The new home market is “hitting on all cylinders”

Builders shifted into high gear last year to keep pace with demand for homes fueled by low interest rates and millennials leaving apartments to buy homes.

Now they can’t build them fast enough.

Builders have waiting lists, which limit the number of homes they sell due to a limited supply of land, building materials and soaring lumber prices. The situation is not unique to Houston.

“It’s an extremely challenging operating environment,” said Lawrence Dean, Houston regional manager for Zonda, a housing information company. “With shortages of land, materials and labor, they simply aren’t able to build as many homes as the market demands.”

Houston’s biggest builder is building homes as fast as it can. Closings for DR Horton rose 27% to 4,695 homes in 2020, according to Zonda.

The Arlington-based builder, which builds under the DR Horton, Emerald, Express and Freedom brands, captured 13.6% of the Houston market in 2020.

“We have accelerated our pace of housing starts in most of our communities over the past two quarters to ensure that we maintain a sufficient number of homes to meet demand,” said the chief operating officer of DR Horton, Michael Murray, on a recent earnings call.

Miami-based Lennar retained the No. 2 position with 2,877 closings locally, followed by Perry Homes with 1,694 closings in 2020.

The other top builders, LGI Homes, Legend Homes and Meritage Homes, all moved up the rankings after posting higher sales, according to Zonda.

Last year, housing starts jumped 20.3% to 36,739 in Houston, an impressive feat since the market shut down for weeks last spring due to the COVID-19 pandemic. Builders are expected to start 33,500 to 36,500 homes in 2021, according to Zonda.

“We’re seeing demand from all generational and demographic groups and demand at all product types and price points,” Dean said. “The market is really banging on all cylinders.”

Buyers can expect to pay more as prices for lumber, insulation, concrete and other materials rise. The median base price for a new home has risen 14.2% or $45,000 over the past year, according to Zonda.

“This is an unprecedented situation,” Dean said. “Materials costs are notably rising at an exceptionally rapid rate, so builders are being forced to start homes that they ultimately don’t know what they’re going to cost to build.”

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