New D-FW homes now cost less than existing ones in historic inversion (Dallas: real estate, 2014)

[move4ward]

According to Dallas Morning News, median price for new construction homes dropped below existing homes for DFW. Existing home prices continue to rise. Builders have slowed down construction on larger homes to focus on smaller houses.

Here is a small excerpt.

https://www.dallasnews.com/business/...ric-inversion/
New D-FW homes now cost less than existing ones in historic inversion
The median price of an existing D-FW home was $410,000 in June, $12,000 more than a new one.
by Mitchell Parton.

< I cut the first part of the story. Skipping to the bottom of the story.>

A year ago, new homes only represented less than a third of all homes sold in the Dallas-Fort Worth area. As of June, they represented almost 38%, according to Residential Strategies.

Builders may offer incentives such as discounts and buying down mortgage rates, which could lure buyers who otherwise would have purchased an existing home.

Many builders are also focusing on smaller, less expensive products to curb affordability challenges. In 2014, only 41% of home construction starts in the Dallas-Fort Worth area were on lots smaller than 60 feet wide. As of June, that segment has grown to more than 66% of the market, according to Residential Strategies.

While local home starts overall are down from a year ago, builders have dramatically reduced higher-end home starts, the consulting firm found. Construction of homes priced at $561,000 or more dropped 40.7% year over year in the second quarter.

[ChristieP]

This is probably a good thing. For many years, the new home builders were focusing on huge houses $500k+. Few younger families/first-time buyers could afford those houses. I am glad to see that now more reasonably-priced homes are being built.

And yes, of course the existing homes will be more expensive. If for no other reason, they are in better locations with higher land value. If you build a new 2000 sq ft house in Forney, it is going to be cheaper than a 30-year old 2000 sq ft house in Grapevine.

[Leonard123]

Liar, liar pants on fire!!! That is absolutely, unquestionably, beyond any reasonable doubt, patently false!

In fact, the gap is unquestionably higher than it's ever been in history! A new home of similar size in the same location will cost at least 1.5 times and in many cases almost double an old one. Mckinney is a perfect example, but it's definitely all over Collin County.

[Wittgenstein's Ghost]

Originally Posted by Leonard123

Liar, liar pants on fire!!! That is absolutely, unquestionably, beyond any reasonable doubt, patently false!

In fact, the gap is unquestionably higher than it's ever been in history! A new home of similar size in the same location will cost at least 1.5 times and in many cases almost double an old one. Mckinney is a perfect example, but it's definitely all over Collin County.

The report isn't about same size, same location housees. It's about the average new house versus the average existing house. The quoted text specifically says this is largely due to compositional changes:

Many builders are also focusing on smaller, less expensive products

[Sunbather]

Originally Posted by Wittgenstein's Ghost

The report isn't about same size, same location housees. It's about the average new house versus the average existing house. The quoted text specifically says this is largely due to compositional changes:

Many builders are also focusing on smaller, less expensive products

Agreed with this. While I cannot speak to the validity of the numbers in the report, the article seems clear in what it is comparing.

Trying to pivot to a severely limited scope of a house of a similar size in the same location changes the whole game. It's pretty understood that, in most cases, if you're wanting a NEW house in an older, established neighborhood you are going to pay more than simply buying an existing home in that same neighborhood. You're also talking a very, very limited number of houses that fit that bill. It is RARE that someone buys into an older neighborhood and builds a brand new home of a similar size. For that to be true, you're mostly looking at empty lots (very, very limited) or homes in true disrepair (also limited). For someone to buy an existing home and tear it down...they're typically looking to build something significantly different and significantly larger than what was already there before.

[Wittgenstein's Ghost]

Originally Posted by Sunbather

Agreed with this. While I cannot speak to the validity of the numbers in the report, the article seems clear in what it is comparing.

Trying to pivot to a severely limited scope of a house of a similar size in the same location changes the whole game. It's pretty understood that, in most cases, if you're wanting a NEW house in an older, established neighborhood you are going to pay more than simply buying an existing home in that same neighborhood. You're also talking a very, very limited number of houses that fit that bill. It is RARE that someone buys into an older neighborhood and builds a brand new home of a similar size. For that to be true, you're mostly looking at empty lots (very, very limited) or homes in true disrepair (also limited). For someone to buy an existing home and tear it down...they're typically looking to build something significantly different and significantly larger than what was already there before.

Yes, and a lot of people don't realize that, generally speaking, structures depreciate. Land is what appreciates (at least in real dollars). So a comparable new home on the same lot will be worth more than an older home. This is ignoring things like historical significance, of course, and it is assuming build quality really is comparable.

If new homes are selling for less than existing homes, it is because they are smaller, in worse locations, on smaller lots or have less desirability due to design, quality, etc.

[rabbit33]

The comparison's stupid. All that existing construction in the Park Cities, Lakewood, Preston Hollow, is priced at a premium. There are only a tiny number of new houses being built within 635; whereas the outer suburbs are buiilding 'em cheap and stacking 'em deep.

Leonard has it right; if you want to compare meaningfully, you have to compare similar locations, square footage, lot size, and level of finish.

Unfortunately you give a reporter access to a database and you'll get garbage analysis. Let's face it; journalism majors don't do math.

[TheOverdog]

Leonard has it right; if you want to compare meaningfully, you have to compare similar locations, square footage, lot size, and level of finish.

Dallas compared to its suburbs has giant lot sizes and wildly restrictive zoning laws. It's never going to be an apples to apples because the economics that created huge numbers of houses in Dallas proper hasn't existed since about 1975, and Dallas' restrictive zoning rules prevent building massive numbers of new ones at smaller lot sizes.

[Sunbather]

Originally Posted by rabbit33

The comparison's stupid. All that existing construction in the Park Cities, Lakewood, Preston Hollow, is priced at a premium. There are only a tiny number of new houses being built within 635; whereas the outer suburbs are buiilding 'em cheap and stacking 'em deep.

Leonard has it right; if you want to compare meaningfully, you have to compare similar locations, square footage, lot size, and level of finish.

Unfortunately you give a reporter access to a database and you'll get garbage analysis. Let's face it; journalism majors don't do math.

I disagree. Both comparisons are valid, but you have to be clear about how you are defining your scope. The scope was reasonably understood.

There is a distinctly separate value in comparing like for like in the same area. But the question you are answering is slightly different, thus the comparison used is different.

The first analysis is answering: "is it cheaper to buy a new home or an existing home in DFW?"

The item Leonard listed would only answer the question: "is it cheaper to build a new home or buy an existing home in [Lakewood - insert specific neighborhood]?" (or more realistically, how much more expensive is it to build new in Lakewood)

One is 'meaningful' at a macro scale an one is 'meaningful' at a micro scale.

However, I would argue that the micro scale question is less 'meaningful' because it would be extremely rare for a new home build of a similar size, in an existing and established neighborhood to somehow come out less than an existing comparable home. So, in my opinion, that analysis is not very useful. Anyone who works in real estate, architecture/construction, renovation etc. already knows the answer to that one.

[hbdwihdh378y9]

Originally Posted by TheOverdog

Dallas compared to its suburbs has giant lot sizes and wildly restrictive zoning laws. It's never going to be an apples to apples because the economics that created huge numbers of houses in Dallas proper hasn't existed since about 1975, and Dallas' restrictive zoning rules prevent building massive numbers of new ones at smaller lot sizes.

And it's not just zoning laws. It's also restrictive covenants that require minimum lot sizes.