job formations in an increasingly competitive market. However, with the Federal Reserve cutting its key interest rate by half a point last month, there's hope that home building will pick up again. More rate cuts are expected before the end of the year and into 2025.

    According to Residential Strategies Inc., North Texas builders started 13,327 homes from July through September, a nearly 2% drop from the same period last year. The annual start pace remained stable at just over 54,000 units. Builders share that the new home market has become increasingly competitive, with housing affordability remaining a significant issue.

    In June and July, 30-year mortgage rates hovered around 7%, but began to drop in August and September in anticipation of the Federal Reserve cutting its fed fund rates. Despite this, potential homebuyers never saw mortgage rates fall below the 6% sweet spot. Homebuilders like Lennar are getting lots ready in hopes that buyers will return once interest rates normalize.

    Job growth in North Texas has been modest over the last year, with D-FW adding 58,700 net new jobs for the 12 months ending in August - a 1.38% annual growth rate. This is well below the 104,000 new jobs added last year. To support its new home growth rate of over 50,000 annual starts, D-FW needs to maintain at least 100,000 new jobs annually.

    D-FW new home closings inched higher from October 2023 through September 2024, with a record 53,219 units closed. However, finished vacant housing inventory moved higher last quarter, reaching a cycle high of 10,269 - a year-over-year growth of more than 2,000 units and a 24.7% increase.

    The trends hold true for Bloomfield Homes, one of the region's top five home builders. Chairman Don Dykstra said the firm is using rate buydowns to keep inventory moving. Sales are choppy, but everybody's still working - it's just a little more competitive. D-FW's supply of vacant developed lots increased slightly last quarter, reaching more than 100,000 units.

    Residential Strategies Inc. includes single-family rentals as part of its quarterly housing data. Last quarter, 1,853 build-to-rent units were started in D-FW - the annual pace totaled 6,128 units. Build-to-rent represents 11.3% of North Texas' new home starts. Sales of existing homes in Dallas-Fort Worth remained sluggish, with a 3% drop year-over-year.

    The supply of listings is continuing to climb, and months of inventory may be returning to a level of six months - considered equilibrium. Until mortgage rates fall to the 5.0 to 5.5% range, most households with low mortgage rates will be reluctant to move, according to Wilson.